Regardless of the size or sector of
your organization, you and your colleagues are undoubtedly thinking of ways to
find new customers and retain current customers. Any good business has a
healthy mix of both. While it is often more profitable in the long run to generate business from current customers,
it is also critical to find a consistent source of new prospective customers.
Ultimately, any good marketing strategy
comes down to solving a customer’s problem. But having said this, I believe
that market
segmentation
is a critical concept—if not the
most critical concept—in finding new customers and retaining
those customers. Without paying close attention to market segmentation, you and
your team are going to struggle in achieving your business goals.
To further contextualize this important
point, I like to rely on a helpful way to think about market segmentation. All
you need to do is take a walk down the aisle of your local grocery store aisle
to see the power of market segmentation in your day-to-day life. This is a
helpful exercise for any employee, but it is especially critical for marketing
strategists or those who work in digital marketing.
I see marketing in everything that I
do.
I tend to think of a grocery store
aisle as similar to a search engine results page (“SERPS”). The endcap, which
is the display at the entrance of every aisle, is similar to a paid search ad.
This is prime territory and companies are willing to pay top dollar to be
located there. As you move down the aisle, some of the top “organic” search
results are those products that are at eye-level. These products are most
likely to be chosen by shoppers who know what they are looking for. Their
intent will determine which products they choose—similar to an internet user
clicking on a link according to their search intent. But all of this is a
discussion for a future post, so stay tuned.
Entering our local supermarket is an
exercise in routine. We take the same route around the store and look for the
same items to stock our kitchens. It is so automatic that we often tend to brush
over some of the interesting things that are occurring before our eyes.
For instance, the next time that you
are in your local supermarket, I encourage you to walk over to the dairy
section. Once you arrive, I want you to head over and find some eggs. While you
may intuitively know this, you will quickly see that there are many different
types of eggs. You will see brown eggs, cage-free eggs, white eggs, organic
eggs, egg beaters, all whites, low-priced eggs, and countless others.
Eggs themselves are extremely simple
things, yet food companies have taken the time to create different egg types
for their customers. Quite obviously, there are many different uses
for eggs, but it has
become even more important to cater to specific egg eaters. Ultimately,
everything from shifting consumer demand for organic products and increased
demand for new and novel food products
has led to increased market segmentation within the egg industry.
To put it simply, the market has responded. Egg producers and processors have
developed new products that speak to a certain subset of egg eaters.
Consequently, the egg processing market has seen healthy demand for the near
future. Between this year and 2024, the egg processing market is expected to
grow at an annual compounded rate of 4.3 percent. In such a stable,
low growth industry, these numbers are promising.
While this is just one simple example,
market segmentation in the egg industry speaks to a larger point. As you can surmise,
it shows the increasing importance of market segmentation—especially in digital
marketing.
We live in a world where consumers have
more choices compared to five or ten years ago. This is even truer compared to
20 or 30 years ago. Essentially, consumers are looking for products or services
that speak to their individual needs. They argue that they are unique and that
a “one size fits all” approach isn’t appropriate for them. Whether or not this
is actually true, marketing strategists must account for this attitude when
speaking to their customers.
The numbers speak for themselves.
According to one study by Bain and Company, a whopping 81 percent
of executives have found that market
segmentation is crucial for growing profits. The study also found that
organizations with great market segmentation strategies had a 10 percent greater profit
over a five-year period compared to those organizations that did not have great
market segmentation strategies.
Marketing strategists and those who
work in digital marketing simply cannot ignore these facts. Because of this, it
is in your best interest to develop a comprehensive plan to leverage marketing
segmentation in your digital marketing strategy.
But how do you do this?
There are a variety of tips and tricks
that you can leverage, but one of the best ways is to use the tools provided to
you. Facebook, for example, makes it easy to get started
with market segmentation. If you choose to run several Facebook ads, Facebook
lets you target a granular audience. Yes, you can target based on obvious factors
like geography, age, and demographics. But beyond that, Facebook lets you
target based on things like
lifestyle and
psychographics, education, income, and even social class. You can even have
Facebook look at the type of users visiting your Facebook page and have it
build a “lookalike audience”
that is more likely to convert. Even though Facebook has received significant
criticism for its practices related to data privacy, Facebook ads let you use
market segmentation in a virtually unprecedented way.
Whether you choose Facebook, Twitter,
Google Ads, or any other digital marketing platform, you will also want to pay
close attention to data. Digital marketing is extremely powerful in market
segmentation due to the fact that you have a wealth of data at your fingertips.
Using the tools provided by digital marketing platforms or tools like Google Analytics,
you can see what types of users are interested in your product or service. If
you are running A/B tests to target two different market segments, for
instance, data will give you an objective look at whether one segment is more
responsive to a marketing message compared to another.
Simply having the data isn’t enough,
however. You must implement the insights that you learned. Embrace the
iterative process and continue testing marketing segments that you are
targeting. Discuss the results with your team and execute an updated plan of
action. Doing this will provide even more insights that you can use to tailor
your message to all
of your customer
segments.
Whether you are walking down your
grocery aisle or analyzing your competitor’s business, you will undoubtedly see
market segmentation in action. It is absolutely in your best interest to simply
embrace this reality—especially if you are a marketing strategist or work in
digital marketing. By remembering the insights above and incorporating the
referenced advice on market segmentation, you will be well on your way to
marketing bliss.
I wish you the best of luck!
