Divide and conquer is the most effective strategy in geopolitics. How about businesses? They use audience segmentation and targeting to win.
The Idea of Segmentation and Targeting
So you want a car. But not just you. A lot of people want a car.
What kind of car? A great car? What do you mean “great”? How do you define “great”? This is where the opinions start to diverge.
In fact, they’ve begun to diverge even earlier than that – at the point when we wrote “a lot of people want a car”. So that means not everybody does – there are some people who want a bicycle, a helicopter or simply do not want anything at all since they prefer walking or using public transport.
Now, that’s from a customer’s point of view. How about a business owner’s point of view?
Well, it turns out that a company cannot produce simply “great cars”. They need to know some specifics like design, materials, quality, features, and much more. Where do they come from?
They come from the fact that no matter how unique every person (customer) may seem, there are always things that they share in common. And knowing these similarities does help a lot in marketing.
For some unknown or, rather, not yet known reasons, we people like to categorize things and make up terms, groups, and definitions – probably, because it just helps us conduct our shady human deals. 🙂
So, audience segmentation is the process of dividing people into homogenous groups based on a certain criterion. Targeting, therefore, is the process of adjusting your business, product, and marketing activities to each of the segments you’ve created.
Examples of Segmentation
Here are the most popular criteria used for segmentation:
- Geographic (country, area (urban/suburban/rural), domestic/international)
- Demographic (age, gender, language, occupation, ethnicity, social class, family status, education, etc.)
- Psychographic (customer’s subjective interests and attitudinal traits like opinions, tastes, values, activities, and interests)
- Product/service usage (new customers/frequent customers/fans, regular users/occasional users etc.)
You could go on and create more but these are the basic ones.
Audience Segmentation and Targeting on a Real-Life Example
How does it work in real life? Well, let’s take Mercedes-Benz, a German car-manufacturing company.
People in North America, Europe, and the Middle East generally have a higher income than people in Central Africa or South East Asia => concentrate sales and marketing in those regions
People in urban areas generally have higher income and prefer compact or mid-sized petrol-fueled cars => offer them the appropriate models
German audiences generally prefer German-made cars to the cars made in Japan or the USA so that spikes up the level of competition among the German brands => premiere all the new models on German market first; produce models exclusive to Germany only
People, who are most likely to purchase a Mercedes-Benz car, are males aged 35-45 => adjust the visual ads
Obviously, localize everything related to the specific country in terms of language. But it’s more than that – a lot of times companies would give their products different names depending on the language/country.
A bit of trivia: when Toyota Motor Co. had decided to enter the US market with a luxury segment vehicle lineup, they couldn’t use the name Toyota as it had been long associated with cheap yet reliable and economical vehicles. They had to come up with a different name that had no negative connotations.
To do so, they hired a special branding agency, which had come up with a list of potential good-sounding names – among those were Vectre, Verone, Charapel, Calibre, and Alexis. The top management altered the spelling of Alexis a little bit to make it match the word “luxury” phonetically. There you go – “Lexus”. 🙂
Or you can believe the version that says that LEXUS is an acronym and it stands for “Luxury EXports to the US”.
- Occupation/social class
People who buy Mercedes Benz cars are usually high-income managers or business owners => use those images for visual advertising
- Family status
People with families would rather prefer a mid-sized station wagon than a compact sized sedan => adjust the product features to match the common family needs during a car trip
Based on a customer research, the buyer persona of a typical Mercedes Benz customer has been compiled featuring the following points:
- Proactive life position
- Strive for success in life
- The sense of superiority
- Adoration for luxurious items and lifestyle in general
- Great attention to detail
- Fondness for dark, serious tones (black, silver, grey)
- Very high customer service expectations
Basically, this is your guide to successful marketing – just make sure you deliver on each of the points mentioned.
4) Product/Service Usage
Obviously, current customers may have some advantages and bonuses since they have already shown their affection for the brand by purchasing a Mercedes Benz car => trade-in loyalty programs, special MB club membership perks, service discounts and more
How Is Segmentation Done?
For a proper segmentation, one has to go through a few required steps.
1. Audience Analysis
Before the separation comes an audience analysis. You can do it yourself, have somebody else (a professional agency) do it, or use already existing data. The choice depends on the type of product/service and market.
It all starts with the data – the more you get the better. However, when running an audience analysis, you want to collect only meaningful, actionable data – something you can use for decision-making later. The information about the average shoe size and preferable mobile carrier of your potential or current customers won’t do you any good if your business is selling chainsaws.
Ideally, you should combine the audience analysis with a situation analysis to get the full picture before you.
2. Data Review
Sift through all the data you have collected to separate the actionable, meaningful data that you can act upon from mere numbers and stats.
For example, if you are offering business consulting services specific to your area, you should concentrate on location, occupation, and income level.
3. Determine the Main Segmentation Criteria
Based on the previous step, group the chosen criteria into four categories, which we already know:
Continuing with our example, we could have something like:
- Income, gender, occupation
- Business attitude and ethics, personal qualities
4. Segment the Audience Based on the Criteria
For example, we could have segments like:
- Lives in Georgetown/lives in the country
- Business owner with high-income/Business owner with medium income
- Impatient, wants quick results/ready to wait longer
- Wants formal proof of qualification, case examples/relies on the word-of-mouth
Of course, you could go deeper and combine the segments depending on your needs
5. Decide Which Segments to Target First
Obviously, some segments are more attractive than others, from a marketing point of view.
Consult with your overall business strategy and the current market situation to choose the right target for the first strike.
6. Assess the Chosen Segments
Despite what you may think, not all segments are actionable. To eliminate the risk, you should assess the ones that you’ve chosen using this simple template.
7. Create Audience Profiles
If the segment is actionable and checks out, the final step would be to describe the kind of person that would fall into that category/segment. Here’s an article that talks just about that – “How to Create Buyer Persona for Your Business and Get More Clients”.
After you’re finished with that, all you have to do is adjust your marketing efforts to satisfy the segment.
Thanks for getting to the end of today’s article – I hope that was a good and useful read.
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If you have further questions on the subject, please write them in comments – I’ll be glad to answer.