What Is Market Segmentation? Importance and Tools to Use

The success of any business significantly depends on providing the right product or services to the right audience. In fact, Harvard Business School stated that 95% of the products or services fail due to wrong audience targeting.

It’s no secret that every customer has their own unique requirements, so your one marketing strategy might not be enough to reach and bring many customers on board. That’s where Market Segmentation comes to play. In this blog, I will talk about the importance of market segmentation, its types, examples and the essential tools you can use in today’s dynamic marketplace.

It will help you to reach the right audience and drive business growth. Let’s get to it!

What is Market Segmentation?

Market segmentation refers to the strategic process of dividing a broad consumer base into distinct and smaller groups with similar characteristics and behaviors. When businesses identify these segments, they can tailor their marketing efforts and offers to better meet the needs and preferences of specific customer groups.

This not only helps businesses with more effective marketing campaigns but also shapes stronger customer relationships and enhances overall business performance.

Importance of Market Segmentation

Market segmentation helps businesses get better clarity about their customers, identify new opportunities, and make better pricing decisions. Below are some of the reasons why it is important for businesses to apply the right segment marketing techniques:

• Effective and Targeted Marketing: Marketing Segmentation helps businesses to better target their customers on various aspects like age, gender, location, preference, etc.
• Resource Efficiency: When businesses understand their target audiences, they only need to advertise their product to a specific customer base instead of promoting it to the entire market. This helps businesses to save money on their advertising costs and resources.
• Increased Profits: If you market your product to the right audience, it has a higher chance of conversion and a better ROI. For example, it can save money on advertising, time, and other resources. This ultimately enhances business profitability.
• Strong Brand Loyalty: Segment marketing helps companies understand their target audience, and when they do, businesses can create messages and products that resonate with them. This builds trust and loyalty among users which can later lead to long-term relationships.

Types of Market Segmentation

There are five types of market segmentation- Demographic, Behavioral, Geographic, Firmographic, and Psychographic Segmentation. Let’s discuss these market segmentation types in detail:

• Demographic Segmentation: In demographic market segmentation, customers are divided in terms of income, age, gender, education, race, nationality, and other parameters.
• Firmographic Segmentation: Classifies customers on the basis of company attributes. It considers aspects like company status, size, location, industry, employee count, etc.
• Geographic Segmentation: These segment types divide customers in geographical terms. It is assumed that customers in the same geographic area will have identical tastes and needs.
• Psychographic Segmentation: This segmentation of marketing groups customers according to their political opinions, lifestyle, aspirations, psychological characteristics, and personal values.
• Behavioral Segmentation: Here customers are classified and divided according to their purchasing process, decision-making and reactions.

Examples of Market Segmentation

Here are a few market segmentation examples:

• A clothing brand can use marketing segmentation and divide its customers according to their age, gender, and income level. It will allow them to target their marketing messages to specific groups of customers, such as young people and adults with high incomes.
• A hotel chain could segment its market by travel purpose and budget. This would allow the hotel chain to offer different packages and amenities to different types of travelers, such as business travelers, solo travelers and vacationers.
• A software company can divide its customers on the basis of industry and company size. It can help the software company to tailor its sales and marketing efforts to specific types of businesses and focus on what is needed.

Top Tools for Market Segmentation

• Google Analytics
• UserPilot
• Segment
• UpLead
• Baremetrics

Here’s some of the best market segmentation software with details below:

• Google Analytics

Google Analytics isn’t only used for website analysis or website analytics tools. It has inbuilt audience segmentation tools that you can use to run your google ad campaigns.

This tool offers some amazing features like audience reporting, website tracking, audience segmentation, demographics data and more. This free tool is a great option for SMBs and individuals alike.

Pricing: Google Analytics offers a fully featured free plan. However, if you need an enterprise plan (google analytics 360), it is available on request.

Pros and Cons of Google Analytics

• UserPilot

UserPilot customer segmentation software helps businesses personalize and segment in-app experiences for their users. Moreover, this platform lets you personalize the entire customer journey without worrying about custom-coded solutions. This makes it a good fit for SaaS companies.

Pricing: UserPilot offers three types of paid plans:

• Starter: Starts at $249/month
• Growth: Starts at $499/month
• Enterprise: Available on request

Pros and Cons of UserPilot

• Segment

Segment by Twello, is a CDP (Customer Data Platform) with both audience management and unified analytics tools.

It is one of the few tools that is built to analyze audience segmentation within multiple channels like websites, social media, forum etc. Furthermore, this software also offers A/B testing features for a better customer segmentation analysis.

Pricing: Segment currently has 3 plans. These are:

• Free: Free to use plan
• Team: Starts at $120/month
• Business: Available on request

Pros and Cons of Segment

• UpLead

UpLead is a widely used segment marketing tool for B2B industries. Apart from the company details and databases, this software also provides tools to create segmented ad campaigns to drive traffic according to your customer preferences.

Features like prospect segmentation, lead enrichment, intent data segmentation, segmented email campaigns, website personalization etc., make it a go to solution for many business-to-business companies.

Pricing: UpLead offers credit-based plans.

• Free: Free to use with 5 credits a month
• Essentials: Starts at $99/month with 170 credits
• Plus: $199/month with 400 credits

Pros and Cons of UpLead

• Baremetrics

Baremetrics is one of the best market segmentation tools designed especially for subscription-based businesses. With the help of Baremetrics, you can find out who your best customers based on trial insights and customer segmentation features. Moreover, you can build a reward program to boost your revenue.

Pricing: The pricing plans of Baremetrics are following:

• Cancelation Insights: Starts from $129/month
• Recover: Starts from $189/month
• Metrics: Starts from $249/month

Pros and Cons of Baremetrics

Conclusion

There you have it! A comprehensive guide on Market Segmentation, its importance and top market segmentation tools you can use. As a business, its crucial to understand that not all leads or customers are created equal, and each has their own preferences and tastes.

Market segmentation software can help you and your business thrive in the most practical ways. It can help you gain a better understanding of your customers and their needs. So, I suggest you invest in a good market segmentation tool and see its true potential.

FAQs Related to Market Segmentation