In the last decade, there has been a small change in my Rewards cards programs.
About a year ago, I was mailed a flyer from Shoppers Drug Mart that contained coupons for products that were directly related to ones that I regularly use.
Not for the exact same products, though. Not my don’t-want-to-live-in-a-world-without-this-dry-shampoo, but a hairspray by the same brand. No coupons for a six-pack-of-men’s-razors-because-they’re-cheaper, but the slightly more expensive Life brand of (women’s) razors.
While, as a consumer, stuff like this rings my creepy bells, as a marketer I appreciate the strategic thoroughness of it.
Shoppers Drug Mart uses the data from their Optimum program (and maybe other data sources) to algorithmically define me as a consumer and then to market specific products that I’m likely to buy to me – and incentivise my purchase of them.
This is a highly-tailored segmentation strategy that you can apply in your business, big or small, to great success.
What is market segmentation, and how do I start?
Market segmentation is when you divide up your consumer base into specific, homogenous groups, and market to each of them.
There are two kinds of market segmentation. One is finding your niche and sticking to it – called concentration strategy. Luxury brands are the most commonly-cited example; but children’s television shows, makeup and beauty products, and other highly-specific industries use it as well.
Concentration strategy has been gaining traction over the last decade as more products have flooded the market. It may seem counter-intuitive, but it’s more profitable to market to one segment than many. It’s easier to convince and mobilize one “type” of person than many, especially to do one specific thing. You can make children ask their parents to buy Lucky Charms, but can you make teenagers do the same, with the same tactics? Probably not.
The other strategy is multi-segmentation. It means you divide up your audience into a few or many different groups, and then send them tailored, individual messages that drive them to do different things.
The first stage of market segmentation is doing an audience analysis. It’s easier said than done – without data, finding out who your current consumers really are can be difficult (and unreliable). Market research is an entire industry for this exact reason.
Most of us can’t afford serious market research firms or manual data collection. But social media, website tracking, and Google Analytics has made it easier to access vast amounts of consumer data cheaply and easily.
How to collect data for segmentation purposes
We’re just gonna say it: you should be using a CRM (Customer Relationship Management software). Have you noticed your barber always remembers the name of your kids or where you work, even though you only see them once every few months? They store your info in some kind of CRM system – and you should be doing the same for your customers.
At Arke, we use Nationbuilder. It’s a really data-intensive, full-service CRM designed specifically for grassroots mobilization – ie. getting people to do what we want them to do, on their own terms. And with a small budget. <3 you, NB.
In a CRM, you can track everything your customers do online and tag it to an internal profile (which is stored in a larger database). Simone has liked these things on Facebook, and has put items in her shopping cart without purchasing. Carl often opens and clicks through our email newsletters, but hasn’t interacted with the brand otherwise. The CRM automatically tracks this stuff and pulls as much data out of their behaviour and social media as it can.
With all of these people and their behaviour put into a database, we can find patterns. Liking something on Twitter is a decent predictor of going to our website – but the same isn’t true for Instagram. People who have visited our website more than twice are six times more likely to buy something. Half of the people who purchase online are under 30. Patterns like that.
How to take the data and identify specific market segments
Once you find the patterns in your audience’s behaviour, you can group them up into accessible segments. What you should be looking for are the traits and factors directly related to likelihood to purchase.
We wrote a whole blog post about hitting up the “low-hanging fruit”. You can use data to find the right fruit. If there is one person in the entire world who is the most likely to buy your product, who are they?
Here are the main traits you should be looking for:
- Geographic location
- Social class
- Who they follow or frequently interact with on social media
- Who follows them on social media
- Influencer status
- Product-related categories
- How, when, and where people use the product
- How often they purchase and related behaviour
- Benefits they’re looking for when they purchase
If you find a large number of women are buying your product, dive into that category. What age are they? Who do they follow on social media? What are they like? Narrow this category as much as possible, until you have a homogenous, specific, accessible market segment.
Your segment needs to be large enough that you can earn a profit from them, and stable enough that they do not diminish after some time. The segment needs to be relatively stable and characteristically similar internally, and different from other possible segments externally. And finally, they need to respond. You can’t market to people who won’t ever see or act on your messaging. Find who will buy, then find out exactly who they are.
The future is targeted. Whatever segments you have or however many you focus on, you need to be targeting to each specifically and purposefully.
Social media has made it easier than ever to target unique segments. Because sites like Facebook collect interests, demographic, and usage data automatically, you just have to select what features you’d like in order to send them an ad. It’s eerily easy.
Email campaigns are also an effective way of targeted marketing. You can collect email lists and segment them through your CRM, and then send tailored newsletters or email blasts.
Whatever medium you choose, it should be related to your audience. There’s no point in using Facebook ads if your target segment doesn’t use Facebook. Choose your avenue consciously.
Another growing trend in targeted advertising is the use of influencers. Sometimes, you can’t access your target market yourself, and so you need to find someone who can. Say you’re a small professional organization that’s looking to grow, and so you might look to hit up the biggest name in your industry. If you can access them, and if they have a platform where they regularly access your target audience, then you can approach them about a partnership.
The nature and style of influencer marketing is changing rapidly, so it’s definitely one of the top trends to watch in 2017. Keep an eye out for subtle influencer tactics in your everyday life, and ask yourself how you can emulate it in your business.
But what do you send to them?
That is a whole box of crayons that we’ll have to address later. For now, ask yourself a few questions:
- What do I want this segment to do?
- What is this segment most likely to do?
- What would sway this segment the most – and then how do I use that?
- How can I be valuable to them?
The last question is probably the most important. Consumers are inundated with do-this-for-me advertising all of the time, through every possible medium, in every possible way. When you offer them something – something as simple as a birthday coupon, or free gift with purchase – they’re more likely to like and trust your brand.
A friend of mine recently raved about a company, for no other reason than that they send some candy in the box with every online purchase. It’s a really small gesture, and they don’t advertise it. But it builds loyalty through surprise and delight, which spreads the word of their company through influencers organically.
It’s really indicative of how well they know their consumer. They’re younger. And they aren’t so fussy that they won’t eat a delicious surprise that came in the mail.
The market segment that receives the candy has already made a purchase. Post-purchase segments should receive messaging that increases loyalty, keeps your brand top-of-mind, and encourages a repeat sale.
Box candy does this wonderfully. And it’s more effective than any billboard ever.
What to do now
This is a lot to think about in one go, especially for brands that are just starting out. Building a market segmentation strategy is a broad, wide process that should take you a lot of time, and should be evaluated frequently. It’s not something you can really set up in an afternoon.
If you just want to get going, start by evaluating and understanding your audience. Then, break them up into separate, homogenous groups. Decide or find which ones are most likely to buy more often, and focus on those. Then figure out who they are, what they like, what they want, and why they buy (or would buy) from you specifically.
Finally, connect with them on their level. Whatever that is.
If you have any questions about strategy, market segmentation, box candy, or influencer marketing, let us know! We love to chat about this stuff and we’re happy to help. Send us a message at firstname.lastname@example.org or add a note in the comments!