What Is Segmentation Analysis and Why It Is Important To Implement In Business?

by Nick T

Are you interested in improving your marketing efforts? Do you want to be smarter about how you spend your advertising budget? Segmentation is a technique that allows marketers to divide their customers into smaller groups based on similar characteristics.

Factors of Segmentation, Segmentation Analysis

These segments can then be targeted with specific messages or offer to appeal to the needs of each customer group. The goal is not only to generate more leads and sales but also to increase your conversion rates. Many factors can be used for segmentation, such as geographical location, age, and gender. This blog post will provide an overview of the different segmentation analyses you can perform to understand your customers better and help grow your business.

  • Demographic segmentation - Demographic segmentation is the process of dividing a population into sub-groups. It helps to identify your customer base and understand which products you should be offering them, as well as how you can best reach out to them.
  • Geographic segmentation - Geographic segmentation is a term that describes the practice of dividing your marketing efforts by geographic region. By doing so, you can better tailor your offerings to suit each specific region's needs and desires. ZIP code analysis is the most common technique, which divides a geographic area by its postal codes.
  • Psychographic segmentation - Psychographic segmentation helps a business identify the specific needs of its target audience. This allows them to understand better what they want and need, which can help improve customer satisfaction.
  • Behavioral segmentation - Behavioral segmentation is the most accurate way to determine which customers are most likely to convert. It's a process that allows you to categorize your users based on their actions and then targeting those specific groups with personalized offers and ads.

Why Does Segmentation Satters For Business?

Imagine you have an analytics report for your website's homepage. There are people from multiple backgrounds visiting your web page. You need to understand people have different backgrounds, i.e., high-paying, low-paying clients, and various interests. Most websites send visitors through one generic path which fits the needs of one category. The visitors won't get a personalized approach, and an average visitor spends less than a minute on a website, if he doesn't get what he needs he is less likely to visit the second time.

Segmentation will give the audience a personalized approach from searching the product to making the payment. It will reduce the time taken by the user to search and buy a particular product. This will make the website user-friendly for people from different age groups. By knowing basic information like who they are and what they want, you can build personalized email recommendations that will deliver the right products to the right customers.

Steps To Increase Conversion Rates:

  • Compare yourself with competition- Every business will have its competitors. It can be direct or indirect. Unless you are a market leader and have created trust with the audience, people will not buy your product without checking your competition. Convince your audience why they should prefer you over others. Also, admit any shortcomings in your business and explain to your audience how you will improve them.
  • A/B Testing- A/B testing is a technique to test your conversion rates. Suppose you create two websites with different designs; the only way to decide which works better is by running a split test. The website which has higher conversion rates is the winner. Use tools like Google optimize for testing. You don't want to spend bucks on expensive testing tools.
  • Offer personalized recommendation- Send customized emails targeting their needs and behavior. You can provide more relevant offers and keep them updated with any changes in your products.
  • Discover your segments with the survey- Audience segmentation through polls is one of the important ways to learn about consumer interest. For example, if you have a sports gear site, people from various backgrounds visit, but very few are interested in your product. You can conduct a poll asking a question like which of the following describes you? This will give a data-driven approach to understand the occupation of your customers, and you can design the products based on their needs.
  • Re-market to your segments- If someone fills out a survey saying they are a startup and you are a website that provides graphic designing services, you need to re-market them with highly targeted ads. This is a way to follow up and drive them back to your site to convert the leads.

Segmentation Mistakes To Avoid:

Segmentation Mistakes to avoid
  • Smaller market segment - Targeting quality customers is crucial but ensure not to reduce your customer base to that extent where you limit your customer base. Understand your objectives for specialized customers and make sure the size should be achievable. 
  • Return on Investment (ROI) – After spending hours of research, you concluded that segmentation would bring you customers but keep track of the most important metric: return on investment. It takes time to see the impact, so keep reviewing the pricing, marketing tactics implemented and ensure it is rewarding in the long run.
  • Ignoring new markets - while your segmentation strategies are serving you well, you need to look out for potential customers in the new markets. Ignoring new customers will stagnant your growth possibilities in the future.
  • Segmentation on instinct – It is a good idea to segment your market, but you need to make sure it is profitable. It would be best to look at the actual number of customers who are getting converted from leads to paying customers. Create simple tests before you finalize your segments and analyze your results. If you are not getting expected results, look for any improvements and target different segments.
  • Using the wrong channel - You may be sending emails to reach your customers but spending your resources on such media is not worthwhile if your customer is not regularly active on the platform. Instead of targeting all platforms or the wrong ones, you can use polling to understand the channel customers use the most. Another way is to classify the media based on their age group. Use social platforms like Snapchat and Instagram to target 18-25 and emails for working professionals.
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