What are the benefits of market segmentation for companies?

Trying to succeed in an unsegmented market is like trying to hit a target with your eyes closed. You’ll certainly hit something, but you’re unlikely to hit the right thing. In a globalised world, every business must become a big fish in a massive pond. What are the benefits of market segmentation for businesses?

benefits of market segmentation

Gartner defines market segmentation as a way “to divide large groups of people into smaller groups that improve relevance, and as a result, the effectiveness of marketing”. Market segmentation combined with email marketing software splits your demographic into bite-sized chunks, allowing you to redefine your brand for several demographics.

Understanding the purpose of market segmentation

Market segmentation can help understand which figurative habitats and ecosystems you need to create for each demographic you serve. Every segment you define feeds the buyer personas that are so important to your online trade. Segmentation is usually achieved in clusters or needs. Once you’ve partitioned your market by needs and behaviours, you can create the perfect conditions for it. Those conditions determine everything from your marketing strategy to your logistics and lead generation policies. That improves the customer experience which, in turn, raises your profits.  

Market segmentation in times of crisis

The COVID-19 pandemic has forced the business world into a new habitat. Businesses have had to adapt to quarantined buyers, new needs and stunted logistics. Location independence and remote work have changed the way brands trade, so software spend has grown exponentially with 51% of businesses forced to implement new digital tools. 

According to a recent survey, 76% of businesses have adjusted their products to fit the virtual world, but many are still hunting for a way to survive in the new landscape. Happily, segmentation is the perfect tool for the lost. Like a tuning fork, the benefits of segmentation can define the perfect wavelengths for every buyer persona. It can also:

  • Position your business in areas with fewer direct competitors, allowing you to dominate and gain brand strength.
  • Eliminate rivals by offering the most inside knowledge.
  • Transform you from a follower in a large market to a leader in a small one.
  • Teach you how to appeal to unique needs.

As the business world turns to continuity plans that refocus their companies beyond the health crisis, segmentation becomes a core focus. Companies have started developing procedures that will help them to survive the next crisis. You can’t develop an idea of your core business functions until you know exactly who you’re serving. Segmentation should thus be at the heart of every continuity plan. Below are the three main benefits of market segmentation.

#1: Product development

Entire industries have crossed the digital divide to survive the pandemic. The tourism industry is selling holidays via virtual tours; supermarkets are pushing more eCommerce than ever before. Even healthcare has gone digital, with telehealth and teletherapy bringing patients more convenience than they’ve ever enjoyed. The post-pandemic world will take those digital adjustments along for the ride.

Those products might have been built for quarantine, but their relevance is unlikely to fade, so businesses need to ensure that their digital products are correctly targeted. Segmentation needs to be at the core of all product development. Without it, your efforts will fail in response to every tiny jump in market volatility. 

Segmentation assures your long-range prospects. Think of it as the foundation that determines your long-term constancy: it hedges your bets and warns you when a product can’t attract the profits it needs to sustain itself.

#2: Role automation

Audience segmentation has been a marketing practice for over a century, but today’s brands are taking it to new extremes. Deep segmentation goes beyond mere personas, segmenting individual buyers so that you can offer personalised care. This depth is a necessity in industries like healthcare and insurance, but more traditional sellers have started to use it because automation has made it possible. eBay was one of the first companies to offer this much depth. 

The eCommerce titan relies on automation to personalise its communications to every shopper at every stage of their buying journey. It even markets by previous purchases in the same way that Amazon’s web pages adjust to every shopper. With machine learning and automation at your side, you can market to individuals within every segment without obliterating your expense account.

#3: Attention economy

In an attention economy, every brand needs to achieve a new level of relevance. That’s no easy task in a digital landscape where relevance redefines itself every day. Personalisation is up for the challenge, but you can’t provide individualised care without a segmented market. Most automated tools rely on a rules-based structure fed by defined personas. It’s a golden infinity circle: the more accurate your segmentation, the better your personalisation. 

The better your personalisation, the more relevant your segmentation. There’s no better way to succeed in an attention economy than to make every buyer feel seen, and custom messages and products achieve exactly that.

The post-marketing benefits of market segmentation

The subject of segmentation tends to arise during the most volatile times in human history. There’s a reason for that: segmentation might be a marketing practice, but its benefits spread far beyond mere PR. It can fuel your product R&D, define your logistics, refine your pricing strategy and even play a role in the selection of your staff.

It’s a discipline that your entire business can benefit from, so it can refocus your company during times of change by reminding all who work for you who they’re ultimately trying to benefit. 

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