What is segmentation, and what does it mean?
Segmentation means dividing something into independent units. In marketing, the term segmentation is used to describe dividing all potential customers into subgroups based on shared characteristics, according to what makes sense for the individual business.
This can involve segmenting the consumer market as a whole to define individual target groups, or segmenting a company's leads based on where they are in their buying decision (life cycle), their size, how frequently they purchase, and so on.
Segmentation simply means dividing a whole into smaller parts — how it is used depends on the specific purpose.
Why is segmentation important?
Segmentation in marketing and sales is important because it helps you make your marketing and sales more:
- Personalised
- Targeted
- Tailored
- Timed
This ensures a more effective and profitable effort and, overall, a higher marketing ROI.
An example of why segmentation is important
An example, in very broad and general terms, to illustrate the importance of segmentation is, for instance, a local women's clothing store in Aarhus that wants to use advertising on Facebook.
If the business simply runs ads on Facebook targeting everyone on the platform, this will mean 1. that money is spent quickly, and 2. that only a small fraction of those who see the ad will find it relevant.
If the women's clothing store instead uses relevant segmentation criteria — for example, the following:
- Gender: Women
- Age: 18–50 years
- Demographics: Aarhus and surrounding area
- Interest: Fashion
Money is spent "only" on showing the message to those for whom it is relevant. This will be reflected in the effectiveness of the advertising.
How do you carry out a segmentation? The segmentation process in 4 simple steps
How to segment your target audience is fundamentally very simple and can broadly be divided into 4 general steps, regardless of the purpose:
#1 Definition of relevant criteria
The first step is to assess, in relation to the specific problem and the purpose of segmentation, which criteria are relevant to segment on. In other words: which conditions and criteria are relevant for dividing the whole. The criteria depend 100% on the purpose and the individual business and target audience.
These could be, for example, gender, behaviour, age, place of residence, etc.
#2 Selection of segmentation criteria
Once you have defined which criteria are relevant to segment on, you need to select the relevant segmentation criteria.
The 3 types of segmentation criteria
We broadly distinguish between the following 3 types of segmentation criteria:
- Geography: City, country, region, etc.
- Demographics: Age, gender, income, marital status, etc.
- Psychographic: Beliefs, personality traits, social status, loyalty, etc.
#3 Development of segments based on criteria
Once you have defined the relevant segmentation criteria in relation to the purpose, you need to define each individual segment based on the selected criteria.
For example, one segment could be: Men, aged 20–45, living in Aarhus, and another segment could be women aged 45+ living in Copenhagen.
To put it another way: you need to have divided the unit into the individual segments.
#4 Use your segments
The fourth and final step: using the segments.
You have now segmented the unit into relevant segments in relation to what is relevant for your problem and/or purpose.
You should now use your segments where they are needed — in your marketing, on your customer lists, lists of leads, or similar.
If you need help with your segmentation, or if you are not seeing the desired results, don't hesitate to contact us on tel. 30 12 42 72 for a no-obligation chat!
