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What is Marketing Segmentation?

Marketing has become more complex operation since the early days of the Internet. An increasing number of online only and bricks and clicks retail businesses compete against each other to ensure that their message reaches as many consumers as possible. While on paper this seems like a no-brainer, there can be disadvantages to employing a "spray-and-pray" volume-based method when attempting to convert customers. Although your communication may reach thousands of consumers, the product or the message being conveyed may not be relevant. So the message is often ignored and in many cases actually turns consumers off the brand sending it. When we're asked 'what is Marketing segmentation?' we boil it down to a key word: relevance. Whatever the situation the retailer faces Marketing segmentation allows them to convey a relevant message to the correct group of customers. So for us, the exercise of segmenting customers is something that is both tactical (happens often, specific to a particular communication objective) and strategic (happens once every 12 to 18 months, to set the overall business strategy)

What is Marketing Segmentation?

Marketing segmentation is an exercise in dividing up a customer base into mutually exclusive segments of customers with similar traits. So why bother going to the trouble of doing this when a spray-and-pray method would simply hit all customers that have transacted with a retailer previously? Surely that puts them all in a similar segment of people whose common trait is that they have bought from that given retailer? The answer is that although these customers bought from the same retailer, their shopping mission, attitudes, personal situation, level of disposable income, aspirations etc. are varied. Understanding customers in a multi-dimensional way and then being able to retain this information by way of clustering them into segments allows a business to create a bespoke marketing offer for each cluster. Thus the customer only sees that which is relevant to them. This in turn creates a greater likelihood of a generating a sale.

Segmentation will improve Marketing overall

As well as a business being able to send relevant marketing to the right cluster of customers, marketing segmentation can also aid a business in spotting flaws in its current marketing strategy. A business could see that a certain cluster of customers isn’t engaging at first expected. This gives the business chance to reflect on how they are marketing to a certain cluster of people, and whether the current product range appeals to this cluster of customers. A business can then make any necessary amendments to its product range and marketing efforts to see a greater turnover moving forwards.

How to build a Marketing segmentation

The thought of building a marketing segmentation may seem tricky initially, but the simplest way of  is to use a system that already exists and use it in conjunction with your current customer base. For example, The OAC geodemographic was created as part of a PhD project at UCL sponsored by the Office for National Statistics. As long as you have the addresses of your customer base, then you can append geo-demographic data to each customer's address and assign them to an individual segment. At rais we provide this as standard for our UK clients. These segments can then be used to profile customers and provide contextual information about them that can be used to make Marketing more relevant.

Marketing segmentation can also reveal other information to a business that it may not have been aware of before. For example, segments not only show a particular trait of a customer, but it will also details whether such traits have changed over a period of time. Tracking the changes of a cluster of customers allows a business to consider what implications come with those movements. This determines what tracking mechanisms need to be put in place to ensure the data received details any relevant information to help build a complete customer profile.

If you have any questions about how to best approach segmenting your customers feel free to drop us an email at hello@rais.io