The earlier years of business had a more utilitarian approach to manufacturing goods and offering services. For instance, during the early production of cars, manufacturers painted their vehicles black simply because they dried the fastest. There was little to no concern for what people might need beyond a simple utility, like a car of a different color.
However, in the modern day, customers have a lot more options at their disposal. As a result of this incredible rise in choices available to customers, companies need to be more aware of what their audiences like and don’t like. Therefore, they need to make use of market segmentation to better categorize and understand their audience. Some of the types of segments can include:
Firmographic segmentation is a popular choice among B2B marketers for financial services marketing, as it allows them to better understand the business that they are targeting. Target market characteristics for firmographic segmentation can include financial standing, the company’s size, legal status, employees working there, and the industry in which they operate. All of these are factors that you will need to consider when segmenting B2B companies.
Companies that will be using firmographic segmentation often focus more on growth trends and a company’s viability in the market in which it is operating. The data that allows for this type of segmentation can be relatively easy to find, as some companies will have it publicly available.
Geographic segmentation, as the name implies, adds people into clusters depending on where they work, travel, or even live. Even factors like where their children go to school or how close they live to any major cities can be included in this segmentation. The location plays an essential part in finding out the buying habits of individuals and how companies can better cater to their needs.
Other variables that companies can consider include population density, culture, zip code, climate zone, state, region, and country. Population density and culture are possibly the most important ones that they measure since these factors can directly predict the target audience’s buying habits.
Behavioral segmentation focuses less on the customer, and more on the steps that they take when engaging with a company. This can include variables like what they want, the steps they take before making a purchase, how long before they make that purchase and the specific benefits that they will look for in their preferred product.
By better understanding why individuals buy or make certain decisions before making a purchase, companies can then optimize the process. They can see at which step of the buying process most individuals stop or how long they will keep an object in the cart before buying it.
Psychographic segmentation is likely one of the most advanced forms of segmentation that companies can perform. It focuses on dividing possible customers into groups based on factors like opinions, interests, activities, social status, personality, and even their lifestyle. Looking at all of these factors can help companies determine why people make choices. Better yet, they can learn what motivates people to make certain choices.
This type of segmentation also helps determine how they perceive a certain type of product or service. It can also help determine possible issues that they have with current products or services that they use. All of this information can then help companies design a better product or service.
Demographic segmentation is often a culmination of the previously mentioned grouping techniques. The hypothesis pushing this type of segmentation forward is that people with similar characteristics will often have similar tastes and life patterns, putting them into a new demographic. Combining the other grouping methods can help companies significantly narrow down their target audience into a cluster of people most likely to engage with their product or service.
The variables that most companies will check for during demographic segmentation include age, gender, education, income, and occupation. They can often collect this data through surveys and online questionnaires.
The Benefits of Effective Market Segmentation
Effective market segmentation is essential to the success of a product and a business in the long run. Some of the major benefits of investing in market segmentation include:
Easily Identify Trends and Opportunities
Through these different types of market segmentation, companies can very easily identify opportunities and trends in the market. By successfully identifying these trends, they can better predict what type of trend could go viral next. Better yet, by properly studying the relevant market and what it holds, these companies can make their own trends. Furthermore, keeping track of these opportunities can be important as it also allows companies to release their product or service at just the right time to maximize their potential revenue.
Better Research for Developing Products
Another advantage of conducting this type of market research is that companies will have more reliable data when they start developing their products. Even if a product is genuinely good, its chances of survival can be slim. Furthermore, all of that time and money that they spent developing the product will just go to waste. Surveys are a good way to gather relevant market information and allow companies to understand what their target audience really wants.
Improved Advertising Campaigns
Finally, the most obvious benefit of doing all of this market research is that your advertising campaigns can be a lot more successful. Along with getting more conversions from customers, it can also make a company well-known among groups that are not part of their target audience. Marketers need to collect plenty of data before they can effectively implement their marketing strategy.
Market segmentation remains one of the most effective ways that companies can find out the interests of their target audience. From firmographic segmentation that is highly specific to demographic segmentation that takes a lot more people into consideration, these methods of analysis are worth their time and money. So, even if they can take some time to properly implement, the results speak for themselves. Effective market research, when conducted with competent marketing teams, can make a product almost immediately successful.