In the customer experience world, there is increasing dialogue about the importance of market segmentation and customer personas. For anyone who has not yet encountered them, you may be forgiven for thinking that they are exactly the same thing.
Irrespective of how well a company is able to identify and profile its audience, the question remains as to the extent to which businesses can personalize the experience to meet individual customer needs, while still making a profit from the relationship.
After all, the whole purpose of establishing a target market and creating audience segments is to strike the right balance between meeting customer needs while maintaining sufficient volume to achieve critical mass and drive the economies of scale needed to be competitively viable in a mass-market scenario.
Table of Contents
What is Target Marketing?
Market Segmentation
A Word of Caution on Audience Segmentation
The Segment of One
The Next Step: Segmentation to Personas
Marketing Persona Definition
How to Create a Persona
What is Target Marketing?
Target marketing is the process of defining specific segments of your audience through various identifiers. Businesses with multiple brands and/or products should ideally have multiple target markets.
Segmentation means businesses can apply a different marketing mix (product, place, price, promotion) per target market, helping them reach those people in their audience who actually have interest in the product, rather than taking a blanket approach.
These efforts help create a positive brand image, increase brand awareness, and contribute to brand loyalty over time.
Market Segmentation
Market segmentation can be a real head-scratcher if you don’t know how to approach it. The principle of taking your entire consumer base and then splitting it up into smaller, more manageable homogeneous chunks is widely practiced and understood. That being said, organizations don’t always get segmentation right. For most companies, the biggest obstacle is understanding the best way to start - there are lots of different ways you could approach market segmentation.
In the early days, many product or manufacturing-orientated businesses would segment their audience along product lines. However, with consumers often buying different products from across their portfolio – and demanding some kind of discount or loyalty bonus as a result – it soon became apparent that businesses needed to think about their audience segmentation in a different way.
This naturally led to a financially-based approach, with companies organizing and prioritizing customer segments on the basis of revenue and profit potential. The downside of this was that they started dehumanizing customers by thinking about them as units of money rather than people, thereby generating a distance between them and their buyers.
Over time, this approach led to the introduction of additional information to improve the sales pitch and continue to grow profits. This additional intel included the four ways to determine target markets used to this day:
The 4 most popular types of market segmentation
- Geographic segmentation
- Demographic segmentation
- Psychographic segmentation
- Behavioral segmentation
We'll go into these in more detail below, but first, let's take a look at the benefits. (In a hurry? Skip ahead to the definitions!)
Benefits of market segmentation
There are many benefits to market segmentation. They can be incredibly helpful when crafting your marketing strategy, providing consumer insights that allow your team to focus their efforts and energy in a clear and confident way. For example, once you have segmented your audience, you could:
- Create targeted marketing messaging and promote it where it will make the biggest impact.
- Establish a deeper emotional connection with your audience by understanding (and addressing) your audience's pain points.
- Choose your advertising channels more wisely. Sometimes a channel that fits one segment simply won't be as effective in another. Direct mail vs digital ads, for example.
- Find ways to differentiate your brand from your competitor's, while also strengthening the ties to your consumers' values.
As you learn about your customers on these levels, you can continue to hone your marketing efforts and build brand trust.
Types of market segmentation
The four main types of marketing segmentation include geographic, demographic, psychographic, and behavioral. It is highly recommended to use them in tandem with each other, as this will help inform a more well-rounded image of your audience.
People are complex and in today's world, there are limitations that come from a simplistic view. (For example, today it would be wrong to automatically assume that an upper middle class ‘chap’ would be more likely to be reading Nietzsche than your average working-class ‘bloke’!)
Here are the most common types of segmentation that marketers use:
Geographic segmentation
One of the most straightforward ways to segment your target market is through geography. There are a few ways this is useful:
- Brick and mortar proximity: Based on knowing a zip code and, say, its proximity to a particular store location that’s having a sale, you can use direct marketing to target that region specifically - perhaps sending a direct mailer with coupons for an extra amount off.
- Urban vs rural: Cater your messaging based on whether your target market lives in an urban or rural setting. Tapping into the differing needs and values of these communities can help your brand stand out.
- Climate: Talking about the weather may be the stereotypical small talk approach but it is a great equalizer. Consider how the climate affects (or doesn’t affect as the case may be) your audience in particular geographic areas and use that to inform your marketing strategy. For example, a clothing company can focus their shorts, t-shirts, and swimwear to people in warmer climates while jackets, long pants, and snow gear are marketed to consumers in cooler climates. Straightforward but effective.
Demographic segmentation
Another tried and true marketing technique, using demographic data is helpful for appealing to particular groups based on specific factors. B2C companies might use age, race, education level, and income whereas B2B companies could utilize knowledge of company size and industry for their sales teams.
Be aware though, using a socio-economic demographic approach alone is fairly outdated and marketers should not depend solely on this data to inform their messaging and marketing strategy.
Psychographic segmentation
Getting a bit deeper into the weeds, market segmentation based on a person's interests is an increasingly popular approach. Psychographics take into account your audience's likes and dislikes, values, motivations, priorities, conscious and subconscious beliefs.
This approach, while alluring, is inherently flawed and can be inaccurate from a behavioral perspective. You can often observe a significant difference between what customers state as being their preferences and what they do in reality. One specific example of this was a survey taken of London city commuters, asking them what newspaper they read.
The survey indicated that a very high proportion of people claimed to read a broadsheet newspaper on their way into work. However, these figures did not tally with the newspaper sales data showing that in reality, a significantly higher proportion of red-top tabloids had been purchased.
Behavioral segmentation
Closely related to psychographic data, behavioral segmentation takes into account audience purchase patterns and brand interactions. Behavioral market segmentation looks at the hard numbers that either prove or disprove psychographic assumptions (i.e. the fact that although London commuters said they purchased legit newspapers, they actually bought tabloids).
While psychographics can be problematic, it’s important not to discount them altogether. Whereas behavioral data provides a very accurate representation of reality, it does not consider the aspirations and desires provided by psychographics. After all, perception is reality in the mind of the customer, so something can be missed if we only consider people in the way that they ‘are’ rather than the way in which they would like to be seen. Especially for marketers!
A Word of Caution on Audience Segmentation
The world is becoming increasingly complex so even these parameters for the segmentation of your target market are less cut and dry than they used to be. There are dangers that come from categorizing people on the basis of their location or academic attainment, and we are acutely more aware of them today than we were even 10 years ago.
A combination of these data sets is most likely to give the most accurate picture of your audience's character, thereby theoretically aiding the segmentation process. However, in today’s Big Data world, questions are being raised, not only about the management of data but also the relevance and future direction of segmentation.
The Segment of One
With the growth of the digital age, organizations now have enormous volumes of data flowing into them on a daily basis. This presents several challenges: how to make sense of it all and how to differentiate between the really relevant information to form their target market(s) and all the ‘white noise’.
If the organization is, however, able to crack these codes they’ll be able to move ever closer towards an omnichannel ‘nirvana’. Furthermore, with social listening tools, the internet of things, propensity modeling, and predictive analytics making big data ever more sophisticated and readily available, there could even be enough information to truly create a ‘segment of one’.
But until that happens these traditional market segmentation strategies still hold great value for marketing professionals seeking to reach their target market on a more personal level.
The Next Step: Segmentation to Personas
Some argue that segments and personas are completely different (as suggested in this article from 2012 by the UX design company Foolproof), whereas others suggest that a persona is an evolution of a segment.
Having worked with both, my recommendation would be that the organization needs to be getting its target markets right at the outset, during the segmentation process, before building personas around them. It certainly doesn’t make any sense to create characteristics for potential customers that bear no relation to a meaningful and accurate segmentation exercise. Market segmentation validates the identity of homogeneous target groups, whereas personas help to then enrich those identities for other purposes.
Marketing Persona Definition
Personas enable a business to craft a detailed story around the actions and motivations of your audience through combining the extensive quantitative data used for market segmentation and the rich qualitative data that can be gathered from other sources, such as interviews and focus groups with individuals recruited from representative segment samples.
The information not only relates to the needs and wants of the person relative to the product, service, or channel; it also helps build a much better understanding of the customer’s backstory. This might include how branded customer experiences influence their lifestyle as a whole, clearly subject to the nature of the proposition and its potential emotional influence on their psyche.
To demonstrate just one of the many ways this can be useful, we used Meltwater to look at the differences between people who follow Disney Plus vs those who follow Prime Video.
Below is the Disney Plus audience:
And here is the segmentation of people who follow Prime Video:
While the age range is the same (18-24) that's where most of the similarities end. From this data, we can surmise that those that follow Disney Plus are slightly more pure entertainment focused with Star Wars, gaming, film writing, and an affinity for actor Robert Downey Jr. dominating the segment distribution, while the Prime Video audience has a wider breadth including an affinity for CNN, and more authors and bloggers in the segment distribution.
Each of these production companies could use this segmentation information to craft more detailed and complex personas, which may help inform both the type of programming they create as well as which channels they use to market said programming.
How to Create a Persona
There’s no real right or wrong to creating a customer persona, but in general, specificity is your best friend. The more specific you are, the more real this person becomes, helping your team stay focused on the reality of who their consumers actually are, as opposed to who they might want them to be.
Side note: creating aspirational personas is absolutely a worthwhile exercise, especially as you consider expanding your business or product lines, but it should be secondary to crafting personas from the data gleaned from market segmentation.
When creating a persona we recommend gathering all the information and expressing it in writing and pictorially (e.g. pen portraits, cartoon caricatures, and storyboards) to present an easy-to-understand snapshot expression and chronological/ historical representation of the person. This considers their life from both a functional and emotional perspective, detailing their personality, values, actions, motivations, frustrations, etc. This image can then be used to help build future-state customer journeys and experiences as part of a CX service design exercise.
Better understanding your audience is essential for marketing pros. Whether you're creating buyer personas or looking to conduct a market segmentation exercise, consumer and audience insights help you keep up with real-time audience trends. Contact us to learn how you can use Meltwater by simply filling out the form below to get a free consultation or check out more information about our Meltwater consumer insights tool. Consider getting more information about Linkfluence to segment, understand and activate your audiences.
This article was written by Ian Williams of Jericho Consulting for Business2Community.
