Customer Segmentation Market Research: A Complete Guide

Customer Segmentation Market Research: A Complete Guide

Customer segmentation: What is it?

Customer segmentation is the process of grouping consumers according to traits they have in common. This enables businesses to better target, market to, and sell to those groups by fine-tuning their messaging, sales techniques, and products.

Both business-to-business (B2B) and business-to-consumer (B2C) marketing use this strategy. The majority of B2C consumer groups are determined by factors including demographics, way of life, values, and requirements. Contrarily, B2B marketers frequently divide their target audiences according to their industry, geography, preferred method of payment, or previous purchases of particular goods.

Why should you segment customers?

Companies can more easily market their goods and services by segmenting their consumer bases. It is the distinction between promoting a product universally and focusing your messaging to the wants or needs of particular customer segments.

For each key customer category, marketers frequently develop buyer personas, or research-supported avatars of their ideal clients. Customer groups will be categorised using demographic, psychographic, shopping, and motivational data.

A corporation can create a buyer's journey map that depicts the choices and actions a client makes before, during, and after a purchase once it has built buyer personas. As a result, it may adjust its branding, pricing, and marketing language to suit each stage of the customer journey.

Customer segmentation and detailed buyer persona descriptions give certain customers a life of their own, boosting the likelihood that products will be sold and lowering the high risk of product failure. These descriptions are employed by businesses to enhance consumer experiences, increase brand loyalty, and cross-sell and upsell other products. Identification of the best consumer segments, understanding of preferred message and purchasing methods, and cost-effective selling are all made possible by segmentation.

How to divide a consumer base

In order to better understand the prospects in the market, organisations frequently segment their customers as part of a bigger market research project. Finding out the responses to inquiries like:

  • What size market opportunity does our good or service have?
  • How does our company's brand compare to the others?
  • Which groups of people are most likely to purchase our goods or services?
  • Which marketing initiative will be most effective with our target audience?

Surveys for market research are regularly used to gather thorough information on consumer motives and actions. These usually address inquiries like:

  • How likely are you to tell a friend or work colleague about this product?
  • What is the most-liked feature of the product?
  • What features of rival products do you find most appealing?
  • What factors led you to choose the product?

What are some potential reasons you might choose not to purchase the product? Frequently, over a longer period of time, these questions will be posed to the same audience numerous times. A panel survey like this one tracks shifts in consumer sentiments and offers advertisers useful information.

To learn why a person purchases a product, you can utilise market research templates and other tools. However, you also need to know who will purchase the item. Customer segmentation is useful in this situation. You can successfully segment your consumer base into subgroups when you identify the traits of people who like and will purchase your goods. To divide your clients into distinct groups, you must gather data. Surveys are an excellent approach to get information about demographics, spending habits, interests, and other specific areas. Additionally, you can acquire data through focus groups, interviews, current consumer data, and other means.

When you have enough information, you may start classifying your consumer segments. A popular method for client segmentation is demographics. You can gather information on a customer's age, gender identity, level of income, educational background, and marital status through surveys. Customer segmentation questions may also ask about who in the household makes purchasing decisions, what lifestyle challenges they face, and comparable information depending on your study purpose.

After segmenting your consumer base, you may focus on addressing those groups. However, segmenting and targeting are sometimes misunderstood. When you segment, you create multiple groups of individuals with shared traits. Targeting focuses your efforts on a specific group or segments because they are more likely to buy your products.

You might, for instance, have a brand-new tea variety to market. People from various demographics who drink tea for its health benefits, for a caffeine boost, or as a less expensive alternative to soda may be included in your consumer groups.

You must determine which customer group is most likely to purchase your new tea. You can determine the ideal consumer category for your product using demographics and behavioural characteristics. This strategy is used by businesses selling to both consumers and businesses to find the customer segments with the highest likelihood of making a sale.

You must provide answers to questions that further describe your consumer segment and how you might market to them in order to determine your target audience. the following inquiries

Do you market to both businesses and consumers?

How many people would you say make up your target market?

How many individuals or businesses offer a product like yours right now?

How fiercely contested is the market for your goods?

You may now design a survey for your intended audience that asks inquiries like:

How frequently do you sip tea—hot or iced?

Do you shop online often?

How eager would you be to receive tea delivered?You should ensure that you sample the appropriate amount of participants from your target client category while conducting a survey. To determine whether people will purchase your tea, for instance, you could want a representative sample of 30 million people. Depending on your intended market, you might discover that 400 survey replies from that group will give you the information you require.

You may gather the survey data you need to determine whether your tea will be a success by employing statistical sampling, screening questions, and pertinent questions.

Example customer segmentation models

Customer segmentation entails grouping people together based on characteristics in common. To do this, marketers employ customer segmentation models that specify the factors that best characterise the target markets that would purchase their goods.

Companies acquire client information, results of market research surveys, data on purchases, current trends, competitor analysis, and other details that would enable them to divide their consumer base into various groups. Automation has made it simpler to gather and analyse data about their current and potential consumer bases.

The items and services sold will determine the segmentation model that is employed. These segmentation models are applied to both B2C and B2B clients as well as to the general public and employees. Demographic, regional, psychographic, technological, behavioural, needs- and values-based techniques are some examples of customer segmentation types.

Geographic segmentation

Geographic segmentation relates to where businesses are situated or where consumers live and work (for B2C) (for B2B). Six elements are frequently utilised to conduct geographic segmentation:

  1. Climate
  2. Cultural or religious preferences
  3. Languages spoken
  4. Population characteristics (urban, rural, population density)
  5. Geographic location (state, city, zip code, region, province)
  6. Timezone

Advertising benefits greatly from geographic segmentation, particularly when focusing on U.S. zip codes. By employing specific neighbouring zip codes, local companies can more easily promote their services in print and online advertising.

Due to the diverse tastes of clients in various geographic regions, this form of segmentation is also beneficial. For instance, McDonald's offers beer at its eateries in South Korea and Europe but not in the United States. Additionally, McDonald's offers lobster rolls in six Northeastern states that are close to the Atlantic Ocean.

Demographic segmentation

People are regularly put into groups according to their personal and lifestyle traits using demographic consumer segmentation. This might comprise:

  • Age
  • Gender identity
  • Income
  • Ethnicity
  • Occupation
  • Religious affiliation
  • Household structure
  • Education

For audience targeting, demographics are frequently employed, particularly in market research surveys. It is simpler to conduct concept testing, analyse pricing sensitivity, and assess marketing messaging when audiences with similar interests or identities represent possible customers.

Psychographic segmentation

Focusing on psychological traits like personality, attitudes, social position, lifestyle, and opinions is known as psychographic segmentation. By grouping customers based on these attributes, you may learn more about how customers feel about your goods and services.

Psychographic surveys are used to collect information for market research in order to comprehend not only purchasing patterns but also the driving forces behind those actions. Buyer personas frequently incorporate psychographic data since it may tell you what consumers desire, how they perceive your products, and what holes you need to fill to enhance your messaging, offerings, or customer experience.\

Behavioral segmentation

Customers are grouped using their behaviours, not their qualities, in behavioural segmentation. It assists in determining not just who clients are but also how they respond while interacting with a business or making a purchase.

Analyzing a customer's purchasing activity is frequently necessary when focusing on their habits, trends, and behaviours. What procedures do they follow? What is required for them to finish a transaction? What barriers prevent them from making a purchase?

The following four elements can have an impact on customer behaviour:

• Purchase behaviour – what transpires after a purchase?

• Occasion and timing – which audience will purchase through a physical location, a mobile app, or a website?

• Desired benefits – what value proposition or advantages do they hope to obtain?

• Customer commitment to your brand or loyalty programme: How devoted are they?

Even after a customer has paid for your good or service, behaviour continues. Behavioral segmentation also takes into account:

• The stage of customers' customer journeys

• The extent of using the product.

• How satisfied they are with the buying procedure

By using behavioural segmentation, you may find cross-sell and upsell opportunities, evaluate the overall value to your organisation, and create a strategy that improves your customer's purchasing experience.

For a more thorough customer segmentation analysis, behavioural segmentation is typically integrated with demographic, psychographic, and other models.

Technographic segmentation

Technology has a significant impact on how businesses and customers purchase goods and services. Technographic segmentation highlights the devices and applications that are considered in the choice to buy.

Marketers must take into account the apps and devices that customers use to make purchases in order to segment their B2C consumer base. Customers who buy things through a phone app can be different from those who shop in-person or online. Each technical feature must be taken into account as part of the transaction.

Customer segmentation for B2B sales can take into account the clients' tech stack, which may include CRM software, marketing automation tools, commonly used applications, and upcoming technology. Technographic segmentation data improves the efficiency of reaching particular target audiences when paired with geographical, industry, and customer base data.

Needs-based segmentation

By concentrating on how customers meet their emotional and practical requirements, needs-based segmentation aids marketers in further refining their customer segments. Such qualitative data regarding the must-haves of consumers can be gathered through market segmentation surveys.

Emotional demands typically revolve around:

• Attributes and product characteristics

• Functional benefits of products and services

• Emotional benefits

• Values met

Consumer studies reveal which product aspects satisfy their needs. You may make products that solve issues for particular client segments by having a thorough understanding of these needs and how they relate to customer pain points.

Benefits of needs-based segmentation include targeted messaging, value propositions, and improved engagement. Panel studies will show whether businesses are successful in satisfying those demands over a longer period of time rather than just once.

Values-based segmentation

Customers' perceived value in relation to the price they pay for a good or service is the focus of values-based segmentation. It directly affects a product's cost and the economic value it offers.

Companies can better understand the price sensitivity of a good or service by grouping clients with comparable economic values. The prospective profitability of a product can be assessed by sellers by contrasting the price that customers are ready to pay with their production expenses.

You can find out why people buy your items, which needs will be satisfied, and what price they are ready to pay for the value they receive by combining values-based segmentation with other segmentation methods.

How to develop your customer segmentation strategy

Your market segmentation aims will be guided by your marketing approach. Your project's objectives can be to reinvent your brand, roll out new marketing initiatives, learn how prospective workers view your business, or determine whether B2B clients will utilize a recently created app. You will find it simpler to choose your target audience and identify your client segments if you have a clear project aim.

The STP technique, which combines segmentation, targeting, and positioning, is used by many marketers to create their customer segmentation strategies.

Your market will be segmented utilising customer segmentation models into several categories. You can segment your consumer base using demographic, psychographic, technological, behavioural, needs-based, and value-based models. These models can be used separately or in combination to categorise clients into different groups that share characteristics.

Selecting the customer group(s) you wish to target will require making this decision based on which segment is (are) more profitable or likely to convert. It is simpler to concentrate your marketing efforts and carry out more surveys to comprehend particular issues and interests once you have identified your target group. Targeting a wide audience without first breaking it up into groups can lead to results that are unclear and misleading.

In order to position your product, service, or brand to appeal to the client groups you're targeting, you must first determine the best ways to do it. If your target audience has been surveyed, you may utilize the information to identify your value proposition and what makes you different from rivals. Additionally, survey data on consumer behaviour, wants, or opinions can assist identify the most effective ways to contact your target market. The 4 Ps of marketing—product, price, promotion, and placement—can then be used to enhance your positioning.

You can create customised and successful marketing campaigns by concentrating on a particular segment of clients who are ready to purchase your product. With the aid of the STP approach, you can develop messaging, branding, and packaging that speaks to their particular requirements and expectations.

Surveys provide a quick, affordable approach to target your customers, develop a strong customer segmentation strategy, and gather market research for your upcoming product launch. You'll gain a deeper understanding of who your consumers are, what they need, and how you can better serve them, whether you run a large corporation or a small startup out of your kitchen.

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mona-content-writer Ayushi