Segmentation allows for targeting advertising activities at different audiences, taking into account demographic, psychographic, behavioural, and geographical criteria. These activities enable to create customised offers, achieve better conversion rates, engage recipients, and thus increase profits. How to segment users? How to collect data on recipients to create relevant segments?
Microsegmentation and macrosegmentation
Using several levels of market segmentation is a good solution. Its basic types include macro- and microsegmentation. Macrosegmentation involves estimation of the market size and sales. It needs to be further divided into smaller segments, namely user subgroups according to the given criteria: demographic segmentation, psychographic segmentation, behavioural segmentation, geographic segmentation.
Acquiring demographic data about users is relatively inexpensive and easily available. It assumes the division of target groups based on differences observed among consumers. Demographic segmentation refers to B2C relationships and aims to extract segments according to the following criteria:
- age – consumer habits and needs depend on the age group. They will be different for dependent minors, and different for people over 40 having a stable financial situation;
- gender – this is one of the most important bases for market segmentation. Women’s and men’s needs differ at many levels. Differentiation of market behaviours can be seen on the example of the clothing, jewellery, and cosmetics industries;
- education – it could even be said that the more educated the user, the more product knowledge they have and will react differently to an advertising message than people with lower education;
- income – marketers divide the market into three groups: high, medium and low income. On that basis, a sales strategy regarding the manner of communication is established – whether to sell the product as a need, luxury, or desire;
- nationality – determines the choice of a given brand. One of them may be very popular e.g. in Japan, while in Poland it will not be the first choice.
Psychographic segmentation takes into account psychological and emotional aspects of consumer behaviour. They are not as easy to observe as in the case of demographic data, but they provide valuable insight into specific users’ needs and preferences. Segmentation includes, among others:
- lifestyle – recipients’ behaviour may be influenced by their lifestyle, activity, hobby, or everyday habits. For example, women who live an eco friendly life are more likely to buy cosmetics with natural ingredients;
- personality traits – they influence purchasing decisions to a large extent. For example, research shows that extroverts make up the largest proportion of Coca-Cola and Pepsi recipients;
- values – they must be shared by the consumer and the brand.
Behavioural segmentation allows for assigning consumers to specific groups based on their behaviours. Such microsegmentation primarily concerns activities related to interaction with the website, online store, or application. Targeting and segmentation are made on the basis of:
- actions taken on the website – they refer to the time spent by a user on the site, types of content he or she is interested in, articles they browse, or links they click on;
- shopping habits – these include, among others, devices used for shopping purposes (desktop, mobile), product categories users spend most money on, as well as factors that motivate to buy (discounts, bargains, prestige, or emotional issues);
- loyalty – loyal customers who do not make shopping decisions accidentally are more important to the brand. Behavioural segmentation applies to users who repeat purchases in the same online store (heavy users).
Geographic segmentation differentiates users based on location, giving an opportunity to present advertising messages based on:
- country of residence,
- postal code,
- population density,
- area of residence (rural, urban, suburban).
Geographic segmentation is of great importance, among others, to local companies or brands that want to conduct advertising activities taking into account cultural differences, consumer interests or needs in different regions. Niche marketing requires defining specific needs of audiences who often exhibit non-standard characteristics. This type of marketing focuses on gaining or maintaining a competitive advantage in a given area and particular target group.
Segment utility vs marketing goals
Specific segments must be relevant for business purposes and meet marketing goals. The number of segments should not be excessive, since it may go beyond capabilities of the marketing department. Not every market segmentation is effective. One should make sure that the segments created are measurable, i.e. analyse the level of sales and effectiveness of the campaign. On that basis, it is possible to reformulate one’s own market definition – it might have been defined too broadly, which means that marketing goals have not been achieved.
Segmentation and targeting are performed on primary data, i.e. obtained through marketing research or collected in the course of implementation of various company activities. Effective segmentation should be based on data regarding consumer characteristics and requirements, market size, consumer attitude to the brand, prevailing trends, or product characteristics.