Main Methods of Audience Segmentation

Today, the market for different offers is so large that preparing a product and just waiting for sales is a bad strategy. Website Builder research results show that segmentation and individual offers for small groups of people with the same requests increase sales by 18 times more than those aimed at a wide audience.
In our article, we will consider methods of audience segmentation, features of creating separate offers for each group of users, and how this approach to working with customers affects conversion and sales.

Why is segmentation important?

First of all, what is segmentation? It is the division of the audience into separate groups with the same interests. There are many ways to segment the audience: by geolocation, age, budget, and lifestyle.
Segmentation of the target audience increases conversion, calls, applications, orders, and purchases. If you highlight the main groups of customers and determine their interests, it will be easier for you to make an appropriate offer at the right time.

Each segment consists of several participants. Otherwise, the costs of creating personalized offers will be too high. Create a portrait of the ideal buyer for each audience. Figure out who these people are, what and when they are interested in, and where and why your offer will be most relevant.

Segmentation methods

There are many ways to segment the target audience. Among them, there are no bad or good methods, but there are those that are more or less suitable for a specific situation and business niche.
Let's look at three popular methods of target audience segmentation.

Philip Kotler's method

Kotler's method allows you to divide the target audience into different segments, starting from geolocation, and ending with purchasing power, religion, and nationality.
Kotler's method allows you to segment the audience according to four major parameters: geographic, psychographic, behavioral, and demographic.

Geographical characteristic

Classifying target audiences according to the geographical principle allows you to analyze regions, regions, cities, and towns taking into account the interests of residents. After a detailed analysis, your brand can decide to develop a strategy for one or more regions. If you are segmenting target audiences in a large city, you can even divide it into several small parts.
Previously, geographic characteristics were the main factor in developing a strategy and unique offer for some business niches. For example, R.J. Reynolds Tobacco divided Chicago into three districts. The northern part of the city was supplied with cigarettes with a low tar content: here live more educated residents who care about health, in the eastern part of the city most residents are engaged in physical labor, so the company supplies Winston cigarettes, and in the southern part of the city, Salem cigarettes are sold, which have a high menthol content.

Demographic characteristics

Customer segmentation by demographic principle consists of dividing customers into groups by gender, age, family size, income level, nationality, and position. These factors are the most popular when analyzing the target audience since the preferences and needs of customers are closely related to demographic characteristics.
Here is one of the striking examples of the use of demographic data, or more specifically, age parameters. The Ford automobile brand developed the Mustang model for young people who love fast cars at an affordable price. The demand for the car was huge and exceeded all expectations. This happened by mistake: the manufacturers claimed that the Mustang was for young people, but after analysis, it turned out that those who were young at heart bought the car.

Behavioral characteristic

Behavioral analysis allows you to divide buyers into groups depending on their knowledge, attitude to purchases, and reaction to the product. Attention is paid to the reasons and intensity of purchases, and the choice of a particular brand.

Psychographic characteristic

With the help of psychographic segmentation, users are divided into groups by social class, lifestyle, personality type, values, and emotions. Psychographic characteristic allows you to analyze how users make purchases. For example, teenagers make emotional purchases, and people 35-40 years old plan and think through each purchase more carefully.

Mark Sherrington's method (5W)

Sherrington's methodology is simple and allows you to reduce the time for segmenting the audience. You have to answer 5 main questions about the client and the product:

• Who is the client (who?);
• What do you offer or what does the client want to receive (What?);
• Why does the client need it and what pains does your offer «solve» (Why?);
• when and in what situations is your product needed (When?);
• Where do clients get to know your product (Where?).

Sometimes another question is used for segmentation – «Which?» As a rule, this question helps to highlight customer segments when setting up targeting.
Let's look at how photographer Andriy segments his audience and determines when and which services are relevant.

*this is how Andriy segments his audience
Andriy has identified 4 main segments for himself (there may be many more). Now he just has to analyze each user group, and their interests and prepare a unique sales offer, and at the right moment - make it.

Ben Hunt's Method

Marketer Ben Hunt came up with a theory and a «ladder of recognition», according to which a client goes through 5 stages from getting to know a product to buy it.

According to Hunt's theory, his ladder works when buying any item: shoes, a musical instrument, or a vacation package. Let's look at how young mother Marina chooses a photographer for her son's birthday:

1. Indifference. Marina has a lot of photos from past photo shoots, so there is no need to order the services of a photographer without a reason.
2. Awareness. A young mother remembers that her son will soon be 10 years old. She needs to come up with an idea to make the birthday memorable.
3. Comparison. Marina came up with a cool-themed party in honor of the upcoming holiday. It remains to decide who is needed: a videographer or a photographer.
4. Choice. The party will take place in different locations and the videographer will have to make many transitions. This was not convenient, so Marina stopped taking photos. On the recommendation of a friend, she looked at Andriy's portfolio and prices for his services and decided to stop searching.
5. Purchase. Marina called Andriy and agreed on the date, time, and duration of the shoot.

The time it takes to realize the need for a product before purchasing it depends on its cost and relevance. The cost of a photo shoot is small, and it was never worth thinking about (you can't postpone your son's birthday).
Andriy can run ads on social networks, maintain a personal photo blog and Instagram page, and offer discounts on themed shoots so that clients can quickly evaluate his work and decide whether his style and skills are suitable for cooperation.

What data to use for segmentation

If you know your target audience (hereinafter referred to as the target audience) well, it will be easy for you to segment it. We recommend using additional tools to learn more about your customers:

• Place a form with a short survey on your website (for example, ask how a customer solves a certain problem) or develop an email newsletter to communicate with them;
• study CRM data and materials from Google Analytics;
• Study the interaction of competitors with their audience;
• Compare reviews about your product and your competitor's products.

How to understand that you have identified the right segments

It's simple: your offer should be relevant to each member of the segment. Bad segmentation, for example, is when athletes receive a newsletter and offer discounts on alcohol. Good – when discounts on alcohol are interesting to all participants in the segment.

Common mistakes in audience segmentation

Audience segmentation is not the most difficult task, but it is easy to make mistakes. Some brands use segmentation methods only to determine the target audience, while others are not guided by all the data. Let's look at the main segmentation mistakes for business:

• partial use of customer information. You should not use only data on the age and gender of the customer. For example, skydiving may be equally relevant for a student and a pensioner;
• incorrect definition of segments;
• segmentation without taking into account the geography of customers. For example, when drawing up a sales proposal, it is worth considering that the salaries of customers in the capital and a small town are different;
• no hypothesis testing. Conducting customer segmentation and preparing unique sales proposals is not all the work to increase sales. Build hypotheses, try new ways of interacting with the audience;
• management of irrelevant customer information. Let's consider the example of a pensioner who loves skydiving. Your email newsletters have been relevant for several years, but this year the pensioner stopped jumping due to health reasons. If you are guided by old data, your newsletter will be useless and will only bring you financial costs;
• lack of re-segmentation. For example, at first you provided website development services, but after 2 years you expanded the range of your services: copywriting, advertising, SEO promotion. As your services expand, you need to conduct additional segmentation to determine who needs your services;
• using segmentation methods only to determine the target audience. In addition to determining the target audience, segment data allows you to build communication with customers and make timely sales offers.

Instead of conclusions: how to use segmentation for your business

Segmentation is an excellent tool for increasing conversion and profit for your brand. Start the segmentation process small:

• analyze your audience using Mark Sherrington's method (5W);
• Think about what data can be used to define segments;
• Select one segment and test it: create a special mailing or targeted advertising;
• If as a result of testing you have established that each segment is selected correctly - use Hunt's ladder and create a sales funnel for each group of customers.

FAQ

1. Why does a business need segmentation if it already has a «target audience»? The target audience is a general framework of «who we sell to», while segmentation breaks it down into groups to more accurately select offers, channels, and arguments, which usually increases conversion.

2.  What data is best to use for segmentation? In addition to a basic understanding of the target audience, it is worth taking data from CRM and analytics (Google Analytics), surveys/forms on the website, reviews, and analyzing competitors' communications.

3. How can you check that the segments are correctly identified? If the offer is truly relevant to all members of the segment and produces the expected response (clicks/feedback/applications). If the segment does not respond to the offer, then either the segmentation or the offer needs to be adjusted.

4. What are the most common mistakes made in segmentation? The most common ones are: using only age/gender, not taking geography and context into account, not testing hypotheses, working with old data, not re-segmenting after a product change.

5. How to use segmentation to really increase sales? Start small: identify 1–2 segments (for example, using 5W), collect data, create a separate offer/mailing/target for them, test the result, and scale the approach to other segments, adding funnels for each group.