Market segmentation is the research that determines how your organization divides its customers or cohort into smaller groups based on characteristics such as, age, income, personality traits or behavior. These segments can later be used to optimize products and advertising to different customers.
At its core, market segmentation is the practice of dividing your target market into approachable groups. Market segmentation creates subsets of a market based on demographics, needs, priorities, common interests, and other psychographic or behavioral criteria used to better understand the target audience.
By understanding your market segments, you can leverage this targeting in product, sales, and marketing strategies. Creating your marketing communications both in ad messaging and advanced targeting on digital platforms like Facebook and Google using your segmentation will allow for better response rates and lower acquisition costs. Market segments can power your product development cycles by informing how you create product offerings for different segments like men vs women or high income vs low income.
Companies who properly segment their market enjoy significant advantages. According to a study by Bain & Company, 81% of executives found that segmentation was crucial for growing profits. Bain also found that organizations with great segmentation strategies enjoyed a 10% higher profit than companies whose segmentation wasn’t as effective over a 5-year period.
Companies like American Express, Mercedes Benz, and Best Buy have all used segmentation to increase sales, build better products, and engage better with their prospects and customers.
Article source: qualtrics.com
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