In a highly competitive environment, when a huge number of goods and services are available to consumers, it is vital for businesses to clearly understand who their target audience is. You shouldn’t assume that your target audience is everyone. In today’s realities, such an opinion will only lead to failure. To succeed, you need to clearly understand who your “ideal customer” is and focus your resources on them.
Recent studies show that segmented and customized offers targeted at small groups of audience members with similar needs increase sales by 18 times compared to those aimed at a wide reach. This clearly demonstrates the need to study your customers in detail and adapt marketing activities to their characteristics.
However, target audience segmentation is not just a template collection of information about consumers. This is painstaking analytical work that requires a deep dive into the hobbies, goals, fears, and concerns of customers. Only by putting in enough effort will you be able to truly identify your people, and the effort will pay off a hundredfold.
What is target audience segmentation?
Target audience segmentation is the process of dividing people into groups based on certain characteristics in order to create personalized offers and communications. The goal of the entire process is to increase conversion, increase the number of calls, applications, and sales through more targeted exposure to potential customers.
Without segmentation, marketing efforts are likely to be scattered among people who are not interested in your offers. This will inevitably lead to inefficient spending of the advertising budget. For example, if you have products for several age categories, then both the advertising messages and the communication channel for each segment should be selected individually.
Segmentation is relevant both for startups that are just looking for their niche and for mature companies that want to find new growth points. The deeper you understand your audience, the more targeted and convincing your offer will be.
At the same time, the methodology helps not only to increase the effectiveness of advertising, but also to obtain valuable insights for finalizing and improving the product. It can be used to adapt the functionality and characteristics of a product to the needs of specific customer groups, which opens up new growth points.
However, you need to understand that a segment is not a single person, but always a group. Personalized work with each individual Internet user would be too costly.
Why do you need to segment your target audience?
So, why do you need to segment your target audience? Here are the key tasks that this tool can help you with:
Assortment optimization. Understanding the needs of the customer makes it possible to adapt the content of the product catalog on the website. For example, if you know that students aged 18-24 are actively looking for compact laptops for studying, while office workers prefer powerful workstations, you can create appropriate sections in the catalog and satisfy the needs of both groups.
Increase the effectiveness of campaigns. With a clear understanding of the interests, needs, and pains of each segment, you can create offers that hit the mark. This way, you can avoid “shooting at sparrows with a cannon” when advertising is targeted at all potential customers at once, hoping to guess their preferences.
Cost reduction. Segmentation allows you to avoid unnecessary costs for testing and mistakes when setting up campaigns. You don’t spend your budget on promotion among irrelevant target audiences, which means you get a more substantial return on your advertising investment.
Personalization. The better you understand your customers, the more personalized your ads will be. For example, in email newsletters, you can address the recipient by name and offer products that are relevant to them. For example, “Dear Nikita, if you’ve just moved to a big city, we have an offer that will help you adapt to a new place.”
Focus on key benefits. Working with segments allows you to emphasize those product advantages that really matter to these people when communicating with each group. For example, when promoting thermal mugs among office workers, you should focus primarily on their ability to keep a drink warm for a long time, rather than on their low price.
Choosing the best promotion channels. Knowing which platforms and resources each segment of your target audience prefers, you can focus your efforts on them. For example, if you realize that your customers hardly ever use Facebook, you can save money by refusing to promote on this social network.
Determine the value of each individual segment. You can identify the most promising and profitable groups to focus your marketing efforts and budgets on. For example, if the main customers of seedlings and seeds in your store are rural residents, it makes sense to focus on attracting them.
How can you segment your target audience?
To figure out how to segment your target audience, the easiest way is to use the most obvious features that can be used to divide users into groups.
Gender
Men and women perceive information differently. Men usually pay attention to the general message of a message, while women are more attentive to details. Women respond better to emotional content that evokes empathy, while men value status and financial success.
In visual advertising, women positively perceive images of brutal young men, and men positively perceive images of attractive and sexy girls. Taking these features into account, you can create more targeted advertising messages.
Age
People’s preferences, social status, income, and worldview change dramatically with age. Advertising targeted at an 18-year-old student is unlikely to interest a 40-year-old father of three or a top manager of a large company. For example, it is better to offer fashionable gadgets and apps to young people, and tours and health products to the older generation.
Location
Geographic segmentation is relevant both for local firms targeting residents of a certain region and for businesses working for a wide audience. It helps to adapt marketing to language, cultural traditions, climatic conditions and specific characteristics of people in different parts of the country or the world.
For example, a fashion retailer in the capital city will display different advertisements depending on the season, while in a mountainous area it will emphasize warm clothes and equipment for outdoor activities.
Consideration of geographical specifics is clearly demonstrated by examples of unsuccessful names in international markets. For example, Blue Water sold poorly in Ukraine because of the consonance of its name with the unfamiliar word “vomit”. And Mitsubishi had to rename the model Pajero for the markets of Spain and Latin America, because the original name was similar to the colloquial term “masturbate”.
Nationality
Cultural traditions and peculiarities of nations also play a significant role in segmentation. What is acceptable and interesting to one nationality may be completely irrelevant or even offensive to another.
For example, pork is in demand in India, but is almost never bought in Israel, where the majority of the population does not consume it due to religious beliefs. The promotion of beef, on the contrary, will resonate with Israelis, but not with Indians.
In addition, you need to take into account the mental characteristics of nations. Conservative Germans will be more receptive to content based on facts and logic, while emotional Italians will be more responsive to messages that appeal to feelings and experiences.
Marital status
This has a direct impact on the long-term interests of consumers. For a working mother with several children, the topic of savings and benefits will be much more relevant than for a single man or a young bride who has not yet faced the realities of family life.
Promoting a trip to a family resort to a conditional bachelor or romantic dating to a married woman means wasting the advertising budget. That’s why taking marital status into account can help you create truly compelling offers.
Occupation
A person’s professional activity and position influence mainly his short-term interests. For example, men’s manicure may be in demand among top managers of large companies, for whom an important role is played by neat appearance and presentability. But for employees of car washes or car mechanics, whose work is associated with constant contact with oils and dirt, all this is completely irrelevant.
Understanding the professional specifics will help to create more targeted and effective advertising campaigns, offering people what really has value for them in the context of their occupation.
Education
It not only determines people’s lifestyles, but also influences their receptivity to different types of advertising. Budget students can be offered inexpensive mass demand goods or invitations to publicly available youth events and festivals.
For schoolchildren, educational programs on promising professions paid for by parents are relevant – this is a kind of children’s marketing, aimed at children, but financed by adults. In turn, people with good education, as a rule, have better-paid jobs and, accordingly, different interests and demands than those who do not have it.
Income
Even peers from the same city can have very different purchasing power. For example, a budget student living on a scholarship and parental support will respond to different content than a more affluent commercial student. Pensioners or mothers in maternity leave are not relevant to investment advertising due to lack of funds, even if they are interested.
On the contrary, wealthy top managers or businessmen will pay attention to luxury offers and premium brands, while the economy segment may scare them away. Therefore, in communication with them it is better not to use the words “discount” or “savings”, replacing them with “advantages”, “benefits” or even “privileges”.
Needs
It is important to understand the true needs and motives of the CA. This determines how the UTP, advertising messages, and content for warming up the audience will be formulated.
For example, a simple cheap watch satisfies the basic need for security, helping us to know the time. And status watches cover a higher level of Maslow’s pyramid – the need for respect, symbolizing the owner’s high position.
Behavior
Effective behavioral segmentation requires a lot of information, much of which can be obtained through a website, mobile app, and external CRM system. This is information about customer habits, views, additions to saved items, reviews and, of course, brand loyalty.
This is how you can build effective communication. For example, you will be able to distinguish a visitor who has visited your website for the first time from those groups who have seen it before and browsed the products, but never took a targeted action. With this data, you can make customized offers for all groups, for example via push notifications:
New user: “Welcome! Register on the site and get a bonus.”
To a frequent guest: “Connect your loyalty program for repeat customers and start saving money!”
What other types of segmentation are there?
In addition to the most common ways of segmenting the target audience, there are other, less obvious ones. At the same time, it is not prudent to ignore them, because with the proper approach they show no less good results. So, segmentation can be:
Technographic
Helps group people based on the devices they use to access the web. For example, if a user opens an online appliance store using Safari browser, it is likely that he is interested in Apple appliances. Accordingly, you can show him a pop-up banner recommending devices of this brand.
This method is especially relevant in the era of mobile devices and cross-platform connections. Understanding what gadgets and software customers prefer, you can adapt your content, design, functionality of your website or application to them.
Transactional
It is based on the history of interaction with the brand. It takes into account, for example, the date of registration on the site, how long ago the previous order was, their total number and much more. In essence, this is a kind of behavioral grouping, but with a wider scope of criteria.
Such segmentation is indispensable for increasing loyalty. For example, you can deliver goods for free not to everyone (which would be too costly), but only to those who have a certain amount of products added to their cart. Or give additional discounts to those who regularly order something in your store.
Firmographic
Analogous to demographic grouping, but for B2B customers. It takes into account the market segment, physical location of the company’s office, turnover, gross revenue, number of staff, etc. This information helps to form a personalized offer for each corporate customer.
For example, an enterprise software provider may offer a serious multinational firm a wide range of customizable services, while smaller players may offer something simple with a fixed one-time fee.
Main methods of CA segmentation
Of all the existing methods of segmentation of the target audience, we will single out 4. However, it is a combination of them, rather than using one of them separately, that will work best.
The Mark Sherrington Method (5W)
One of the most effective methods. It is based on the marketing law that says that every product is intended for its customer. The essence of the 5W methodology is to answer 5 key questions beginning with the letter “W”:
What, exactly, are you proposing? The proposal should be clearly stated.
Who? Who is your target audience? Who needs and is interested in your product?
Why? Why does your product exist, what problems does it solve? You need to understand people’s motivation based on their tasks, ambitions, challenges.
When? When will people want to contact you? Here you need to consider seasonality or linking to certain events in the consumer’s life.
Where? Where can potential customers see information about the product and how can they buy it? You need to identify the most effective touch points and the places where people will be most receptive to advertising.
By answering these 5 questions, you can clearly understand your audience and offer them the most relevant solutions to their problems.
Let’s look at a concrete example. Let’s say you offer the service of installing an operating system on computers. In this case:
What? This is the installation and configuration of the operating system itself.
Who? People who bought a new computer without an operating system, or who want to reinstall the system. Usually these are PC users with basic skills who do not have deep knowledge for self-installation. Sometimes they are people who don’t have enough time to install, especially if it’s something specific like Linux.
Why? People want to make full use of all the capabilities of a computer – to work, surf the Internet, install programs, etc. Without an OS and the right drivers, they can’t do that.
When? When a new computer without an operating system has been purchased or when the current system has stopped working properly and needs to be reinstalled. That is, the service is in demand under very specific circumstances.
Where? People are likely to search online for information about a service when they encounter a problem. Therefore, it makes sense to set up contextual advertising on search engines.
Ben Hunt’s Ladder of Recognition
This is a theory that describes a person’s journey from the first acquaintance with a brand to making an order. According to this concept, the consumer goes through 5 key stages:
Indifference. Now he is not yet aware of the problem and does not know about the existence of the product. The task of the marketer is to attract his attention, to show that he has a certain problem and that a particular product can solve it. For example, a person may not even think about the need for car insurance until he is confronted with information about the number of car accidents and possible negative consequences.
Awareness. The client becomes aware of the problem and learns that solutions exist. At this stage, they are usually looking for additional information, studying websites, subscribing to newsletters. It is necessary to provide the potential buyer with a maximum of useful content that will help to better understand the topic and make you stand out among your competitors. Continuing with the insurance example, a person already realizes that an insurance policy can protect them from unexpected expenses and starts exploring different options.
Comparing solutions. Having several options for solving his problem, he begins to actively compare them among themselves by various parameters – price, quality, additional advantages, etc. He evaluates which option is the best for his situation. Now the task of marketing is to provide a complete and convincing summary of the advantages of a certain product, to remove possible objections. In our example, a potential customer studies insurance programs, comparing coverage, deductibles and cost.
Purchase. The customer makes a decision to buy and performs a targeted action: places an order on the website, calls a manager, etc. He is already convinced that your product is the best choice to solve his problem. The task of the business is to make the purchase process as simple and convenient as possible, to eliminate any barriers that may hinder the client. If all the previous stages have been successfully completed, a person chooses an insurance company and takes out a policy.
Loyalty. Working with a customer doesn’t end after a purchase. This stage focuses on building long-term relationships, increasing loyalty and generating repeat sales. Various tools can be used for this purpose: loyalty programs, special offers for regular customers, regular communication support. A satisfied customer is more likely to return to you again and recommend the product to their friends.
LTV method
This method takes into account the assessment of the customer’s lifetime value during segmentation. With the help of this method it is possible to predict how much revenue each customer will bring for the entire period of cooperation. In order to calculate LTV you need the following data:
Total number of customers;
Average check for each segment (economy, standard, premium);
Average number of purchases made by one person;
Average number of orders during a month;
Average duration of the customer life cycle.
The formula for estimating the indicator is as follows:
LTV = Average check × Number of purchases per month × Retention time.
Let’s consider an example. Let’s assume that in the economy segment the check is 5000 hryvnias, the client makes an average of 5 orders per year and stays with you for about 12 months. So, his lifetime value will be equal to: 5000 × 5/12 × 12 = 25000 hryvnias.
In the premium segment, the check is higher – 18000 UAH, but the average client makes only 1 order per year. Accordingly, its LTV will be the same 18000 UAH.
This example clearly demonstrates that working with the economy segment of the audience can be more profitable in the long term due to a greater number of repeat orders, even despite a lower check. That is, you get a stable turnover instead of a one-time high margin.
ABCDX analysis
A segmentation method that separates people based on their level of engagement, readiness for targeted action, and potential value. According to this methodology, customers are categorized into 5 main groups:
A – the most valuable. They use the product regularly and bring the company significant profit. There’s a clear need that the product fills, so conversions are usually high.
B – high potential. In this case, the buyer takes a long time to make a decision on the final action, but it can bring a large income in the long run. Here there is a need, but there are certain objections and doubts.
C – customers who are ready to buy, but for small amounts and not immediately. They don’t really need the product right now and are partially covered by alternative solutions. Such customers may have a number of serious objections.
D – the least promising customers with a low probability of purchase. They can take a long time to make a decision and often do not reach a purchase at all. Their need is minimal or already covered by other solutions, and there are many objections.
X are potentially large customers, but they are not satisfied with the product in its current form. They may move to segment A when your offer meets their requirements. Admittedly, the business may not have the resources or capability to make these changes.
It is important to engage with each audience segment in different ways. For example, group B should be convinced of the benefits of the product by offering test access and emphasizing guarantees. And for category C, it is better to focus on telling them about the features and value of the offer, gradually building their need.
When and how often should you segment your audience?
The ideal time to start segmenting your target audience is during the product development phase. Even before prototypes and MVPs begin, you need to have a clear picture of future customers and what they expect from the product.
This will help to make the right decisions regarding functionality, design, pricing and positioning. In this way, you can determine the main product lines and the structure of the product line, if a variety of versions or modifications are planned.
Early segmentation will give an understanding of the availability of CA, optimal communication and sales channels. Knowing where potential clients “live”, what social networks and media they use, what events they attend, you will be able to build a really effective promotion strategy.
As for the frequency of segmentation, we recommend conducting it:
When there are significant changes in the market – economic shocks, technological breakthroughs, legislative shifts, etc. These factors can significantly affect customer needs, behavior and solvency.
When major competitors emerge or the positioning of existing players changes. This may lead to a redistribution of the audience, change in expectations and perception of the product.
When launching products or entering new markets. Each market has its own specific audience, which will have to be analyzed and segmented separately.
When updating your marketing strategy on a planned basis. Even if there are no visible changes in the market, it is useful to refresh customer information once every year and a half. During this time, significant shifts in the preferences and behavior of the audience can accumulate.
What mistakes are often made when segmenting the target audience?
Narrow focus on demographics. Many marketers limit themselves to grouping by gender and age, ignoring other factors. But people who are identical by these indicators can differ dramatically in income, interests, and lifestyle. For example, two 20-year-old students – a budget worker and a “major” – are unlikely to react in the same way to an advertisement for inexpensive English courses.
Rarely updated information. Markets and people are constantly changing, and a product that was relevant a couple of years ago may not be relevant today. A prime example is the 2020 pandemic, which dramatically changed consumer behavior patterns. Using data on restaurant or mall traffic during a lockdown period is clearly a flawed strategy.
Neglecting testing. Before launching a large-scale production or advertising campaign, it is worth testing demand and audience response on a small sample. This will help you to adjust your strategy and avoid large losses. It is worth testing both products and sales techniques – a particular segment may need a special approach.
Excessively narrow segmentation. In an effort to personalize the approach, marketers can “subdivide” the audience into very small groups. The result is 2-3 people in a group, which makes scaling and automation impossible. It makes more sense to combine close segments by key attributes. For example, instead of separate campaigns for moms aged 25 and 30, it makes sense to make one “young moms” campaign.
Ignoring geography. The place where you live and work is the most important factor influencing your customers’ purchasing power, habits and preferences. Offering luxury goods in a small provincial town or advertising snowmobiles in southern regions is clearly ineffective.
Focusing on the product. Many segment audiences based on the features of the advertised product rather than the actual needs of customers. People don’t buy drills – they buy the ability to make holes in the wall. Focusing on the product rather than the benefits prevents you from seeing alternative markets and points of growth.
