Top-Shelf Tip No. 202:

"Segments must be measurable, substantial, accessible, differentiable and actionable."

Philip Kotler

Segment Customers To Market Smarter

With the customer population and preferences becoming wider, and the competitive options becoming more available, market segmentation has become critical in any business or marketing plan. For example, if you are targeting the director of pharmacy at a hospital, you would find that this role has a different level of influence or buying powers at a small independent hospital vs. a regional hospital with several locations vs. a large national health system with thousands of facilities. It's important to know these differences to better craft your message to address different pain points.

In this issue of Promotional Consultant Today, we share four basic ways to segment your customers and prospects as a first step to developing a targeted marketing campaign, from Hitesh Bhasin, blogger and founder of Marketing91.com.

1. Demographic segmentation. This is perhaps one of the simplest and widest types of market segmentation used. Segmentation generally divides a population based on variables. Thus, demographic segmentation too has its own variables such as age, gender, family size, income, occupation, religion, race and nationality. An example of demographic segmentation is in the automobile market. For example, Kia has the low-price bracket and therefore manufactures lower-priced cars. Audi and BMW target buyers who want to spend on high-end luxuries and who pay extra for quality. In this case, the segmentation is being done on the basis of earnings which is a key demographic element. Similarly, age, lifecycle stages, gender and income can all be used for demographic type of market segmentation.

2. Behavioral segmentation. This type of market segmentation divides the population on the basis of their behavior, usage and decision-making pattern. The product is marketed based on the behavior of the individual. This type of segmentation is highly used in business-to-business marketing.

For example, if a drug manufacturer is launching a new product to the market, the way that drug is marketed to the doctor or healthcare professional is very different from the way it's marketed to the consumer. Also, the way a new software technology is marketed to the C-suite is different than the way it's marketed to a director, who is the targeted day-to-day user of the software.

3. Psychographic segmentation. This type of segmentation uses lifestyle of people, their activities and interests as well as opinions to define a market segment. Psychographic segmentation is quite similar to behavioral segmentation. But psychographic segmentation also takes the psychological aspects of consumer buying behavior into account. These psychological aspects may be the consumer's lifestyle, social standing, activities, interests and opinions.

You can see this behavior across consumer products and brands. In retail, H&M presents its brand and low-cost trendy items for teens and young adults on a budget, whereas Nordstrom represents high quality, luxury clothing for those who are upwardly mobile and driven by success.

4. Geographic segmentation. This type of market segmentation divides people based on geography. Your potential customers will have different needs based on their geography. For example, people who are in rural areas might require propane gas, whereas those located in municipal areas pay for city or private services.

Similarly, in countries where the weather is cold, the same company might be marketing for heaters whereas in hot countries, the same company might be targeting air conditioners. Thus, many companies use geographic segmentation as a basis for market segmentation. Geographic segmentation principles are often used when you are expanding the business in more local areas as well as for international growth.

What type of market segmentation is important for your business as you look to growth in 2019?

Source: Hitesh Bhasin, is the founder of Marketing 91, a leading marketing resource website.

Compiled by Cassandra Johnson

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