Market Segmentation

Research for Boosted Sales, Profitability & Competitive Advantage

In today’s competitive environment and saturated marketplaces, companies need strong relationships with customers.

Instead of raising the amount of resources dedicated to these efforts, companies need to invest in “smart” strategies. Market Segmentation can help companies identify the customers that they can effectively service.

What Is Market Segmentation Research?

Market segmentation research is the systematic process of dividing a broad consumer market into sub-groups of consumers based on shared characteristics. These characteristics could be as broad as demographics or as specific as buying habits, or lifestyle preferences. 

That’s why market segmentation research offers a clear lens through which businesses can view their audience. The aim of market segmentation research is not just to see these segments, but to understand them – to grasp their nuances, needs, and nuances – so that businesses can interact with them more effectively.

Why Is It Important?

Consumers today demand personalized experiences and products that resonate with their unique needs and lifestyles. By harnessing the insights from market segmentation research, businesses can align their offerings more closely with what consumers truly want. Moreover, with digital platforms granting access to global markets, understanding different segments becomes paramount. This market research has several compelling benefits businesses can reap, including:

• Enhanced Customer Understanding: By segmenting markets, businesses can gain in-depth insights into the needs, preferences, and pain points of specific consumer groups. This understanding aids in designing products or services that resonate deeply with these segments.

• Efficient Resource Allocation: With clear market segments identified, businesses can allocate their resources, be it time, money, or workforce, more efficiently. Instead of spreading efforts thinly across the entire market, companies can prioritize segments that offer the highest potential returns.

• Targeted Marketing Campaigns: Market segmentation research allows for the creation of tailored marketing campaigns. Advertising messages can be customized for specific segments, increasing the likelihood of engagement and conversion.

• Higher Customer Satisfaction: When products or services are designed based on insights from market research, they are more likely to meet or even exceed customer expectations, leading to higher satisfaction and loyalty.

• Competitive Advantage: Understanding market segments better than competitors can provide a significant edge. Businesses can identify underserved segments and cater to them, or differentiate their offerings in oversaturated segments, thereby gaining a competitive advantage.

• Optimized Pricing Strategies: Market segmentation research sheds light on the purchasing power and willingness to pay of different segments. This can guide pricing strategies, allowing businesses to maximize revenue while ensuring affordability for the target segment.

• Innovation Driving: By understanding the specific needs and desires of various market segments, businesses can innovate tailored solutions. This could range from product enhancements to the development of entirely new offerings.

• Cross-selling and Up-selling Opportunities: Knowing the preferences and behaviors of each segment can allow businesses to more effectively cross-sell and up-sell relevant products or services.

• Feedback Loop: Engaging with specific market segments can provide businesses with direct feedback on products, services, and marketing campaigns, leading to continuous improvement.

Opportunities in Market Segmentation Research

The landscape of market segmentation research is full of untapped potential. As businesses continue to adapt and evolve in an ever-changing market, several opportunities arise such as :

• Emerging Market Discovery: Businesses can uncover emerging market segments they may have previously overlooked. Early identification and catering to these segments can lead to significant first-mover advantages.

• Digital Transformation and Segmentation: The digital age has brought forth myriad data sources. Market segmentation research can capitalize on this, delving into online behaviors, e-commerce preferences, and social media trends to further refine segments.

• Sustainability and Ethical Segmentation: Modern consumers are becoming increasingly conscious of sustainability and ethical practices. Market segmentation research can help businesses identify and cater to segments that prioritize these values, allowing them to align with broader societal goals while also tapping into a lucrative market.

Challenges of Market Segmentation Research

Market segmentation research also has some challenges to overcome. Therefore, businesses should be aware of the following challenges: 

• Data Overwhelm: Businesses often find themselves inundated with vast amounts of information. Parsing through this and identifying relevant data for market segmentation research can be daunting, requiring expertise and sophisticated tools.

• Regulatory and Ethical Considerations: Especially when dealing with personal consumer data, market segmentation research must be sensitive to privacy concerns. Navigating the evolving regulatory landscape while ensuring ethical data handling can pose challenges.

• Over-segmentation: While diving deep can unveil nuances, there’s a risk of over-segmentation. If businesses slice the market too finely, they might end up with segments too small to target effectively, diluting the very purpose of market segmentation research.

• Cultural and Geographical Variations: For businesses operating globally, segments might differ across cultures and regions. Understanding and catering to these differences is challenging.

• Segment Overlap: Sometimes, individuals might fall into multiple segments, leading to potential overlap and confusion in targeting.

• Assumption-based Segmentation: Some segmentation might be based on assumptions rather than concrete data, which can lead to misaligned marketing strategies.

Uncovering Profitable Market Segments

SIS Market Segmentation Market Research aims to find the untapped profitable markets and how to reach them. We deliver actionable insights on pricing, demand, messaging, and customer expectations.

To uncover profitable segments, we conduct:

  • Quantitative Research: Surveys, questionnaires, and other tools can help gather numerical data to identify trends and patterns.
  • Qualitative Research: Interviews, focus groups, and observations provide in-depth insights.

It’s also essential to assess the potential profitability of each segment. Considering the following:

  • Size: Is the segment sizable enough to be profitable?
  • Growth: Is the segment growing or shrinking?
  • Accessibility: Can you effectively reach and serve this segment?
  • Stability: Is the segment consistent or does it have seasonal fluctuations?

As part of our unique “Hybrid” Research approach of Market Research and Strategy methods, we analyze the wider impact of targeting certain segments on our client’s supply channels and competitive position. These market segmentation services allow companies to develop a clear market positioning that can be tested.

Consumer Market Segmentation Services

SIS International Market Research works with clients to develop segmentation plans that are accurate, reliable and useful. Segmentation variables vary depending on how customers interact with our clients:

  • Psychographics / Lifestyle
  • Profitability / Lifetime Customer Value
  • Behavior
  • Benefit / Attribute
  • Use or Application
  • Product Class
  • Price / Quality Demands

In developing segmentation plans, researchers must understand segmentation nuances. Many industries can have “Multiple Influencers” or non-buyers that heavily influence the purchase of products. An example is of a young child (non-buyer) influencing his parent (buyer) to purchase cereal. Also, many industries have different relationships with novices and expert product users. With novices, companies often focus on product benefits and provide multiple exposures to information. With experts, companies often conduct marketing by focusing on attributes and less exposure of the message. SIS works with clients to develop a customized solution fitting their needs.

Business-to-Business Market Segmentation Services

Business-to-business market segmentation rarely receives the attention that customer segmentation receives.  SIS helps companies develop useful, accurate, and actionable segmentation plans. Segmentation variables may include:

  • Decision Makers
  • Firmographics (e.g. revenue size, employee size, industry type)
  • Behavior
  • Profitability / Lifetime Customer Value
  • Benefit / Attribute
  • Organization Type
  • Business Culture
  • Use or Application
  • Product Class
  • Price / Quality Demands
  • Customer Needs
  • Competitors

Considerations for Market Segmentation

Many segmentations are focused on value, rather than functionality and company size. In these plans, companies focus on perceived benefits that underlie the target segment’s purchasing considerations.

In low-involvement product offerings, companies often consider researching usage behavior, buyer behavior, price elasticity/sensitivity and brand loyalty, among others.  For high and medium-involvement products, businesses often consider researching their customers’ comprehensive needs, buyer types, business buying behavior and core values, among many others.  Lifetime Customer Value as a metric provides a measurement of the customer’s total worth which can help companies concentrate on improving profitability. Indeed, the variables for segmentation will vary by objective, company and industry.

About SIS International

SIS International offers Quantitative, Qualitative, and Strategy Research. We provide data, tools, strategies, reports and insights for decision-making. We conduct interviews, surveys, focus groups and many other Market Research methods and approaches. Contact us for your next Market Research project.

Contact us for your next Market Segmentation Research project.