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What’s Driving Marketing Segmentation Strategies?

We are all inundated with marketing emails, ads, commercials and other brand-related content. It can be overwhelming and the typical response is to ignore them. Companies have shifted their strategies to get the attention of their target audiences in innovative ways, investing in marketing segmentation strategies that enable more personalized messaging.   

Marketers didn’t land on personalization out of the blue. There is plenty of consumer data that points to the fact that consumers expect brands to be more deliberate with their marketing techniques, customizing campaigns for specific audiences. It’s no longer cost-effective or efficient to mass market. Today, data is king and marketers who use data science and marketing analytics to understand their current and desired audience are finding much greater success.

Related: The Role of Data Science and Marketing Analytics to Fuel Killer Campaigns

Forbes gathered statistics from multiple sources backing up this claim with insights into what’s driving personalization:

Consumer attitudes

  • 42% of consumers are annoyed when content isn’t personalized
  • 70% of millennials are frustrated with brands sending irrelevant emails
  • 74% of customers feel frustrated when website content is not personalized
  • 36% of consumers say retailers should do more to offer personalized experiences
  • 80% of consumers are more likely to make a purchase from a brand that provides personalized experiences
  • 90% of U.S. consumers find marketing personalization very or somewhat appealing
  • 63% of consumers will stop buying from brands that use poor personalization tactics

Business response

  • 98% of marketers say personalization advances customer relationships
  • 89% of digital businesses are investing in personalization
  • 79% of retailers are investing in personalization, the most of any industry
  • 51% of marketers say personalization is their top priority
  • 88% of marketers say their biggest driver in personalization is to deliver a better customer experience

Personalization results

  • Marketers report a 760% increase in email revenue from personalized and segmented campaigns
  • Consumers are 2.1x more likely to view personalized offers as important versus unimportant
  • 59% of consumers say personalized engagement based on past interactions is very important to winning their business
  • 70% of consumers say a company’s understanding of their personal needs influence their loyalty
  • 80% of companies and 86% of marketers report seeing an uplift since implementing personalization
  • Personalization can increase marketing spend efficiency by up to 30%
  • Marketers report that personalization efforts can boost revenues by up to 15%

Making Marketing Messaging Count

With so much content swirling around us every moment of the day, people are looking for content that matters to them. Take Twitter, for instance. The platform allows users to hand-select sources and topics they care about so they aren’t inundated with irrelevant issues. On every social media platform, we have the ability to choose who and what we want to follow. 

Marketers are trying to provide the same type of relevant content to their target markets. Marketing segmentation strategies are aimed at getting them closer to their desired audience whether individuals choose their brand or not. Thanks to data science and marketing analytics, finding those segments and creating personalized campaigns around them is much easier than in the past. Marketers are able to not only get into the heads of their target audience, but they are able to identify opportunities to grow their markets as well.

Market Segmentation Types

Look on the Internet for marketing segmentation strategies and you’ll see hundreds of posts about the four types of market segmentation. It’s a hot topic and everyone is trying to get it right. Seasoned marketers already know these, but just in case you’re new to the game, let’s review:

  • Geographic – segmentation based on geographic location, such as country, region, state, city..
  • Demographic – segmentation based on personal variables, such as age, gender, occupation, job title, income, political or religious preference, education background, marriage and family status, and more. 
  • Psychographic – segmentation based on personal traits, such as lifestyle, opinions, interests, and values. 
  • Behavioral – segmentation based on buying habits, brand loyalty, customer journey stage, product/service usage frequency, or types of products purchased.

These characteristics rarely happen in a vacuum. A concentrated marketing segmentation strategy may be fine for a start-up looking for mass appeal from a smaller audience. A more established company likely wants to use a differentiated market segmentation strategy to target several segments at the same time – each with messaging that matches their identified characteristics. 

Related: How (and Why) to Nail the Market Segmentation Process

Keep in mind, however, that while you may achieve a greater number of conversions with the concentrated marketing segmentation strategy, your target audience is much smaller. When your market size is larger and targeted via the differentiated market segmentation strategy, you will reach more people. Looking at the percentage of conversions is a more accurate metric.

Finding the right-size market is a matter of preference. You can use your marketing data to determine the trade-offs and right-sizing your segments to fit your objectives. Be careful not to limit your success by making your segment too small or wasting resources and effort by choosing a segment that is too large. Your offering does have a market sweet spot and it may take some testing of your strategy to find it.

By focusing your marketing efforts on the audience who you are most likely to attract, you can reduce costs, delight existing customers, expand your market, and have greater confidence your marketing campaigns will achieve their objectives. 

As successful as a marketing strategy may prove to be, strategies are not set in stone. Your customers’ wants and needs constantly change, as does the market and the competitive landscape. Having flexible strategies that are agile to change will keep your brand relevant for the long term. 

Let’s Talk About Alignment

The value of your market segmentation strategies are to be able to more accurately align your messaging to what you know about the audience you already have and the ones you want. Looking at the data above, we have plenty of justification that personalization is effective and what customers want, but there’s another type of alignment that must underpin every marketing strategy you ever create.

All too often, marketers come up with fantastic ideas and creative campaigns only to be disappointed in their outcomes. They crossed all their Ts and dotted their Is, but their efforts and budget failed to bring real value to the business. Why?

Alignment. We’re not talking about message and audience alignment. Before you can get there, you have to think bigger. We’re talking about marketing strategy alignment with business strategy and sales strategy.

There’s a problem within many organizations. Business units frequently operate in a vacuum. The C-suite may not communicate their decisions and objectives to the rest of the business as well as they should. Sales runs at full throttle without much direction or a collaborative partnership with marketing. The result is a disjointed business environment that gives birth to a culture of inefficiency, overspend, and missed targets and opportunities.

For business objectives to be met, sales and marketing must work together in lock-step to determine what their roles are in helping the business achieve their goals. Typically, the business lays out and communicates their overarching objectives and goals, sales uses that information to develop their strategy and plan, and then marketing leverages both to create a strategy to support sales efforts and drive business value.

Because the business may have multiple objectives, marketing leaders must understand how those objectives should be prioritized. This may not be as simple and knowing which objective is most valuable to the business. Marketing campaigns require resources in terms of people and budget. If marketing is running multiple campaigns simultaneously, there may not be adequate budget or required staff to support them all. Resources spread too thin or over-allocated can result in multiple failures.

Marketing leaders must work with business leaders to determine which strategies to prioritize given available resources. This may require marketing managers to shift around their list of priorities, as well as resources. Beyond cost-benefit analysis, leaders must be able to look at various scenarios and understand dependencies in order to see what may happen if these shifts occur.

Marketing segmentation strategies are only effective when the business is working together to solve problems, innovate, and identify opportunities. The more the objectives of the business units are aligned, the easier it will be to create the segments and personalize the messaging to achieve the best outcomes.