October 28, 2022
 min read

Market Segmentation Analysis: Definition and Examples


The world runs on data. Because of that, there’s more than one way to slice the pie when it comes to market segmentation analysis. By now, you’re probably aware that segmentation analysis is yet another way to draw insights from your customer data to drive better marketing campaigns by building more complete customer profiles. In other words, you’re able to meet your customers where they are on their customer journey. With segmentation analysis on hand, you’re able to provide a personalized experience to an ever-demanding customer base. When done right, it's a great way to make data-driven marketing decisions that yield results worthy of revenue.Not sure where to start? This guide will walk you through the ins and outs of market segmentation analysis including the different types of analyses, its benefits, and how you can get started.

What is market segmentation analysis?

To make decisions about targeting and positioning their products and services, businesses need to understand how they can divide potential customers into groups. This process is called a market segmentation analysis.There are several different methods for market segmentation analysis, but the most common approach is to use demographic information such as age, gender, location, or income. Other approaches include segmenting customers by their interests, needs, beliefs, or behaviors.Once businesses have identified their target markets, they start developing marketing strategies based on segmentation analyses tailored to each group. This way, they align marketing channels, the audience, and their goals with higher precision. Pretty straightforward, right? Not completely—market segmentation analysis can be a complex process. But if you have a business that’s interested in maximizing its results with the resources they have on hand, it’s a must. Without segmentation analysis, it’s harder to make data-driven decisions that help marketers target their audiences effectively.

The benefits of market segmentation analysis

Running a market segmentation analysis helps marketers drive more value. Perhaps the most important benefit is that your business can focus its resources on the most promising segments of your market or get a better feel for who your audience actually is. As a result, you see an increase in sales and customer satisfaction. Some specific market segmentation analysis benefits include:

  • Uncovering new opportunities for growth
  • Gaining a more unified view of your ideal customer
  • Applying data-driven go-to-market strategies
  • Mass customization across your audiences within your marketing campaigns
  • Securing a better understanding of changing marketing trends
  • Developing new products and services that’ll appeal to each segment
  • Appealing to real customer needs, market gaps, and pain points
  • Increasing your bottom line with better resource management

That’s a long list of benefits—and we could go on. But the bottom line is that any data-driven business looking to optimize its efforts would be remiss not to focus on segmentation analysis as part of its larger marketing plan. To do that though, it’s important to become familiar with the types of analyses you can run.

The types of market segmentation analysis

There are generally four types of B2C market segmentation analysis:

  1. Geographic segmentation
  2. Psychographic segmentation
  3. Demographic segmentation
  4. Behavioral segmentation

Geographic segmentation

This type of market segmentation looks at where customers live or work. You can then use that data to target marketing campaigns, specifically to certain geographic areas that are most likely to result in sales. For example, a business selling snowboards would want to focus its marketing efforts in areas with high levels of winter tourism or where there is reliable snowfall throughout the season.

Psychographic segmentation

This type of market segmentation looks at a population’s psychological characteristics, including values, attitudes, interests, and lifestyles.You can use this type of analysis to identify customer needs and desires that are not always apparent through demographic data alone. For example, a customer interested in buying luxury cars may also be interested in other high-end products and services.

Demographic segmentation

This type of market segmentation looks at a population’s characteristics, such as age, gender, income level, or occupation.Understanding these demographics helps businesses better target their marketing campaigns and products/services to appeal to specific groups of people. A company selling baby products may want to focus its marketing efforts on new parents within a particular age bracket, like 25-34.

Behavioral segmentation

This type of market segmentation looks at how customers behave when making purchasing decisions. Factors such as purchase frequency, product usage, and brand loyalty, are included. Understanding these behaviors helps businesses tailor their marketing campaigns and strategies to better meet the needs of their target customers.A business selling mobile phones would want to focus its marketing efforts on customers who frequently upgrade to the latest model or those who are loyal to a particular brand.

How to get started with segmentation analysis

First, businesses should identify their overall goals for a market segmentation analysis. What does the business hope to achieve by conducting this type of analysis? Is the goal conversions or brand awareness? Once your marketing goals are clear, it’s time to gather data on your target market. This is where a customer data platform (CDP) makes it easy to gather first- or third-party customer data with fewer bottlenecks. A segmentation analysis usually consists of a few general steps that can be divided into phases, including segmenting, targeting, and positioning. These phases are as follows:

  1. Outline who your target market is
  2. Analyze your existing customer base
  3. Create buyer personas
  4. Identify gaps, groups, and opportunities to target
  5. Research and define each segment
  6. Test and optimize

After you have segmented your target market, you can begin analyzing each segment. You should look at factors such as size, needs, and potential growth of the segment. Through marketing efforts, businesses identify which segments are most promising and worth targeting.Market segmentation analysis is a powerful tool businesses use to focus their resources on the most promising market segments, better understand their customers, and identify new opportunities for growth.

Examples of segmentation analyses

Let’s look at some examples of how a segmentation analysis can help you uncover valuable insights for better marketing results.

1. Use customer data to segment your target market

One way to use customer data in a segmentation analysis is to segment your target market according to various criteria. This can include the following criteria:

  • Customers on your newsletter who haven’t made a purchase yet
  • Specific customer timestamps
  • Dates
  • Numeric values
  • Boolean values
  • Statuses (active, canceled, expired)
  • Any promo codes used to make a purchase

2. Segment your customer base by purchase history

Another way to use customer data in a segmentation analysis is to segment your customer base by purchase history. This can help you identify your most valuable customers, set up a remarketing campaign, and use a lifecycle marketing approach to continue to keep repeat buyers.

3. Use customer data to segment your target market by demographics

A further way to use customer data in a segmentation analysis is to segment your target market by demographics. What if you want to target adults between the ages of 20-40 who love the Disney brand and live in Florida and California? With a demographic target segmentation, you’re able to target that specific group of people. The more criteria with which you can narrow down your target audience, the better your chances of getting optimal results. CDP solutions like Simon Data make it easy for your marketers to segment their market and save and name each segment. With its sophisticated segmentation logic, you’re able to segment your audience with plenty of criteria for GTM motions like email marketing campaigns, brand awareness campaigns, and retargeting strategies.

Run better analyses with Simon Data CDP software

By using Simon Data, you can get a complete picture of your target market and identify growth opportunities. You can fine-tune and automate workflows, including customer segmentation analysis.Businesses use Simon Data to collect data from multiple sources, including online and offline channels, social media, CRM systems, and transactional data. It’s one thing to hear about it—and it’s another to see it in action. Our world-class CDP helps you unlock and manage the insights hidden in your data. Request a Simon Data demo today.

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