In today’s overflowing marketplace, trying to appeal to everyone can be a costly mistake. Instead, businesses must utilise segmentation – breaking down the larger market into smaller, more manageable pieces that share common characteristics. “If you target everyone, you target no one”, is especially relevant within marketing as identifying and understanding who your customer is and what they need is essential to cutting through the noise and reaching your ideal audience.
Why market segmentation matters
Market segmentation is the process of dividing a broad consumer or business market into sub-groups of consumers based on shared characteristics such as needs, behaviours, demographics or psychographics. Segmentation allows businesses to:
- Target effectively: Reach the right audience with tailored messaging.
- Increase engagement: Provide more relevant products and services, leading to higher consumer satisfaction.
- Optimise resources: Focus marketing efforts on segments that are most likely to convert into paying customers, avoiding waste.
Companies that fail to segment properly can waste valuable resources by marketing to uninterested or irrelevant audiences. Instead, by focusing on specific groups, brands can maximise their marketing spend and get a better return on investment.
Key benefits of market segmentation
1 . Improved customer targeting
When businesses understand their customer base, they can craft messaging and products that speak directly to their needs. Crocs, for instance, has capitalised on the post-pandemic shift towards comfort and loungewear by targeting consumers interested in comfortable fashion. Their ability to connect with young consumers through customisable trendy designs and endorsements has made them a major player in the youth fashion market.
2 . Higher engagement and brand loyalty
Targeting the right customers also fosters better engagement and long-term loyalty. Nike, for example, divides its marketing into segments for athletes, fitness enthusiasts, and casual wearers. By understanding the different needs of each segment, Nike has been able to create messaging that resonates with these groups and retain its position as a top global brand.
3 . Resource optimisation
By focusing marketing efforts on well-defined segments, businesses can ensure that their time and money are being spent efficiently. Businesses can streamline both their marketing efforts and their product development strategies by focusing on the highest-value customers. This focus maximises profitability but also ensures more effective resource allocation.
Types of Market Segmentation
To effectively segment a market, businesses can use several different approaches:
Demographic segmentation
This type of segmentation focuses on factors such as age, gender, income, education, and occupation. For example, brands like LEGO have successfully used demographic segmentation by launching products that appeal to both boys and girls of different ages. Their collaborations with Minecraft and Fortnite have resonated with boys, while the Botanical Collection appeals more to older children and girls.
Psychographic segmentation
Psychographic segmentation divides consumers based on their lifestyle, values, and interests. For example, Coca-Cola doesn’t simply market one drink to everyone; instead, it has developed multiple products: Coca-Cola, Diet Coke, Coke Zero, Caffeine Free as well as an assortment of flavours, each designed to appeal to different consumer segments based on taste preference and dietary concerns.
Behavioural segmentation
This approach focuses on how consumers behave, such as their buying habits, spending patterns, and loyalty. Nike’s ‘Nike Run Club’ app is a prime example, taking advantage of the dramatic increase in the popularity of run clubs. The app tracks users’ running activities, offers personalized training plans, and rewards users with achievements. By understanding and catering to runners’ behaviours, Nike not only strengthens brand loyalty but also tailors its messaging and product offerings to this highly engaged segment of fitness enthusiasts.
Conclusions:
In an age where consumers are overwhelmed with choice, segmentation allows businesses to cut through the noise by focusing on the customers that matter most. Trying to market to everyone leads to diluted messaging and wasted resources. Instead, by identifying key customer segments, brands can ensure that their marketing efforts are focused, efficient, and ultimately, more successful.
Whether you’re looking at demographic, psychographic, or behavioural segmentation, the key to success lies in understanding that “if you target everyone, you target no one.”
Sources:
- https://hbr.org/2006/02/rediscovering-market-segmentation
- https://www.mckinsey.com/~/media/mckinsey/industries/public%20and%20social%20sector/our%20insights/customer%20experience/creating%20value%20through%20transforming%20customer%20journeys.pdf
- https://www.bloomreach.com/en/blog/a-marketers-guide-to-personalization-at-scale#:~:text=Personalization%20at%20scale%20refers%20to,needs%2C%20behaviors%2C%20and%20preferences.
- https://blog.hubspot.com/service/customer-segmentation
- https://www.forbes.com/councils/forbescommunicationscouncil/2024/07/01/using-enhanced-marketing-segmentation-to-engage-audiences/
- https://www.tandfonline.com/doi/abs/10.1080/0267257X.1987.9964020
