Segmentation is the dividing of a market, customer or employee base into groups or “segments” of individuals that share similar attributes and other commonalities.
Market segmentation empowers organizations to target groups of consumers who behave differently from other groups and hold common perceptions and characteristics. Methods of segmentation can differ depending on a variety of factors, and often include criteria such as behavior, demographics, geography and psychographics.
Segmentation is useful for charting a path to current and potential customers. It is also highly effective in creating a path to success, by showing what it will take on the part of both producer and consumer in the way of changes for them to come together. Whether its product innovation or change in sociographic make-up of a given population, segmentation can show the step changes needed to achieve success.
Effective segmentation removes much of the transaction friction from the path to growth. It can eliminate false starts, in which companies make overly simplified assumptions about current customers, and can help organizations to prioritize and direct resources to more effective areas.
In addition, it is equally as effective in highlighting stop signs–identifying people who are not likely to become customers. Given the drive for Return on Investment (ROI) in marketing spends in recent years, knowing where not to spend money may be as important as knowing where to make major investments.
Segmentation can help provide insight into the following strategic priorities: