Marketing Segmentation Strategies

In my third blog post, I am going to look at marketing segmentation strategies. The segmentation concept was first developed by Smith (1957) and group consumers together by their needs. To get the best return on investment from your marketing budget it is important to make sure you know your target audience. A market segmentation strategy organises your customers into demographic, geographic, geo-demographic, psychographics or behavioural segments.

Demographic

This is the most common form of segmentation. Customers are structured by popular traits such as:

• Age
• Gender
• Income Occupation
• Marital Status
• Social Class
• Religion
• Education

Geographic

Customers can be split by their geographic location and where the consumer lives. For example:

• Region
• County

Geo-demographic

This combines both geographic and demographic information to create a more developed profile of the consumer. It is based on the idea that people who live in the same housing estates or streets may have similar incomes, lifestyles, etc.

Psychographics

Psychographic or lifestyle segmentation target customers based on their hobbies and interests. This segmentation strategy fits most niche markets.

• Interests
• Social Status
• Personality Type
• Attitudes, Opinions and Values

Behavioural

Behavioural segmentation is a new type of segmentation that has come more to the forefront following the emergence of the digital age. This type of segmentation takes into account the information collected through customer data reports, surveys and marketing trends.

Protyre Segmentation

We are fortunate at Protyre to have developed a database of customers that now exceeds 1.5 million customers, this has been built over several years. It would not be feasible and beneficial to target all of these customers with the same offers and promotions as customers life stage and requirements are different. To combat this, we completed an exercise where we have taken the database of customers and segmented this into eight different sub groups of similar types of customers and created eight different personas to represent our customers and there behaviours – this enables us to identify our target audience and what their habits are. By using the right targeted marketing communications to each of these persona segments we have an opportunity to drive additional sales into the business, retain more customers and gain market share, by making sure we market the correct products, to the correct customers when they are in market to purchase – this is key to returning a positive return on investment from our marketing activity. The idea of the marketing database is to maximise revenue opportunity, we have created a model with distinct segments and audience profiles. This has enabled us to define key characteristics of each audience segment to improve the alignment of our Protyre offers. The Protyre database has been split up using geodemographic classification using the Experian mosaic system analysing customers at an individual household level – using electoral roll and censor information the customers have been matched to the mosaic profiling.

RFM Modelling – taking our targeting one step further

Given we have the transactional data of these customers, we are also able to overlay their transactional data which allows us to start to work out what the average spend is for each of the segments generated and their behaviours – this is done using a type of behavioural segmentation we call RFM Modelling to allow us to analysis customer value. The R stands for Recency – how recent has the customer purchased from Protyre. Frequency – how often do they purchase (maybe they have multiple cars in the same household) and Monetary Value – how much do they spend. All of this allows us to segment our database, accordingly, create personas from these different segments of customers and identify where we are best spending our marketing budget to drive a good return on investment.

One of the segments we have created from the marketing database is called “End of the Road” – by overlaying the geodemographic data with the transactional data of these customers we have learnt a number of key attributes for these customers. The customers we have grouped into this segment are likely to have young families or are singles. Living in the more affordable areas of the city on lower income. Typically working an unskilled or semi-skilled job and reliant on their car for work and running their young families around. Critically for Protyre this group of customers drives 7 – 10 year old vehicles. This is important to Protyre as these vehicles will require a lot of maintenance due to the older age and this is an ideal target market and a profitable target segment for us. For example, new vehicles don’t normally need much maintenance, as an example a new car isn’t due its first MOT until it is 3 years old, so Protyre is not in the market of maintaining the newer vehicles – this segment is in market for annual MOTs and annual service so it is perfect for Protyre.

Thanks for reading! I hope you have found my own experiences interesting and how I have related these subjects to my job role. Please leave a comment, I would love to get your thoughts.

Bibliography:

Key Differences. (2022). Difference Between Segmentation and Targeting (with Comparison Chart). [online] Available at: https://keydifferences.com/difference-between-segmentation-and-targeting.html (Accessed 06th February 2022)

Solomon, Michael R, 2019. Consumer Behaviour: A European Perspective, Pearson Education https://r4.vlereader.com/Reader?ean=9781292245461# (Accessed: 06th February 2022)

Blythe, Jim, and Jane Martin. Essentials of Marketing PDF EBook, Pearson Education, Limited, 2019. ProQuest Ebook Central, https://ebookcentral.proquest.com/lib/solent-ebooks/detail.action?docID=5731459. (Accessed: 06th February 2022)