Why Marketing Segmentation Matters for Today’s Retailers

Why Marketing Segmentation Matters for Today’s Retailers

Marketing segmentation is hardly a new topic, but it’s one that is particularly relevant for today’s retailers. Brands are focused on maximizing existing store performance, rather than growing through new store openings, which puts pressure on marketers to drive store traffic through repeat customers and new customer acquisition.

So what’s the best way to cut through the clutter of marketing promotions to capture a customer’s attention and encourage them make a purchase? The answer lies in personalization. Accenture reports that 91% of consumers surveyed said that they are more likely to shop with brands who recognize, remember, and provide relevant offers and recommendations.

Marketing segmentation is the first step towards providing the personalized communications that resonate with consumers. In this blog post, we’ll explain what it involves and how it can be applied to drive real results.

What is Marketing Segmentation?

Marketing segmentation is the process of dividing a target audience into unique, non-overlapping groups for the purpose of better tailoring marketing to those groups.   

The criteria used for dividing consumers into groups (often called segments or personas) can vary depending on the goals of the marketing campaign, level of granularity desired, and availability of data. Segments are often assigned based on a combination of factors, such as the following: 

  • Demographic characteristics (age, gender, income, etc.)
  • Lifestyle/psychographic characteristics
  • Transaction history (frequent shopper, responds only when offered a coupon, etc.)
  • Geography (proximity to store, home location in a specific region)

A common mistake for brands just beginning to explore marketing segmentation is to create more segments than are actionable. Just because you can divide a customer base into 10+ groups doesn’t mean that you should. Marketing teams should be realistic about how many distinct segments they have the time and budget to address. At some point, adding additional segments provides just a small incremental return on investment. Developing four to five segments is usually a good starting point.

How Can Retail Marketers Apply Marketing Segmentation?

Retail marketers can apply marketing segmentation to a wide variety of decisions. Here are just a few examples:

  • Customizing messages and design. Segmentation can provide you with insights to guide creative decisions, such as what types of messaging and images to include in marketing collateral targeting specific groups.
  • Tailoring offers. Knowing whether a segment is value conscious or whether they have a history of responding to certain types of promotional offers may help you to determine the best type of incentive to use.
  • Determining which marketing channels to use. Some segments may respond best to social media ads, while others love direct mail. Knowing which channels resonate with each segment can help you make smarter campaign execution decisions.
  • Driving repeat visits. Segmentation allows you to create smarter messages to encourage repeat purchases from existing customers.
  • Acquiring new customers. Segmentation can also make the process of acquiring new customers more efficient by approaching prospects with a more effective offer.

The Bottom Line

Marketing segmentation isn’t something that today’s retail marketers can afford to ignore. By taking the time to understand the distinct groups in your customer base, you can create more personalized advertising that drives real results.

If it’s time to create or update your brand’s customer segments, we can help. Buxton’s team of analytics experts uses your customer data in combination with our extensive consumer databases to identify the groups that are most important to your business. Learn more about how we can help.