Each year, an average of 30,000 new products enter the marketplace (that’s enough to fill the average grocery store!), and 70% will fail to sustain or grow sales in the first two years.

How does a brand ensure that a new product stands out in the sea of competition? How does it increase the odds of success?

The key is to avoid a one-size-fits-all approach and instead get the correct product in front of the right customers at the proper time.

To achieve this level of specificity, brands must use proper market segmentation. This practice allows a company to focus its product development and marketing efforts narrowly.

What is market segmentation?

At its most basic, market segmenting is breaking a broad swath of potential customers into smaller customer groups with similar characteristics. A company can then design products and marketing campaigns tailored to the needs and interests of a particular target market.

Few companies have the resources to sell to a mass market. Most must focus their efforts to meet more limited budget constraints.

Market segmentation identifies the many different reasons people purchase products to help companies make smaller investments with more significant returns.

The more that a brand can narrow the audience for a new product, the more likely it can successfully sell to them. Rather than trying to persuade a generic customer base to buy a product they may or may not want, you can place the product in front of people who need it.

Benefits of market segmentation

Market segmentation provides valuable customer insights that can be used to create many positive business outcomes.

● Product development: By identifying narrow market segments and researching their specific needs, brands can create products that satisfy those exact pain points. These specialized offers will have little to no competition.

● Business growth: The more a company understands various market segments, the more it can expand by moving into new geographic areas, offering complementary products to existing customers, or creating new products to appeal to a previously uninterested audience.

● Optimized marketing: Using the insights from segmentation research, marketing teams can create highly targeted messages on the most relevant platforms. Even

better, they can make calculated decisions about media spend to reduce costs.

● Better distribution strategies: Knowing where and when your customers shop can help you change or tweak your distribution strategies to streamline and save money while improving customer satisfaction.

● Customer retention: Done well, market segmentation can create brand loyalty. When you’re able to anticipate and address a customer’s needs at every turn, they are far more likely to become repeat buyers and brand advocates.

A company that takes the time and energy to cultivate a deep understanding of its customers is almost guaranteed to have a competitive advantage. It’s far more likely to expand its market share and profits.

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Types of market segmentation

There are four main types of market segmentation, each of which offers a different method for identifying clear attributes unique to a particular group of customers.

Geographic segmentation

It can be helpful to group customers by a specific area—from a country down to a neighborhood.

This approach is particularly effective for products and services that address localized concerns. This may include items affected by the weather (lawn care, clothing) or regional preferences (cuisine, sports, or other recreational activities).

To use geographic segmentation, break down potential customers by identifying characteristics such as state, county, zip code, climate, primary language, or population density.

Demographic segmentation

It’s helpful to group customers by quantifiable factors like age, income level, family size, religion, race, nationality, language, educational level, marital status, occupation, home ownership, political party affiliation, or income.

Demographic information is generally easy and affordable to access, which makes this type of segmentation one of the simplest to use.

A product may use demographic segmentation to position itself as the best solution for a specific type of person (for example, married men, 30 to 40 years old, who have a full-time job earning $100,000 or more and own a home).

Demographic segmentation may not be detailed enough to create distinct product differentiation. That’s why it’s often combined with another type of segmentation to narrow the customer group further.

Psychographic segmentation

One of the most detailed forms of market segmentation divides customers based on qualitative traits. These details can’t be easily measured like demographics and include things like values, habits, attitudes or opinions, personality, lifestyle or social status, and hobbies or activities.

Gathering psychographic information requires more effort and can be achieved using surveys, focus groups, interviews, and social media monitoring.

Once you’ve identified shared psychographics for a particular market segment, turn it into a statement. For example, “we help busy moms who want to serve their young children a home-cooked meal in 30 minutes or less.” Then, ask your target audience whether the statement resonates with them.

Very often, marketers like to combine psychographic segmentation with demographic segmentation to create very distinct customer groups.

Behavioral segmentation

Finally, another popular method of market segmentation is based on customer behavior during the buying journey.

Behavioral segmentation considers actions like when shoppers become customers (acquisition), how customers use the product or service (user journey), how frequently they use it (engagement), how long they continue to use it (retention), and how often they make new purchases (loyalty).

This method can be complicated to execute but is likely to generate beneficial insights. It’s often the best way to identify opportunities for new products or markets and for improving existing offerings.

How to validate a segment

To be worthwhile, a segment must be clearly defined and unique. To test whether your potential market segment makes the grade, ask yourself these questions:

What does this segment value most about a product like ours?
What is the number one reason this segment chooses to buy a product like ours?
What is the buying journey for this segment (what content, platform, features are crucial)?

The answers to these questions must be based on data from actual research, not just your intuition or anecdotal experiences.

If you can easily and with great detail answer each of these questions, then your segment has great potential to be actionable and profitable.

If you don’t have clear answers, however, then you likely need to do more research or further refine the segment.

How to segment the market for a new product

The market segmentation process isn’t complicated. There are two major components—creating segments and executing a go-to-market plan—and a few significant considerations at each stage:

Customer Segments

Set an objective for what you hope to achieve through market segmentation (create a new product, better serve existing clients, find more profitable customers, etc.).
Identify which segmentation type or combination of types you’ll use, and assess the viability of your proposed market (Is it too large? Is it large enough?)
Conduct research by collecting hard data and anecdotal evidence related to your preferred segment. Avoid rushing this stage because it is the most crucial component of quality segmentation.
Compile your research and use it to determine which new products or marketing approaches you’ll use to target this segment.
Validate the offer or messaging with a representative sample of the segment using surveys, focus groups, and polls.

Go-To-Market Plan

Develop a launch plan using marketing and sales strategies relevant to the target segment.
Test the effectiveness of your strategy by implementing conversion tracking early.
Continue to execute the plan and monitor the results over time, adjusting as necessary.

To ensure the best results, companies may want to invest in marketing software. Many products will automatically segment customers into relevant groups, analyze the segments using interactive charts, and provide third-party data to improve results.

Market segmentation best practices

As you execute a market segmentation plan, watch out for these common mistakes that can negatively affect your results:

● Unaligned segments: The markets you target must harmonize with your company’s strategy and structure, rather than trying to conform your brand and offer to suit the segment.

● Segments that are too broad: Failing to make the segment narrow enough will allow the competition to gain an advantage by targeting a more clearly defined and like-minded portion of your segment.

● Segments that are too narrow: Focusing on too small of a segment will significantly limit the return on investment of your time and money.

● Too many segments: It’s tempting to pursue all of the potentially profitable segments you identify, but this can dilute resources and negatively affect revenues.

● Targeting people, not money: A perfectly aligned and well-sized segment is useless if its members don’t possess sufficient buying power. Focus on market segments that will create a positive ROI, even if they aren’t the largest or most glamorous.

● Never updating segments: People change, and those changes can come quickly in today’s global, tech-savvy world. Frequently revisit your segments and adjust as needed to remain relevant and competitive.

Market segmentation is a highly effective strategy, and it isn’t complicated. It can be time-consuming, however, and may be challenging if it’s a new approach for you and your marketing team. Expect mistakes as you execute this new approach.

Stick with it, though, because segmentation is an incredibly valuable process that shows customers that you genuinely understand them. Providing tailored products and messages that resonate with your customers’ specific needs will help your brand grow exponentially.

Market research is an essential activity for companies of all kinds. When entering a new local market or category, it’s crucial to do as much research as possible in many areas to ensure you’re as prepared as possible to launch successfully, with minimal risk.

Market research is even more important when entering an international market, as the stakes are higher, and you’ll be facing entirely new market conditions.

This article will examine international market research, how it typically differs from what you’re used to in your domestic market, and some of the main reasons companies need to do it.

What is international market research?

International market research is a blanket term for all the research and preparation on a new market, usually before entering it. Unlike domestic market research, international market research focuses on an overseas market, often with different cultures, business conditions, and consumer behaviors.

There are many different methods and stages involved in international market research. In some cases, the particular methods and techniques are the same as domestic market research, but your overall strategy will likely be very different.

What are the objectives of international marketing research?

International market research is a way of understanding a new, overseas market before you launch a product or service there. The main objectives are to understand your target customers, identify any challenges, get familiar with your competitors, and do anything else to boost your chances of success and avoid unpleasant surprises.

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How is international market research different from domestic research?

There are several key differentiating factors between domestic market research and international market research. Here are three of the key differences:

1. You’re entering a market with social and cultural differences

Domestic market research is already tricky, but the often vast differences between your home country and your target country make international market research much more challenging in many ways.

Often, the reasons for this difficulty are the same reasons why you need to research in the first place — you need to learn as much as possible about a region and culture that may be entirely unlike your own.

The differences between countries can create many challenges for researchers. For example, a research method like one-on-one interviews that work well in western countries like the UK and US may fail miserably in other parts of the world where it is considered suspicious.

2. There may be more restrictions around research

In addition to cultural and social differences, international markets also come with legal differences. While you might have a good understanding of how the law (as it relates to market research) works at home, the reality abroad may be very different.

You’ll need to be aware of an entirely new set of rules to avoid breaking them and ending up in legal trouble. One example is the USA’s TCPA, which forbids calling a cellphone using an automated dialing system.

Legal differences make it imperative to conduct legal research and coordinate with lawyers in your target market before beginning any research. Ending up on the wrong side of the law could be catastrophic.

3. It requires more investment

Conducting market research on your home soil can often be undertaken relatively cheaply. However, costs can quickly skyrocket doing research abroad. Seemingly simple things like hiring venues, running telephone interviews, and gathering people to interview can become exponentially more complicated when you’re doing it in a foreign country with people who speak another language.

You may find yourself needing to hire a small army of staff on the ground to help you carry out these tasks. To make things even more frustrating, the cheaper market research methods like email and online surveys don’t work nearly as well in developing countries with less widespread internet access.

8 reasons why companies need to research their international markets

Despite the additional challenges involved, international market research is simply unavoidable if entering a new market overseas. Here are some of the reasons why.

1. Differences in culture

The culture of your overseas target market may be completely different. Failing to research the culture of your target market adequately could result in serious blunders, which could seriously harm your market entry and brand reputation.

Cultural differences don’t have to be vast to cause significant problems. For example, in many African countries, containers are labeled with a picture of their contents. When baby nutrition company Gerber entered this market with their jars labeled with photos of babies, the reaction was understandably negative and seriously impacted sales.

2. Differences in laws and regulations

Laws and regulations don’t just have an impact on your market research methods. They can affect every part of your market entry process and how you conduct your business in your new market.

If you enter a new market without a comprehensive understanding of the law concerning your activities, you risk getting into legal trouble.

There are many different potential legal pitfalls to consider when entering a new market. Some examples are environmental regulations, tax laws, and laws that pertain to hiring new staff. On top of this, rules can change quickly, and what was legal five years ago might be a no-go today.

Understanding legal and regulatory differences is where one-off research isn’t enough — you’ll have to conduct regular and ongoing research as well as work with legal experts in your target market.

3. Differences in customer preferences

Customers in one country may have completely different preferences to those in another. Cultural differences can be due to the earlier issues, but they can also result from other factors.

When China began allowing its citizens to buy and own homes a few decades ago, US do-it-yourself chain Home Depot quickly capitalized on this new opportunity. Six years later, they closed all their Chinese stores, never to return.

The reason — they opened all their stores in the suburbs, but most middle-class Chinese citizens tend to live in apartment blocks in the cities, homes that don’t require or allow much renovation. This simple misunderstanding due to incomplete research led to the failure of Home Depot’s market entry attempt.

4. Understand the competition

When you enter a new market, you’ll need to compete with already existing brands. Brand competition is not easy — you’re already at a significant disadvantage compared to companies that have been established in that region for a long time and are well-known to the local consumers.

It’s essential to understand who you are competing against and — more importantly — how they have been able to succeed. What exactly is it that customers like about your competitors? What keeps them coming back? What has allowed them to gain and maintain a hold in your target market?

Answering these questions through research will give you valuable direction on what your brand must do to succeed. It will also highlight weaknesses in your competitors that you can address in your marketing.

5. Mitigate risk

Entering any new market is a risky venture, and that risk increases when you expand abroad. According to the Harvard Business Review, companies operating abroad faced far lower Return on Assets than those in domestic markets. Many of these companies do not survive the attempt.

Market research allows you to mitigate your risk by being as prepared as possible for the many challenges of entering a foreign market. You’ll better understand your customers and what they want, be more prepared to take on your competition, avoid legal issues, and have a more viable strategy.

Entering a new market overseas will never be risk-free, but research allows you to minimize that risk.

6. Logistical challenges

The logistical challenges involved in entering a foreign market can be enormous. Everything from selecting and evaluating suppliers to finding ways to transport your products around your new market, there are many things to consider.

When entering a market in the developing world, these challenges become compounded. Regions without well-established transport infrastructure, financial systems, labor laws, government, and so on can create an endless series of logistical challenges.

To prepare for this, you’ll need to research your new market rigorously. Understand all the potential issues facing you so you have time to prepare and aren’t caught unawares by a problem that might set back your operations by a significant amount.

7. Prepare a solid strategy and budget

A well-established strategy and budget plan is an essential starting point for any market entry process. The only way to do this effectively is through diligent market research.

Market research allows you to understand the costs of your new market, including unexpected expenses. It also helps you anticipate obstacles and challenges and flesh out your strategy in a way that boosts your chances of success.

Suppose you need to win the support of high-level stakeholders in your organization. In that case, a well-prepared and financed strategy is an excellent way to convince them that your market entry attempt is well-placed to go ahead.

8. Find available marketing channels

Marketing your product in a foreign market comes with a unique set of challenges and considerations. Channels that work well in your home country may fail abroad — for example, digital marketing in a country with poor internet access.

On top of that, your messaging will need to consider all the cultural and linguistic characteristics of your target market. An advertising campaign that works well at home may very well perform terribly on the other side of the world.

Market research is a great way to identify the marketing channels and approaches that typically work well for similar products in your target market, helping you plan an effective marketing strategy and boost your chances of success from the start.

Market research is an essential and unavoidable task if you want to enter a foreign market successfully. Done right, it can help reduce the many risks involved and give your product the best possible chances of succeeding in a market that may be radically different from the ones you currently operate.

Contact Kadence to learn more about how we can help you with international market research, along with all other kinds.

Considering expanding into an overseas market? If so, you’ll need to do international market research, but be warned, there are many different methods involved and choices.

The difference between good and bad market research can make the difference between the success or failure of your product launch. This is even more true when launching in foreign markets.

All the various challenges and obstacles of market entry are compounded when you enter a market with different cultures, customs, languages, laws, and infrastructure to what you’re used to dealing with in your domestic market.

Without conducting rigorous research beforehand, you risk being unprepared for an already challenging process.

This article will look at some of the most effective methods for international market research and what you’ll need to consider compared to domestic research.

The three main types of data

Before we explore the methods available to researchers, it’s essential to look at the three main types of data you will be aiming to collect:

1. Secondary data

Secondary data refers to data not collected specifically for the task at hand (in contrast with primary data). It can involve things like government records, business reports, information from NGOs, and scientific publications.

Secondary data is usually the easiest to collect and makes a good starting point for your international market research. When researching a foreign market, it’s crucial to consider linguistic differences and that specific data may be less accessible for political reasons.

2. Survey data

Survey data is a blanket term for all the data you gather through speaking to real people in your target market. There are many ways to collect it, including face-to-face surveys and interviews, electronic methods like email surveys, via telephone, and more.

When dealing with an international market, surveys can be highly effective as they offer a direct connection with your target customers in your new market. However, there are challenges to overcoming language barriers and cultural differences.

The best way to conduct an international survey is to appoint a research firm with direct market knowledge and experience.

3. Experimental data

Experimental data is gathered through an experiment. In market research, this can take many forms. For example, you could divide customers into groups and offer one a full-price product and the other a discounted product, then measure which has more uptake.

Once again, experimental data is a helpful tool when researching an international market since it yields real-world findings and allows you to draw concrete insights about how the market will respond to your product.

It’s worth noting that primary data refers to any information collected solely for the task at hand, so survey data and experimental data can be considered primary or secondary depending on the source.

9 of the most effective methods in international market research

Now, let’s explore some of the most effective methods available to market researchers when getting started in a new, overseas market.

1. Overseas business research

The research conducted by other businesses can be a good starting point for your market research. Companies in your space may have already collected this data. It may have been collected by businesses based in your target market or a nearby location.

Business research is valuable because it’s an example of another organization that has done some of its work for you. You can learn a lot about business trends, cultural differences, markets, laws, and more from the research of other companies.

However, this is always just a starting point. No business in the world will have the same set of questions, challenges, and needs as yours, and nobody will have the same product and audience for it. For effective market research, you’ll have to do your own work too.

2. Collecting foreign government information

Governments collect a tremendous amount of information about their populations and the business within their borders. This includes demographics, geography, and culture, which can be extremely useful when planning your marketing and choosing where to sell your product.

In addition, government data can provide valuable insights on the legal challenges you might face when entering a new market and the various regulations you’ll be required to comply with as you market and launch your product. Much of this information is readily available on government websites.

3. Collecting information from NGOs

Non-governmental organizations like charities can be excellent sources of data due to their work in research. NGOs may provide more accurate and up-to-date data than governments in developing regions of the world, which can lack the infrastructure to collect information properly.

4. Face-to-face research

One-to-one interviews and focus groups can both be highly effective market research methods. They afford you a direct insight into what your customers think, what they want, as well as what concerns them, what their pain points are, and how they feel about your competitors, among many other things.

However, doing face-to-face research in an international market comes with a unique set of challenges. The logistical demands are higher — you’ll need to locate and hire venues and work with interviewers on the ground, which may be more complex than doing so back home. You’ll also need to consider linguistic differences, which means hiring interpreters or locally-based staff.

Another challenge is cultural differences. For example, some Middle Eastern cultures treat interviews with suspicion, and it may be not easy to gather a meaningful sample group.

5. Attitude scales

Attitude scales — like the Likert scale — allow respondents to give a score on how they feel about a question or statement, usually on a scale of “Strongly Disagree” to “Strongly Agree”.

There are many benefits to using this type of research method in international markets. It tends to transcend language, and questions are easily translated. It’s also easy to distribute and can quickly be done either in person or electronically.

However, there are still challenges. Some cultures, such as Japan, may be unwilling to give strong responses, leading to many neutral answers and no meaningful takeaway.

6. Text message (SMS) survey

Text message surveys involve sending out a series of questions to a group of respondents via SMS. It’s quick, easy, cheap, and allows you to reach a large number of people. You won’t get detailed responses from this kind of survey, and it tends to miss out on nuances, but it’s potentially an excellent way to get lots of feedback with minimal effort.

The drawbacks are that it’s dependent on mobile access. Many countries worldwide lack this — Laos, for example, has a mobile phone penetration of just 53.4%. This makes it harder to distribute your surveys to a significant number of people.

7. Online survey

There are many different types of online surveys available to you when conducting international market research. Email, social media, and web forums are just a few examples of places you can connect with respondents and distribute surveys and questionnaires.

Online surveys are one of the cheapest and easiest ways to gather information and can be done from anywhere globally with no need to hire additional staff or deal with logistics in your target market. You’ll get fast responses, and surveys are also easy to translate into multiple languages.

There are some challenges involved, however. Anything involving the internet is dependent on internet access in your target market, which may be very low in some parts of the world. This method works well in North America and Europe but is poorly suited to countries like Eritrea, where only 14% of the population uses the internet.

8. Mobile web survey

This method involves distributing surveys via smartphones through applications or some of the other online methods mentioned above. In many countries, smartphone ownership exceeds computer ownership, making this a valid alternative.

In other countries, however, very few people own smartphones. Pakistan is one example — smartphone penetration here is just 18.4%. However, if your target market has a high smartphone penetration, this can be a reliable research channel.

9. Remote Face-to-Face

In recent years, we’ve all seen an explosion in the use of video chat software like Zoom and Microsoft Teams. Today, this is used regularly to communicate with friends and family, attend work meetings, and even see your doctor. The COVID-19 pandemic accelerated this trend and forced us to rely on remote communication for almost all of our social interactions.

This technology applies to market research and is ideally suited to researching foreign markets. Now, face-to-face interviews and focus groups can take place entirely digitally, removing the need to send team members abroad or hire people in your target market.

There are still limitations, of course — it relies on your audience having access to electronic devices which can lead to skewed results (for example, you end up interviewing only younger and more affluent people). It should be combined with other methods for best results.

Market research is an essential but often challenging process, and it becomes harder when you try to do it in a completely new market far from home. Fortunately, market researchers today have access to a wealth of methods and tools, many of which did not exist even in the recent past.
Get in touch to learn how Kadence can help you conduct international market research as effectively as possible, allowing you to mount a confident and informed market entry.

Market segmentation — the process of breaking your market into segments according to factors like needs, past behavior, and more — is essential if you want to gain a clear understanding of your customers and target them effectively.

Companies that use market segmentation successfully can access a whole range of benefits. Segmented marketing performs significantly better, and many of the world’s most successful brands have rigorously segmented their markets for decades.

However, market segmentation is also wrought with challenges. Depending on the scale, it can be a major operation requiring many resources and work. In this article, we’ll look at five main challenges facing companies as they conduct market segmentation and how to mitigate them.

Why market segmentation is so important

Market segmentation allows you to divide your market into smaller groups, which has many powerful benefits. Here are some of the main advantages:

Market segmentation gives you greater focus.

You can target the right groups with the right products by segmenting your market. The alternative is taking a one-size-fits-all approach, targeting a vast range of different people with the same product and marketing message, which is far less likely to convert any given person.

With segmentation, you can use a different strategy for each group, tailoring your approach so your customers get more choices and a higher chance of getting what they want exactly — or at least much closer to what they want, as you can offer.

Market segmentation can give your brand a stronger identity.

Brands and products that try to appeal to everyone often satisfy nobody. Look at highly successful brands like Coca-Cola and McDonald’s — they know who they are appealing to and the needs they want to meet, and they don’t try to pretend otherwise. Nobody is drinking a coke or eating a Big Mac to be healthy or lose weight; they do it for taste and convenience.

These brands can forge a strong and memorable brand identity by focusing on specific segments of the market and their specific needs: in this case, people who want a refreshing and tasty beverage on the go and people who want fast, convenient food. They’re not trying to appeal to healthy gym-goers or people looking for an expensive sit-down meal, so they can focus their marketing and product range exclusively on their true target market. This allows them to build a clear and unmistakable brand.

Market segmentation reveals opportunities for innovation.

Segmenting your market can illuminate new areas for innovation that you may have missed otherwise. You’ll notice ideas for new products, tweaks you can make to existing lines, and new campaigns to create.

When you divide your market into smaller segments, you’ll notice that some groups demand specific things. If you treat your entire market as one block, these distinctions can easily get lost in the noise.

Market segmentation provides more accurate and targeted marketing.

When you segment your market, you can speak to your customers in each respective group more directly. This allows you to create marketing campaigns and use channels that are much more tailored to your audience.

For example, some customers might respond exceptionally well to TikTok content, whereas it may completely miss others. Segmenting your market helps you avoid wasting money by targeting the wrong people, so you can optimize your marketing budget and maximize results.

Market segmentation can help expand your brand’s reach.

Entering a new market is fraught with challenges. Segmentation can help you hone in on a target audience when launching your brand in a new market to give you a better chance of success. Segmentation allows you to target consumers with precision. You can then tailor your approach to the specific customer groups in that country rather than simply using the same strategies you used in a different place.

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The challenges of market segmentation

Market segmentation, while incredibly useful, can be challenging to conduct and implement. Here are some of the main challenges you’ll likely encounter when segmenting your market, with our top tips on how to overcome them:

#1 Cost

Segmentation is an investment. Splitting your market into groups means you’ll have to do some things, for instance, marketing campaigns, multiple times in different ways. This can be more time-consuming and expensive than running a campaign aimed at a single market.

There is no way to avoid this challenge. The cost of market segmentation will always be an investment, but if done right, the extra revenue you will generate from targeting the segments that represent the best opportunities for your brand will more than pay for the initial investment.

#2 Understanding that people can belong to multiple segments

It’s easy to fall into the trap of thinking that each potential customer belongs solely in one specific segment. However, this is an oversimplification.

Imagine you’re selling a brand of wine. One of your segments might be wine connoisseurs who enjoy drinking at bars with friends. Another segment might be those who drink to unwind at home.

One person could fall into both of these segments, depending on factors like the time of the week and their current social schedule. People are individuals, and their habits and desires can change based on their environment and mindset.

Bear this in mind when approaching a segmentation, particularly in FMCG, and consider segmenting based on occasions, asking people about different scenarios to ensure their diverse needs are represented.

#3 Keeping segments precise

Segmentation only works when segments are clearly defined and distinct from one another. If your segments are too broad and vague, you’ll lose out on many of the benefits of market segmentation because you’re unable to tailor your approach precisely enough.

To ensure your segments are narrow and clear enough, it helps to create detailed personas for each one. A persona is a fictional profile that encapsulates the core qualities of each segment, including their needs, behaviors, and motivations, based on initial research. The purpose of personas is to bring to life the segments and demonstrate how they differ from one another.

For example, if you’re selling a brand of bottled water, one of your personas might be “Healthy Harry” who buys water to drink during workouts or sports events. His persona profile would contain a range of information, from what motivates him to what he’s looking for in a product. The more detail, the better — this helps you create precise and tailored segments.

#4 Selecting the right segments to focus on

It can be easy to overlook some potentially promising groups when segmenting your market.

For example, you might disproportionately target one segment that makes up a significant section of the market when another might be a more natural fit for your product.

Remember, the benefit of segmentation is that it can enable you to be incredibly precise and personalized in your approach. This means that even when targeting segments that make up smaller proportions of the market, you will still see significant returns.

It’s essential to take your time in this phase of the segmentation process to ensure you identify the right market segments, or you’ll risk missing out on some lucrative avenues for growth.

#5 Embedding the segmentation in your organization

When people try to anticipate the difficulties in running a segmentation, the research approach is often the first to come to mind. But the real challenge for many organizations is in embedding the segmentation. This is crucial if the segmentation is to drive change and growth for the business.

A segmentation is only as powerful as its internal champions. Fail to get stakeholders on board in the beginning, and you’ll have a tough job getting people to harness the segmentation to inform strategic decisions and realize the resulting benefits.

We recommend taking an active approach to stakeholder management, making this a crucial element of the study’s design. Start with stakeholder interviews to secure buy-in to the project, then keep these people involved throughout the process.

Toward the end of the project, visual outputs can bring segments to life and keep them front of mind when stakeholders are making decisions.

Workshops can also be a valuable tool for taking the segmentation and using this to inform your strategy.

Market segmentation is a powerful tool for businesses. It allows you to improve your product range, tailor your marketing, and increase your chances of connecting with customers and growing your brand.

Although the process can be challenging, it’s well worth taking the time to anticipate the potential barriers and work around them. At Kadence, we help companies of all kinds with market segmentation, mitigating the challenges while boosting their chances of success. Contact us to find out more about how we can help you do the same.

Segmenting your market is incredibly important if you want to achieve success in any industry. It has many benefits, from improved marketing to making it easier to expand your offerings. FMCG (fast-moving consumer goods) are no exception. In fact, there are many reasons why market segmentation for FMCG products is sometimes even more important in this industry than others. There are many steps you can take to ensure your segmentation efforts are as effective as possible for your FMCG business.

First, it’s important to understand why segmentation is so important, and what makes FMCG different from some other industries. Then, we’ll move onto some key best practices for FMCG market segmentation.

Why is market segmentation important?

Whatever industry you’re in, it’s almost always helpful to segment your market into different slices based on a range of factors like needs, values, behaviors or interests. This has a wide range of benefits, such as:

It helps you better target your audience. Instead of developing products for a broad range of people, you can hone in on a specific segment and create a product that addresses their pain points more effectively.

It allows you to market more accurately and reliably. As above, when your target audience for marketing is more precisely defined, you can create marketing materials that speak to your prospects more directly, helping you build more meaningful relationships, engage them more easily, and increase your sales.

It reduces risk and optimizes spending. When you (correctly) target a more specific group of people, you increase the chances of successfully converting them to customers. This allows you to use marketing budgets more wisely, focusing resources on people you know are in need of your product instead of taking a costly scattergun approach.

(Learn more about market segmentation in our ultimate guide to market segmentation)

Why is market segmentation important for FMCG products?

FMCG products can be defined as products that are sold quickly and at a relatively low cost. This bracket of goods includes things like snacks, toiletries, cosmetics, and over-the-counter drugs.

This category has certain characteristics that make segmentation a critical initiative for any FMCG business and will influence the approach you take to your segmentation.

With FMCG goods, people’s needs and desires change — sometimes significantly — based on where they are and who they’re with. For example, someone eating out with friends might have very different preferences compared to when they’re eating at home after a long day of work. This means one person may fit into several segments depending on their environment. This kind of fluctuation doesn’t happen in the same way as many other product types, like cars or investment products. As such, an occasion-based segmentation is needed.

FMCG is a high-competition space. Just think of the enormous numbers of potato chip brands, or toilet paper options. All these brands are fighting for customers all the time, and to compete in this kind of environment you need a keen understanding of your market and how to target it.

Innovation is constant. To keep up in this ever-changing landscape, FMCG companies need to be continuously innovating and developing new products. Market segmentation helps them better understand their customers and where the innovation opportunities exist, as well as how their current products are being received by different segments of their market.

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Market segmentation for FMCG products — guiding principles on how to get it right

For FMCG businesses, market segmentation should use many of the best practices employed by other types of companies. Here are some ways to ensure you get the most out of market segmentation as an FMCG company.

Get the right people on board at the beginning

One of the biggest challenges when you’re running a segmentation in an FMCG organization is getting buy-in to the process from the key stakeholders. A segmentation should drive decisions at every level of a business – from marketing to product development – so it’s important to get these people on board at the outset to optimize eventual adoption of the segments.

One way of doing this is to carry out stakeholder interviews with the key people in your organization. This is important for several reasons:

It allows you to gather important knowledge that exists in the business to inform the segmentation itself

It helps create buy-in. By having skin in the game at the beginning, you are able to excite people about the project and create evangelists who will be more likely to harness the research going forwards.

Another useful tip is to consider a client side “champion” both for the duration of the research and the internal roll out. This should be combined with a client side “core team” with representatives from each of the departments that is planning on using the segmentation.

Remember that a person’s needs can change based on their environment, which will have implications for the way you approach segmentation in this category.

As mentioned above, one of the unique attributes of the FMCG category is that consumers’ needs change based on the situation. This means that with FMCG products, people don’t necessarily fit into fixed, static segments. As such, a lot of the time, segmentation is done based on occasions.

If we think about the alc-bev category, people tend to consume very different drinks depending on the occasion. Somebody having a beer with dinner on a Wednesday night will be motivated by a very different need than he/she will be when hanging out at a nightclub on Saturday, where they might be drinking something entirely different. Putting this person in one segment would wash out the findings, rather than accentuating the two very different motivations present in these occasions.

For this reason, when doing market research to inform a segmentation, it’s important to be specific about the what and why of the choices people make at different times. Ask them about a range of different scenarios to ensure their diverse needs are represented.

This is important to keep in mind for FMCG products since our habits and tastes fluctuate so much, in a way that they don’t always do with other products.

Identify the segments with most potential for your business

The core element of a segmentation project is the development of the segmentation solution, dividing the market up into segments that you can target. In this stage of the research, it’s important to remember that even though one of your segments might be a relatively small percentage of the market, it could account for a large share of sales. This is a vital principle to bear in mind in any category, but for FMCG it’s incredibly important, given how competitive the market can be. Focusing on a niche segment, by targeting consumers’ needs closely, can be a recipe for success.

Augment traditional segmentation techniques with (self) ethnographic research

Every segmentation involves quantitative research to group people into segments based on certain characteristics. This allows us to target groups with broadly similar attributes with the same types of product.

We always recommend combining this with qualitative research to get under the skin of your segments and to help you create detailed personas. This qualitative research can take many forms – from in-depth interviews to online research such as an online community.

For FMCG brands, we recommend considering ethnography at this stage. This gives you a unique and unmatched opportunity to really understand your segments— if you really want to get to know your Fitness Enthusiasts, for instance, you want to see them in the course of their daily life. What do they do after work? What does their house look like? What’s in their refrigerator?

Ethnography gives you a level of insight that you can’t quite access with surveys. Doing this in person is incredibly rich, but it can be logistically challenging (particularly during Covid) and costly so it isn’t always possible to take advantage of this method. That said, there are a range of self-ethnographic techniques you can use to gain this depth of insight through mobile research. Examples include asking people to create a food diary, complete videos or photo tasks in store to help you understand the purchase journey or interview friends or family members.

The insights from self-ethnography can be incredibly rich, helping you to really deepen your understanding of your segments so you can develop products, services and campaigns that really meet their needs.

Bring your segments to life

Once you’ve created your segments, the next task is to bring them to life. There are a number of ways you can do this but the first step is to create personas.

What is a persona? A persona is a fictional profile that encapsulates the core qualities of each segment, including their needs, behaviors and motivations. The purpose of a persona is to help others in the business understand each segment and how they differ from one another so they can better serve their needs. As such, they tend to be very visual so they can be easily remembered and placed at the forefront of decision making.

Naming here is of vital importance. A memorable name can be really useful in helping stakeholders remember the defining characteristics of a segment so that they live on in the organization.

Some personas can be as simple as a PowerPoint slide. But at Kadence, we like to take this further, developing a range of visual outputs that you can use to help everyone in the business understand your core targets – from the C suite to the factory floor.

We’ve developed everything from interactive PDFs to infographics to bring different segments to life. Some techniques we’ve found particularly useful include:

Video-based teaser campaigns prior to unveiling the different personas to build interest and engagement
Posters to bring personas front and center for employees in the office
Documentary-style films with consumers representing each segment. These can be a really effective way of bringing the segmentation to life and helping the key insights stick with stakeholders for a long time to come

(You can find out more about our design team and their capabilities).

Going global – how to approach international segmentations

Most FMCG brands are global, but their products can and do vary depending on where they are sold. As such, marketers often ask us if they should have one global segmentation solution or individual solutions by region or country.

The answer really lies in how you will use it. If you have marketing teams that are deployed at a country level, then country level is the way to go, with, hopefully, a global framework that the countries all fall into that the global marketing team can use.

If most of the marketing action is coming from a single global team, then one global segmentation is better so it really does depend on the set up of your organization and team.

Need help developing a market segmentation for FMCG products in your business?

Market segmentation in the FMCG space is a powerful way to dig into your market, better understand your customers, create better products, and get buy-in from leadership for your plans.

It’s crucial to do this right. There are many challenges and potential pitfalls to navigate, but a huge potential upside in an industry where competition is fierce and customer expectations are high.

For best results, it helps to work with the experts. To find out how Kadence can help with market segmentation for FMCG, read more about our segmentation capabilities, our work in FMCG or get in touch with us today.

Segmentations are powerful tools for any business. But right now, at a time where we’re seeing extremes of behavior – from lockdowns in some markets to a roaring twenties style reopening in others, how should you be approaching your segmentation?

We’ve brought together segmentation experts from across Kadence to share their top tips. In this short 10 minute video, we cover:

How to know if you need to refresh your segmentation – (Hint – if you’re in an industry where behaviours have changed as a result of the pandemic, the answer is very likely to be a yes!)
When you should embark on your segmentation refresh
What you can do in the interim to ensure your segmentation delivers in the short-term
What to do if you need to develop a segmentation now

To understand more about the best approach to segmentation, take a look at our ultimate guide or get in touch.

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Introducing market segmentation

There is no product or service which fits every consumer uniformly. Sometimes there needs to be variation in products to suit different people – compact smartphones for people with smaller hands, for example, or simplified apps for those not so good with tech. It could be different ways of selling a product – appealing to some people with an emotional message and others with a technical pitch.

Knowing the ways consumers behave, feel, think and make decisions can help any business tailor its products and its pitches to meet their needs more fully. By breaking down the market into segments – which share certain traits, are identifiably different from other groups, or have similar attitudes – we can find efficient and effective ways of targeting products and services.

Market segmentation is one of the most commonly used market research and analysis tools. When you call your mobile network provider, for example, you can be sure you’ve been categorized into a tailor-made customer segment, and that the interaction you have with the call center is at least in part defined by the persona you’ve been assigned. It helps them understand how to talk to you, what behaviors you’re likely to exhibit, and the types of need you’ll have.

There are three reasons organizations typically commission a market segmentation project:

They feel they don’t know enough about their customers.
They have some basic ideas about the types of customers they have but they can’t apply that knowledge to meet their marketing needs.
They have a successful segmentation analysis but they’re finding it’s flawed in some way and needs updating.

A segmentation doesn’t just shape the way businesses deal with target customers or existing clients, it informs the design of new products and services and will dictate how they decide to reach you and with what messages. It can shape marketing campaigns and entire brand strategies.

What is market segmentation?

Once upon a time, all business was local. Consumers bought products and services from nearby providers – people from their own communities who understood their needs. There were crude forms of segmentation but they were instinctive and obvious. Salespeople from the dawn of time have tailored their messages according to who they were addressing.

About a hundred years ago, that started to change. Mass-produced goods and emerging global business models meant companies needed to understand in more detail the different markets they might address. Mass media accelerated the trend. When you could reach anyone via a newspaper ad or a TV commercial, understanding who might buy your product, why they might like it, where to reach them and what to say to them became much more important.

Then in July 1958, consultant marketer Wendell Smith wrote an article in the Journal of Marketing titled ‘Product Differentiation and Market Segmentation as Alternative Marketing Strategies’ – the first time the word ‘segmentation’ had been used in this context. He argued that understanding the basic facts, personality traits and needs of different groups of potential customers – and tailoring products or messaging to suit – would increase sales.

By the 1970s, Smith and his colleagues were using what became known as ‘psychographics’ (psychology plus demographics) to come up with classic market segmentations, such as the Values Attitude and Lifestyle Study (VALS) – featuring segments such as “innovators” (high-income, motivated by status and exploration) and “thinkers” (well-educated, thoughtful decision-makers open to new ideas).

The forms of segmentation have evolved over time, as have the specific categories and personas that companies target. Sometimes it’s as crude as defining a target audience as a particular age group but it can also be a sophisticated analysis of deep emotional needs. Methodologies have adapted and diversified, too. But a couple of things remain constant for market segmentation projects. First, they look for definable truths about customers – reliable information that enables you to group them in useful ways. And segmentation remains a cornerstone of marketing campaigns. Segmentation allows companies to target high value consumers and position their product or brand in ways to maximize their performance. That ‘STP’ approach remains fundamental to good marketing.

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Different ways of segmenting your customer base

There are four main categories of information we can use to segment a market:

Geographic: where do people live? What is their environment like? What local factors might influence them?
Demographic: how old are they? What social groups do they fall into? How educated are they? How big is their family?
Behavioral: how do they make decisions? How do they use products? What are their attitudes to brands?
Needs based: What are their needs? What are their attitudes and values?

One of the most obvious ways to approach market segmentations is by generations. But people quickly realized that simply looking at age groups glossed over huge variation in attitudes and needs within generations. There are relatively few ways in which an age cohort behaves uniformly. You must ally demographic with behavioral and attitudinal insights to create segments that are truly useful.

This is illustrated by the rise and fall of the concept of ‘Millennials’. There have been a number of well publicized marketing fails of companies targeting millennials. Lumping them all together – rich and poor, graduates and school-leavers, different countries and cultural backgrounds – is a major misstep. Millennials are hardly homogenous and treating them as one group risks alienating your customer base.

Why ‘needs’ make for compelling segments

We believe that identifying segments by exploring the needs of your potential customers is much more valuable than thinking about any demographic aspects. And this is why the vast majority of market segmentation projects are now needs-based.

For example, you might discover that there’s a portion of the population whose prime need is for low-cost products; another seeks quality or status from their purchases; and some need to have products that meet exacting technical specifications. Once you have those needs-based segments mapped, you can cross-reference by demographics or behaviors if that looks like a useful way of finding other people who might fall into those need groups.

Behaviors are harder to use in a predictive sense. They can change rapidly, especially as a result of external influences. Attitudes and needs, on the other hand, are more revealing and often more predictive. For example, we worked with one academic institution to segment their alumni in order to target graduates with a high propensity to make donations. The value of ‘attitude’ was illustrated by two graduates who both worked in finance in the City. They were the same age, had similar jobs and backgrounds. But one had enjoyed their time at the school and saw it as a springboard for their career; the other had not relished their time there and was considering a career change. The demographics said they were the same segment. But attitudinally, they were poles apart. Creating a segment of ‘inspired graduates’ made more sense than one of ‘rich bankers’.

Getting granular: what really makes a difference when it comes to market segmentation?

Working towards a granular market segmentation is important. If your category is too broad (e.g. ‘millennials’), it’s likely that you’ll capture too many different attitudes to be able to develop compelling strategies. When you mash together a lot of different colors, you just end up with brown. You need to be able to pick out individual colors – those different attitudes and needs – so they can be addressed in a compelling way.

How you’re planning to address your different segments should also help frame your market segmentation strategy. For example, if you’re planning to promote a product through newspaper advertising or on TV, there’s a limit to how granular you need to get.

But as new ways of interacting with customers have evolved – particularly in the digital era – the value of finer segmentations has risen sharply. Today, using tools like email, targeted advertising, or big data analytics, the subtleties between segments can really make a difference.

Imagine you have a product to help pensioners release equity in their homes, for example. There’s an obvious demographic segmentation: you’re only interested in the over-65s. You need to conduct an inspection of their home when they apply and your valuers only cover the South East of England. In this situation, a geographic segmentation is a no-brainer.

But then you know from your existing customer data that people with grandchildren are much more likely to want to free up cash so differentiating between them and the childless elderly is worthwhile. Financial literacy is also a key factor and how trusting of financial services companies they are. Risk appetite can’t be measured demographically but it might define your segmentation.

How to use market segments

So when companies debate which kinds of factors will define the customer personas – and how finely to segment their audience – the most useful question to ask is: how are you actually going to use the segments?

You might be a global business, looking to understand how the same six segments present in multiple countries. Will you actually be able to tailor the product or service around those segments? Can a central marketing function use them in the same way in every country? Or will local teams who understand the nuances of their own markets offer more valuable insights, and perhaps even more relevant segmentations of their own?

Or if you have 15 market segments, for example, and identify seven of them as high priority targets, are you going to tailor your product around every one of them? If not, might there be more value in a more limited approach?

We were approached by a large global business who had segmented the entire personal care market in the UK, which resulted in a lot of different segments. These included people who did the minimum to appear presentable, using the cheapest products infrequently. At the other end were big spenders on grooming who were the real target for that brand’s products.

How might that segmentation have been done differently? In terms of time and money, making a first cut to eliminate the parts of the market that have never shown propensity to buy the brand’s categories of product creates headroom for a deeper segmentation of those more lucrative parts of the population, allowing for more effective targeting.

Embarking on market segmentation? Start with what you already know

The first step of that segmentation journey is looking at what you already know about your existing customers. What is your data telling you? If you’re a pay TV network, for example, your database contains a lot of raw material for market segmentation. You can analyze by frequency of contact, whether someone has switched away and come back to you, whether they opt in to promotional emails, etc. Those kinds of factors alone are a good start to segmentation.

For example, we worked with an online dating service to comb through their database, identifying key segments based on usage patterns and other behaviors, then assigning all existing members to one of those segments. It was a powerful tool for the company’s call center operators who quickly got a sense of the type of member they were talking to from the persona that popped onto their screen, as well as targeting email marketing and much more. The segments became a lens for the business to view its own customers but also gain insights into the wider market of potential users.

A high-quality customer relationship management (CRM) system is obviously a big help. You need to be in compliance with GDPR and be responsible in how data is used, of course. (And bear in mind: if you formally assign customers to a segment, they might one day see how that’s defined thanks to GDPR’s focus on subject access rights). But allying CRM analysis with an attitudinal, needs-based market segmentation can help extrapolate the behaviors you see in existing contacts to potentially untapped audiences, too.

Many traditional (typically pre-digital) businesses have started to accumulate a lot of data about customers but struggle to make the connection between what they know about them and how that might fuel a market segmentation project. Conversely, online-only businesses are typically built from the ground up around careful segmentations, whether they emerge organically from CRM data or are built as part of a formal project.

Why market personas must be instinctive

It’s important to create segments that are meaningful. The key to a really good market segmentation is that anyone can use it.

It should be intuitive – so the personas you create from your segments are recognizable and understandable.
It should be useful to people in different functions – whether that’s new product development, marketing, communications, sales, customer service or even the finance function.
It should work as well for people in the boardroom as it does for people at the front line.

That means how you brand your segments is actually a very important part of the process. We all know some famous segment names – DINKYs (Dual Income No Kids); Yuppies (Young Urban Professionals); Mondeo Man and Worcester Woman in the UK, and Soccer Moms in the US. They’re memorable and self-explanatory.

When you’re working on a market segmentation project, you need to bear in mind who’ll be using the segment analysis. That should be everyone, from the board to the call center operative. Without their buy-in (and their insights) it’s much harder to make the segmentation intuitive. Each segment must make sense to them and tell at least part of the story.

At Kadence, we also have a graphic design team in-house. The use of visuals to bring a segmentation to life is critical, not only to make it live on in the organization but to frame an understanding of the segments. We often produce documentary videos to show what kind of people are in each segment and how they behave or react.

The impact of market segmentation

What difference does market segmentation make to key decisions? Which decisions does it most affect? We see many different benefits from market segmentations. For example:

Incremental gains in congested markets. Successful products and services rely on fine-tuning to gain market share or increase sell-through with existing audiences. Segmentation allows you to identify how to exploit opportunities in underserved areas, or segments where rivals currently outperform.

Product evolution. Segmenting the market allows you to see what other underserved needs exist in groups that are already customers, allowing you to fine-tune your offer, especially if the product or service has flexible elements built in.

Targeted communications. Even email costs money (and goodwill, if it’s perceived as spam). Identifying common traits among high-propensity segments not only allows for less wasted communications, it also allows those comms to be fine-tuned for maximum impact.

Smarter automation. Customer service and call centers are increasingly reliant on automated systems. A solid market segmentation can help ensure those interactions are properly tailored and high-value segments are prioritized.

Extrapolating from the existing customer base. Market segmentation can help identify traits in existing customers that might be shared by other segments that don’t seem at first glance to be fertile markets.

New product development and launch. You might already have an idea of the types of customers a product will work for, or situations where it might be applied. You might not even need a market segmentation in the development phase but once a product or service has launched, the need to optimize its performance becomes much greater. Who’s actually using it? How? Why? Those early adopters (another classic segment) can help define and exploit other segments of consumers.

The role of market segmentation within your long-term strategy

A market segmentation project, done right, is extremely valuable but it’s also a significant undertaking. Segmentation studies aren’t designed to be done every year – ideally it should have a five or even ten year shelf life.

Even then, some events are so huge as to require a fresh look at segmentation. The Covid-19 pandemic has prompted many businesses to refresh their buyer personas. For the bulk of 2020, people’s lives have been artificially constrained. How someone behaves or reacts, what they prioritize in life, and even what values they have, are all affected by ‘not going out’.

Even when lockdowns (hopefully) abate in 2021, how the market breaks down for previously predictable products – from personal grooming and alcohol, to cars and holidays – is going to be quite different to what went before. And it’s very unlikely the old segments will move to adapt to the new reality in precisely the same ways.

We’ve already seen some significant pandemic-inspired segmentation projects, with brands wanting to understand how their market breaks down now that people are eating out much less and work-from-home consumers are shopping differently. Previous segments might not be helpful: do you need to re-cut by job status, for example, given higher unemployment?

It doesn’t matter whether you’re targeting niche markets and need to understand where to find them, or want to tailor a broad-based approach to maximize penetration among different personas, an effective segmentation will set you up for success. Find out more about our experience in running market segmentation studies, or get in touch with our team to discuss a specific challenge.

The purpose of market segmentation is to group customers with similar attributes together so that businesses and brands can understand their wants, needs, and behaviors so that they can ultimately market to the segments that make the most profit. Market segmentation studies are a form of market research that helps brands understand the distinct groups of people that make up their target audience. They work by grouping customers with similar characteristics. This allows companies to identify and target the segments with the most value to the business.

Companies or brands who ignore segmentation as part of their research and marketing strategy run the risk of wasting marketing dollars, or running campaigns that do not resonate with a profitable or worthy segment.

Market segmentation is a process through which a market is divided into various groups based on the demographic, geographical, psychographic, and behavioral attributes of the population. Market segmentation is extremely important for brands because it is not possible to fulfill the wants, needs, and desires of all potential customers with a single marketing message. It is the process used first before target marketing.

One of the big questions we get asked about this type of research is “what is the purpose of market segmentation?”

It’s not uncommon to hear people asking:

“What’s the value of focusing in on specific segments rather than trying to appeal to the mass market as a whole?”
“Surely, my best chance of success comes from targeting anyone and everyone that could buy my product, rather than on particular groups?”

In short, we don’t believe it does. Market segmentation can be a powerful tool for any business. Targeting specific high-potential segments makes commercial sense and boosts the bottom line. Why?

First of all, not all customers are of equal value to your business. Imagine you’re a charity. Not everyone gives equally. They’ll be those that donate small amounts every now and again. They’ll be others that consistently contribute bigger sums, driven by a connection to your cause. It makes business sense to understand the latter segment. That way you can better appeal to these people and actively target them in your fundraising and marketing campaigns.

The second is that customers are different and have different needs. This is important to recognize for a whole host of business activities – from product development to marketing to customer service. By understanding who you are targeting and shaping your strategy around their needs, you can cut through and create a better experience for your customers.

(Take a look at our guide to market segmentation for more insights on how to better understand your market).

How market segmentation studies can inform your strategy

The results of a market segmentation study can guide strategy development in the following areas:

Designing more successful products and services

Successful product and service design rely on meeting customer needs. Rather than trying to be all things to all people, focusing on specific segments allows you to really understand the pain points your target customers face. You can use this to inform product and service design, helping you to create solutions that really delight your target audiences and customers.

Developing more effective marketing campaigns

Segmentation studies help you understand who to target. They can also reveal how to speak to your target customers. The result? You’re able to spend your marketing dollars more wisely and achieve greater cut through with your comms.

There are numerous ways for marketers to segment their audiences and tailor marketing easily. Email marketing to granular digital advertising to name but a few. Against this backdrop, a one-size-fits-all approach is not enough. Segmentation allows you to create sophisticated marketing strategies based on the principle that different consumers respond to different messages.

Offering more relevant customer service

Segmentations don’t just benefit marketers. They can have an impact right across a business. We’ve worked with companies to empower their customer service reps by helping them understand the different types of customers that exist. For instance, we worked with a dating app to build segmentation and integrate it into their CRM system. That way, when a customer interacted with the brand, it was easy for the customer service team to see which segment they belonged to. This approach can be really valuable. It helps customer service reps to react in the most appropriate manner to meet the customer’s needs and the company’s corporate objectives.

Using your resources most effectively

Segmentation studies can be really useful in helping businesses understand where to focus their time, money and resources for maximum effect. Insight from a segmentation study can inform how you spend your marketing budget, determine where you focus your sales staff or how you deliver your customer service.

Whether the applications of segmentations are made to product development, marketing, service or resource/budget allocation, ultimately they help businesses to better understand their target audiences and become more customer-centric. The result (and the ultimate purpose for conducting a segmentation)? You’re able to create superior customer experiences that meet and exceed your customers’ needs.

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What does a typical market segmentation study look like?

Like all of the market research projects we work on, each segmentation is designed around our client’s needs. That said, most segmentation projects involve the following stages:

Immersion

The first step in any successful situation is immersion. This is where the agency tasked with creating the segmentation works closely with key stakeholders in a series of workshops. The purpose of these sessions is to understand the existing knowledge within the business. This can allow you to begin developing hypotheses for potential segments. Immersion sessions align key project stakeholders, ensuring that the segmentation delivers for the business. The immersion stage also has a role in establishing buy-in to the project early on. This will encourage greater adoption of the segments in the long term

Fieldwork

Next comes the fieldwork itself. This allows the business to understand more about its customers and gather the data needed to create the segments. The fieldwork stage will typically involve a quantitative study for collecting this data. However, the research that takes place around it can differ from project to project. Some segmentations we run involve a qualitative stage upfront to test hypotheses. Other involve omnibus studies to determine the incidence of customers and non-customers in the wider population.

Creating the segmentation solution

After the data has been collected, data analytics allow us to find the survey variables which best define the segments. We work closely with stakeholders to create a segmentation solution that is:

Actionable (allows you to target the segments at both a tactical and strategic level)
Future-proofed (will stand the test of time)
Intuitive (easy to understand)

This stage of segmentation also typically involves understanding the current and potential value of the segments and detailed analysis to understand the individual characteristics of each segment. It’s also when the all-important segment naming takes place. Giving segments memorable names shouldn’t be underestimated. This allows people across the business to instantly grasp what that segment is about. This can be crucial for helping embed and encourage the adoption of the segments.

Bringing the segments to life

After you’ve settled on your segmentation solution, the next stage is to bring the segments to life. A lengthy PowerPoint might give the insight or marketing team the information they need. But it’s likely to be too detailed for other functions. Developing impactful deliverables that allow people to easily understand the segments should be high on your priority list if you’re leading a segmentation. This could be anything from posters to infographics. One of the key deliverables we see many organizations investing in is short documentary videos that bring segments to life. It’s human nature to be able to remember stories and characters better than numbers or data points. That’s why videos like these can really help segments live on in an organization, ensuring the segments are front of mind when making business decisions.

Activating the segments

It’s not enough to hope that stakeholders will embrace and use the segments. This process needs to be actively managed. One way to do this is by running activation workshops. This is where you work closely with individual functions to help them understand the segments and what they mean for their department and their role. These sessions are action-orientated, focused on understanding the opportunities and implications for strategic planning.

Segmentations can be powerful tools for businesses. Find out more about our capabilities in this area or get in touch to discuss a specific project.

Market segmentation studies are powerful tools for brands. They help organizations divide a market into distinct segments that share specific attributes. The company can then focus on the most lucrative of these market segments. In this article, we outline the key benefits of this approach.

What is market segmentation in market research?

Market segmentation (sometimes called marketing segmentation) is a marketing strategy that identifies select groups of customers and how to present products to these groups to maximize appeal.

Market segmentation helps brands send the right message by efficiently targeting specific groups of consumers. By dividing a target market into approachable groups, market segmentation creates subsets based on demographics, needs, priorities, interests, and other psychographic and behavioral criteria. By understanding market segments, brands leverage this targeting in product development, sales, and marketing strategies.

The benefits of market segmentation studies

Focus on the customers that matter most

The core principle at the heart of market segmentation is to break the market into groups of customers you can target rather than addressing the market as a whole. Rather than being all things to all people, this approach allows you to zone in on the most valuable customers for your organization so that you can focus your efforts where it matters most.

So what does this look like in practice? A recent case study brings this to life. We partnered with a leading university to design a segmentation of its alums. Securing donations from alums is a core revenue stream for universities. You may assume that targeting all alums equally is a surefire way to elicit donations. But in reality, a small proportion of alums make the most difference.

There are many ways of segmenting a market. In this instance, we opted for a needs-based segmentation, where we explored the attitudes and values of past students. A demographic segmentation would have allowed us to target those in the highest income bracket or particular professions. But, what mattered, in this case, was the attitudes of the alumni towards the university. We helped our client see that those that had enjoyed their time there and considered it a valuable stepping stone towards their future career were most likely to donate. Dividing the market up in this way means that you can focus on the customers that are most profitable or easiest to convert. This in turn helps to lower your acquisition costs.

Power new product development

Another benefit of carrying out a market segmentation study is that it can uncover new opportunities for innovation. Needs-based segmentations are particularly valuable for this purpose. They do as the name suggests: break the market into distinct segments based on customer needs.

This can be a great starting point for innovation. By understanding what customers are looking for from your brand or the category and the pain points they face, you can identify whitespace and design products, services, and experiences that truly meet their needs.

Segmentation studies can also help post-launch. They can help you to understand where a specific product falls short versus consumer needs and how it can be improved to pull ahead of the competition.

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Design more effective marketing

Segmentation studies can also provide valuable input to your marketing strategies. They indicate who to target and can reveal where to find these people and how to speak to them. Brands can spend their marketing dollars more wisely and achieve greater cut-through with their comms.

Your brand could be investing in TV advertising year after year, hoping to reach as much of the mass market as possible. A segmentation might reveal that the people you want to target are Instagram addicts or avid readers of a particular publication. This target audience could be reached on these channels at a much lower price. In a world where we can harness digital platforms to target at such a granular level, understanding who to reach and where to find them is vital for any successful marketing strategy.

Another application of segmentation to marketing strategy development is shaping your marketing messaging. Different customers react differently to different messages, and segmentations can help you understand what to say to who. Imagine you’re a mobile phone company with a broad audience of all ages and tech proficiency levels.

Segmenting your customer base will allow you to create targeted campaigns that appeal to the needs of each segment. Your early adopters may want to see your new device’s technical specifications front and center. But your bargain hunters are likely to want to see something else entirely. By taking a targeted approach to your marketing, you’ll achieve better engagement with your campaigns and maximize conversion.

Deliver better customer service

Segmentation studies are often mistakenly seen as belonging to the marketing department. To get real value from segmentation, the segments should be shared with and understood by everyone in the business – from the CEO to the customer and sales assistants.

We worked with an online dating service to identify key segments based on usage patterns and other behaviors. We then assigned all existing customers in the company’s database to one of these segments. This information popped up wherever the customer interacted with the firm. This proved a powerful tool for the company’s call center operators, who quickly got a sense of the type of person they were talking to – and could understand how best to approach them.

This is something you’ll have recognized in your interactions with brands yourself. That network provider that offers you new benefits to stay at the slightest hint you’re dissatisfied? The TV provider knows what service to provide you based on your viewing history? These are all based on powerful segmentations designed to empower those working in customer service. With the proper knowledge, customer service agents can up-sell or aid customer retention.

Use your resources more efficiently.

As the examples above demonstrate, segmentation studies can be instrumental in helping businesses understand where to focus.

Segmentation studies allow for more efficient use of resources – whether they are human resources (for example, getting a sales team to focus on a specific market segment for their outbound activities), or budgetary resources (for example, investing in a trade show that you know is popular with your target customer).

This emphasis on using resources wisely is why market segmentation studies can be most beneficial for the businesses that are least likely to consider them: small to medium-sized enterprises. The most effective market segmentations do require some investment as they rely on market research to understand behaviors, attitudes, values, and needs. But until you can invest, our advice is to start small.

Take a more fundamental approach to segmentation. This could be a geographic segmentation. You could also segment on demographic factors or behavioral data if you’re lucky enough to have this. This can cut through the noise and provide a much-needed focus for your business.

Develop a more customer-centric culture

A further benefit of market segmentation is that it can result in a more customer-centric company culture, encouraging employees across departments to understand your target market and their needs and to place this at the heart of everything they do.

But it’s important to recognize that developing a segmentation alone will not automatically result in a shift in company culture. This needs to be actively managed, and you can do several things to encourage this.

The first is to secure buy-in to the segmentation early on. You can do this by working with key stakeholders to ensure they are involved and engaged in the process. Segmentations can be disruptive. Ensuring that the people using it feel a degree of ownership of the customer segments is critical if they are to be embraced and adopted long-term.

The second is ensuring that segments are communicated across the organization. Segments should be easy to understand and distinguish from one another. Visual outputs can be a helpful tool in aiding understanding and memorability.

Over the years, our in-house design team has developed a range of deliverables that transformed slides that may not have made it beyond the insight department into easily accessible outputs that help all employees to embrace the segments and ensure they live on in the business. These deliverables should be shared far and wide. Everyone – from the engineer working on a new car model to the sales team at the dealership – should be able to visualize the segments and have them front of mind in their day-to-day work.

Our final tip for encouraging a more customer-centric culture is to activate the segments and embed them into future strategies. We often work closely with individual teams to help them understand what the segments mean for their department and role.

Create a superior experience for customers

Ultimately, the real benefit of segmentation is the impact on the end customer. Targeted marketing, great customer service, and innovation rooted in customer needs will create a fantastic customer experience that drives brand loyalty.

Segmentations can be powerful tools. In a world where behaviors, needs, and attitudes have drastically shifted, they are more critical than ever. Find out more about our experience in running market segmentation studies, or get in touch to discuss a specific challenge.

Market segmentation is a crucial strategy for businesses to target and cater to specific customer groups effectively. By tailoring your strategy based on the needs of your key customer segments, you can better appeal to the customers that matter most. This guide explores four key types of market segmentation: geographic, demographic, firmographic, and behavioral.

Geographic Segmentation

Geographic segmentation divides the market based on location factors such as:

Country
Region
City
Area (urban, suburban, rural)
Climate or season
Timezone
Language

Example: An automotive manufacturer selling four-wheel drives may target rural areas where such vehicles are more practical. However, relying solely on geographic data can be limiting as other factors like income and lifestyle also play significant roles.

Demographic Segmentation

Demographic segmentation creates customer segments based on demographic information, including:

Age
Gender
Income level
Level of education

Example: A luxury brand might focus on customers who earn above a certain income threshold, as they are more likely to afford high-end products. However, assuming that people of the same age or income level are alike can lead to ineffective marketing strategies, as demonstrated by Air France’s failed millennial-targeted airline, Joon.

Firmographic Segmentation

Firmographic segmentation is often used for segmenting B2B customers and relies on similar principles to demographic segmentation, looking at factors such as:

Company size
Industry
Job title

Example: Segmenting businesses by company size can help tailor services to the specific needs of small, medium, and large enterprises. However, it’s important to remember that individuals within these companies have unique motivations and values that also need consideration.

Behavioral Segmentation

Behavioral segmentation analyzes customers based on their past behaviors such as:

Spending patterns
Browsing history
Interactions with the brand

Example: E-commerce sites can use browsing history to tailor product recommendations, enhancing the shopping experience. However, behavioral segmentation based on digital footprints only tells half the story and may miss deeper customer motivations.

Needs-Based Segmentation

Needs-based segmentation creates customer groups based on attitudinal factors such as:

Needs
Values
Motivations
Priorities

Example: This approach allows businesses to understand how their products or services fit into customers’ lives, helping to put customer needs at the heart of their strategy. It can also reveal opportunities for innovation by identifying unmet needs.

Summary

Market segmentation includes geographic, demographic, firmographic, and behavioral types, each offering unique insights into customer behavior and preferences. By employing these segmentation strategies, businesses can create personalized experiences, retain loyal customers, and effectively target their desired audience.

FAQs

What is market segmentation? Market segmentation is the process of dividing a broad consumer or business market into sub-groups based on shared characteristics.

Why is geographic segmentation important? Geographic segmentation helps businesses tailor strategies to local needs, making it easier to target specific areas effectively.

How does behavioral segmentation improve marketing? Behavioral segmentation allows businesses to tailor marketing efforts based on customers’ past behaviors, leading to more relevant and impactful campaigns.

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Find out more about our capabilities in market segmentation or get in touch to discuss a new project with us. We’d be happy to share our expertise.

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What is market segmentation?

Benefits of market segmentation

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Types of market segmentation

How to validate a segment

How to segment the market for a new product

Market segmentation best practices

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What is international market research?

What are the objectives of international marketing research?

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How is international market research different from domestic research?

1. You’re entering a market with social and cultural differences

2. There may be more restrictions around research

3. It requires more investment

8 reasons why companies need to research their international markets

1. Differences in culture

2. Differences in laws and regulations

3. Differences in customer preferences

4. Understand the competition

5. Mitigate risk

6. Logistical challenges

7. Prepare a solid strategy and budget

8. Find available marketing channels

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The three main types of data

1. Secondary data

2. Survey data

3. Experimental data

9 of the most effective methods in international market research

1. Overseas business research

2. Collecting foreign government information

3. Collecting information from NGOs

4. Face-to-face research

5. Attitude scales

6. Text message (SMS) survey

7. Online survey

8. Mobile web survey

9. Remote Face-to-Face

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Why market segmentation is so important

Market segmentation gives you greater focus.

Market segmentation can give your brand a stronger identity.

Market segmentation reveals opportunities for innovation.

Market segmentation provides more accurate and targeted marketing.

Market segmentation can help expand your brand’s reach.

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The challenges of market segmentation

#1 Cost

#2 Understanding that people can belong to multiple segments

#3 Keeping segments precise

#4 Selecting the right segments to focus on

#5 Embedding the segmentation in your organization

Why is market segmentation important?

Why is market segmentation important for FMCG products?

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Market segmentation for FMCG products — guiding principles on how to get it right

Get the right people on board at the beginning

Remember that a person’s needs can change based on their environment, which will have implications for the way you approach segmentation in this category.

Identify the segments with most potential for your business

Augment traditional segmentation techniques with (self) ethnographic research

Bring your segments to life

Going global – how to approach international segmentations

Need help developing a market segmentation for FMCG products in your business?

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