Understand your consumers better with market segmentation.
We help you gain a deeper understanding of your market segments, so you can amplify revenue with niche marketing.
What is a segmentation strategy?
A segmentation strategy helps you categorize your customers into segments based on their age, gender, location, and buying behavior. A comprehensive segmentation strategy helps you understand who your customers are and how to reach them for maximum profitability.
Why do you need a segmentation strategy for your business?
The world currently has 7.7 billion people. There are over 579 million people in North America alone. So there is a huge target audience waiting for your offerings. But you can’t target them all. Every customer has different needs, and you need to take into account their differences when marketing your services. If you don’t, you’ll spend millions of dollars on audiences who aren’t even your potential customers. A good segmentation strategy helps you identify the right customers then break them down into different categories based on geography, location, buying preferences, and demographics so you can target their specific needs and garner potential long-term customers for recurring revenue.
Why choose us for segmentation strategy?
If your end goal is to build the foundation for increased revenue through a loyal customer base, then our consulting experts can help. We are a complete marketing company specializing in diverse marketing services under one umbrella. This enables us to look into your specialized business needs and address them individually to outline a comprehensive marketing plan. Your segmentation strategy is a crucial component of your overall marketing strategy; it helps position your business for long-term profitability. At Winhall Mill, we dig deep into your target market to identify segments that have the potential to draw the most revenue.
Our team uses rigorous analytic tools and techniques to dissect large chunks of market data to organize your potential customers into segments. This helps you:
– reduce cost with efficient targeted advertising
– focus on new potential market segments
– create concentrated distribution
– develop tailored branding for each segment
– narrow overall business focus for improved ROI.
Our Process
We go through the following steps to help you build a segmentation strategy that works for company-wide products and services.
Step 1: We group potential customers into segments
We group potential buyers into different segments based on their demographic, geographic, psychographic, and behavioral attributes. For example, your potential B2B customers could be growing businesses in El Paso, Texas, who are looking for reliable ongoing website management services.
To further understand your customers, we consider five differentiating factors listed below.
1. Markets that have the highest potential for profitability
We begin with choosing potential buyers that have the potential for profitability. We ignore the segments that will cost more and yield less revenue.
2. Buyers with similar needs
We choose potential buyers in different segments who share similar needs. We group all potential buyers with similar needs across different segments to make sure you can target them with a single marketing campaign and expect a similar reaction.
3. Difference in buyer needs within segments
We categorize buyers with different needs in different segments and within segments together as they may require a unique marketing action plan. These buyers may react differently to different marketing actions and therefore require more marketing budget. You have to treat them differently than the potential buyers with similar needs.
4. The cost and ease of reaching a marketing segment
We choose potential buyer segments that can be easily reached with a reasonable budget. If a market segment requires too many resources, it can end up taking more with no promise of substantial return.
For this step, we may conduct some or all of the following analysis.
Cluster Analysis
With Cluster Analysis, we look at the current information databases about your target customers to identify the potential segments. We start with preliminary demographic research to further classify segments. Using a Cluster Analysis software or a mathematical model, we find homogeneous groups with similar characteristics within the segment. Following is an example of Cluster Analysis.
Within Cluster Analysis, we may conduct K-means, two-step, latent Class Cluster Analysis, and Latent Class Choice Modeling.
Segmentation Tree Model
Cluster Analysis works best for businesses that already have a basic understanding of target customers. The segmentation Tree model comes in handy when you don’t have the data from which to extract customer segments. With the segmentation Tree Model, we start with your primary offering and then break down your potential market until we get to the potential customers. Segmentation Tree Model looks something like this:
This is highly particular customer research through Zip codes. With this research, our experts can find income and median age of a population living in a certain zip code.
Lifestyle Analysis
Lifestyle Analysis helps us look into your target customer’s use of technology for shopping, financial situation, general buying preferences, and the types of media they pay attention to. We usually do a Lifestyle Analysis after we have identified the target segments.
Factor Segmentation
Factor segmentation or Factor Analysis helps us create coherent clusters of potential buyers based on similar perceptions and buying attitudes. This is an important analysis in targeting a certain market segment that has similar needs and is easy to reach.
Customer Value Analysis
With Customer Value Analysis, we use analytical tools to discover potential customers’ primary characteristics that play a key role in their buying decision. This helps us identify which customer segments are capable of generating huge profits and whether some groups are worth pursuing. Within CVA we use the RFM (Recency, Frequency, Monetary) model to answer some of the most important questions about customers.
The Recency component of the model helps us determine how much time has passed since the customer’s last purchase.
The Frequency component of the model helps us determine how often has the customer purchased a service or offering.
The Monetary component of the model helps us determine how much the customers spend on a product or service.
We usually pair RFM analysis and Cluster Analysis with Churn Analysis to predict potential customers’ churn rate and use it to improve retention rates.
Scoring Model
Once we have identified a market segment, we use Discriminant Analysis to develop a scoring model that further classifies the buyer groups. This analysis helps answer some of the key questions about customers’ behavior.
Database Customer Segmentation
Our analytics consultants look into large chunks of your customer data to link similar databases. Without proper analytical linking and integration through unique segmentation solutions, we identify customer segments with the highest potential for profitability.
Key Driver Analysis
With Key Driver Analysis, we measure potential buyers’ likelihood to buy an offering. We look at the following factors to determine the key drivers that motivate customer decision:
– product value concerning its cost
– product cost relative to its alternatives
– brand’s perceived value.
– product availability.
Strategic Attribute Mapping
This graphical analysis helps us identify the high-performing and high in importance product attributes. The attributes that are high in importance and low in performance need amplified marketing efforts.
Opportunity and Risk Analysis
This analysis helps us identify the degree of opportunity or risk associated with a certain product or service attribute. We measure the risk drivers, the attributes that offer less potential for revenue but must be monitored to increase the likelihood of revenue; and the opportunity drivers, the attributes that have plenty of room for improvement and can lead to substantial revenue.
We choose a blend of strategic segmentation analysis, tools, and techniques based on your business needs to identify the most profitable customers.
Step 2: Create categories for your services based on segments
Once we have identified the segments, we categorize the products and services into groups based on the specific needs of a segment. This helps us pair the right offering with the right buyer group so while creating a marketing plan we know exactly who we are targeting and what reaction to expect.
Step 3: Create a market-product grid and define market sizes
In this step, we create a market-product grid with segments listed horizontally and offerings listed vertically. Then we add numerical estimates ranging from zero to five where zero represents no potential and five represents maximum potential. Our market-product grid looks something like this:
Step 4: Choose the potential target segment (and create a marketing plan for each segment)
From the market-product grid, we choose markets that have the highest potential to generate profitability. Once we know exactly who the right segments are, our consulting experts start working on a specialized marketing plan for that segment.
Ready to know your customers a little better? Contact us today and our consulting experts will help you devise a lucrative segmentation strategy to enrich your overall marketing plan.
