Improving Marketing Efficiency: The Importance of Market Segmentation

Published: August 12, 2021

Mariah Raner


The key to customer-centric marketing is effective personalization. Anything from lead generation to customer retention requires a smart approach to segmentation.

No matter how big or small your target audience is, dividing it into segments can streamline your marketing strategy and improve your business growth opportunities. The segments you create at the initial marketing stage can help move customers down the sales funnel in the future.

What is Market Segmentation?

Market segmentation is dividing the target audience into different groups based on their preferences, demographics, and behavior. The strategy behind segmentation can vary depending on your current sales and marketing goals.

Four common types of market segmentation are:

  • Demographic segmentation — age, gender, income, marital status, etc.
  • Geographic segmentation — country, region, state, postal code, etc.
  • Behavioral segmentation — buying habits, brand loyalty, interactions with the brand, etc.
  • Psychographic segmentation — hobbies, values, beliefs, lifestyle, etc.

Once the audience is segmented, you can design a campaign aimed at each group separately. Furthermore, market segmentation allows you to target different groups of consumers who value certain products more than other segments and vice versa.

A straightforward example of market segmentation is a company that caters to different locations. It could be a bakery that has branches in nearby towns or a law firm that services an entire state.

They would segment their target audience based on the location and tailor the marketing effort (content, paid ads, influencers) accordingly.

Important Statistics to Consider

  • In email marketing, segmented campaigns demonstrate 14% higher open rates than non-segmented campaigns (MailChimp Survey).
  • Websites based on segmentation can be two to five times more effective than those that aren’t (HubSpot Study).
  • Segmented campaigns can result in a 760% increase in revenue (Campaign Monitor).
  • 80% of customers are more likely to purchase from a brand that provides a personalized experience (Epsilon Study).

Benefits of Market Segmentation

Taking full advantage of market segmentation tactics can have some benefits for a growing business, including:

#1: Higher Profitability

By targeting segments of your target audience, you can identify better business opportunities for each segment. This, in turn, helps your marketing team create a focused campaign that yields better results.

Meanwhile, the sales team benefits from the data collected for personalization purposes to push the consumer down the sales funnel quicker.

Segmentation tactics allow you to capture the attention of more high-paying customers, thus increasing the company’s profitability.

#2: Higher Retention Rates

With 80% of profits coming from 20% of existing customers, retention is on every company’s agenda. By segmenting your existing audience, you can come up with a highly personalized approach and design appealing offers to your loyal customers.

In light of this, it could inspire them to become brand ambassadors, allowing you to reap the benefits of WOMM (Word of Mouth Marketing).

#3: Cutting Marketing Costs

Taking a personalized approach to different segments of your target market allows you to design highly effective marketing campaigns. This can reduce your marketing budget for both organic and SEO tactics.

For example, aiming your paid ad content at a specific part of your target audience allows you to get the best ROI and prevent useless traffic from entering your website and increasing your CPA (cost-per-acquisition).

Meanwhile, creating targeted content for each segment can help bring the right customers to your website, pushing it to the top of SERPs (Search Engine Result Pages).

#4: Higher Customer Satisfaction

With a personalized approach being one of the major aspects of customer satisfaction, targeting can increase the rates tremendously.

Segmentation can help you design personalized offers, allowing both potential and existing customers to see your dedicated involvement in the sales and marketing process.

Eventually, you can serve consumers better and position yourself as an expert in the field and an industry leader.

#5: Improved Communications

Even if different segments of your target audience prefer similar products, segmentation can help you improve communication with the consumers.

By knowing which communication channels they prefer and how they respond to technical information about a product can help you design appropriate valuable content.

#6: Better Product Development

Market segmentation doesn’t just help you market and sell products efficiently. It allows you to study each segment’s needs to create new products.

You can develop new products that may be interesting for the main segment of your target audience, thus appealing to a large group of customers with a high buying potential.

All the data you collect when analyzing target audience segments carries immense value for the entire operation of your company, especially when you are considering growth.

#7: New Directions to Explore

By dividing your market into segments, you can discover groups that tend to fall through the cracks. For example, when studying behavioral traits of the target audience, you may find a big segment of your potential customers that prefer making purchases when commuting to work. This could drive you to create an app.

Another example is a store that aims its marketing efforts at an adult audience only to discover that a significant number of teens are interested in their products as well. This could drive you to design a product line specifically for the teenage audience.

#8: Better Decision Making

The data you collect when segmenting the market can become the driving force behind your business decisions.

You can use this information to change pricing policies, adjust your marketing budget, and determine new strategies for product distribution.

Exploring the Importance of Market Segmentation

Companies that take full advantage of market segmentation can improve the efficiency of their sales and marketing campaigns.

If you are planning to expand your business, analyzing different segments of your target audience can help you make educated decisions about product development and distribution.

From cutting costs to improving the company’s performance, segmentation is a highly useful tool, which can’t be ignored.

At BrandCraft, we are committed to improving your company’s bottom line through exceptional marketing strategies. If you’d like to learn more about market segmentation, please contact us at any convenient time.

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