Market segmentation and targeting

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When it comes to marketing your business, getting to the right customers is essential to your success. 

You may be familiar with the terms segmentation and targeting, but what does this mean to your business? Why is it important to segment and target, particularly if your operating in the care and retirement living sector?

The purpose of segmentation is straightforward. If resources are scarce or competition is tough, then if you focus on those customers most likely to choose your offer or service, then you are likely to get a better result. 

Segmentation is simply grouping potential customers (and existing customers) into smaller more specific groups based on shared need, attitudes or behaviour that are distinctively different from other customer clusters.  

The goal of segmenting your market is so that you can more effectively target customer segments with your marketing messages. Communication that is specific to the needs and interest of your market segment will get a higher return for your marketing efforts.  

Once you’ve identified your segments, each customer group you decide to target is known as your target audience, and should be clearly distinguish from those segments you decide not to target. 

Why knowing your target audience is important 

One size certainly doesn’t fit all. Segmenting your audience helps you to effectively target them and this in turn will save you money in the long-term. Targeting prospective clients already warm to what your business has to offer will help you generate more interest for your product or service and improve your conversion rates. 

Effective segmentation needs to be dynamic and provide helpful insights into what makes each segment unique. A common denominator that is often used for segmenting in the care and retirement living sector is age. However, age is only one way to segment and doesn’t necessarily give you a target audience. 

To make sure that you segment your market correctly, analyse your existing customers by identifying the characteristics they have in common and that unites them, and the differences they have that distinguish them apart from other types of customers.  

Broadly you can begin to group together a number of different needs, characteristics and behaviours which will help you to segment your market into a more meaningful way. 

Your research might reveal that different segments may prefer particular aspects of your service more than others. Gaining this insight of your target audience will help you to create marketing messages that are more effective and pertinent to the needs of your audience.

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How to segment your market

Start with your existing customers

Analyse the needs and preferences of your existing customers and match them to your organisation’s strengths. This will help you to identify the segments that offer you the best opportunities for success. 

Consider what needs and preferences your existing customers share and how this could influence the way you deliver your products and services to potential customers by customising your offer. You should then repeat this exercise for potential customers. 

Define the size of your market

Make use of available data when segmenting your market (e.g. geographic, demographic, lifestyle, interests, etc) and research the estimated numbers to get an idea of the market size. In doing so, answer these questions:

  • What is the size of the market and its potential for new customers?
  • Do individuals within the same segment share the same basic attitudes or have the same needs? Be cautious here. Just because customers share the same basic needs does not mean they share the same attitudes. There could be notable differences in attitudes that may need to be met as a separate segment.
  • Are the segments distinctly different to other segments to warrant a different approach?
  • Is the segment large enough to be worthwhile?
  • Can those within a segment be effectively reached?
  • How many enquiries (leads) could you expect from each segment?
  • How will you differentiate your offer to those of competitors to give you an advantage? This will help you to stand out from other organisations that compete with you.

Profile your target audience

Getting a clear picture of the potential customers in each segment is essential if you are to reach them effectively. You can do this by creating customer profiles in each segment to assess the feasibility of each segment and potential value to sustain your business. 

Develop value proposition for each segment

A value proposition is the marketing messages you use to explain why a prospective customer should buy your product or use your service. 

An effective value proposition ensures that your marketing messages are focused on the key points that are attractive to your target audience. Less is more - instead of trying to be all things to everyone, you generate more interest by communicating what resonates with a particular segment. 

To illustrate – consider what motivates a person to downsize their home in later life? Perhaps it’s the need to move to a smaller home that is more manageable, or the need for companionship and enjoying life with others of similar thinking and interests. Could it be a desire to be closer to family and friends, or the need for support or care to be readily available? For some, costs may also be an important factor.  

Trying to give equal space to all features in you marketing messages has the potential to weaken them. Whereas if you know that you have a segment who are really motivated by the communal features and socialising opportunities of downsizing, then that would be your lead message to attract those customers.

In summary, there is no one size fits all in marketing. Segmenting and targeting is what fine-tunes your aim to get the right customers with the right offer and right message.