Audience Segmentation FAQs For Digital Marketing
Audience segmentation is a crucial part of analysing your customer base. That’s why we’re answering some of the most pivotal questions in this FAQ article. Here, you can learn more about the types of audience segments and the marketing segmentation process.
What is Audience Segmentation?
Marketing segmentation is a strategy and a mode of analysis where companies take potential or captured audiences and classify them into various groupings based on different common characteristics. These can be based on location, behaviour, or other characteristics. Audience segmentation is, similarly, about defining and understanding audiences to tailor content or products to their needs precisely.
So, why is market segmentation important? A market segmentation analysis allows you to define your target groups far better. In doing so, companies and researchers can make accurate targeted marketing campaigns, improve customer engagement by specifying their actions, and create stronger brand loyalty.
Pretty much every firm engages in marketing or audience segmentation to gauge how to best spend its resources. Not every product, service, or piece of content applies to mass market audiences. This is why we create niches and define boundaries around who we target. Segmentation is a means of doing that properly, whether we are talking about audiences, customers, or markets.
What is a Customer Segment?
A customer segment is a division of the audience or buyers for easier analysis and to support marketing efforts. Market segments are a means of classifying audiences or potential customers into various categories so companies can make informed marketing decisions and derive actionable insights.
There are 4 main types of market segmentation:
- Geographic
- Psychographic
- Demographic (or firmographic, if dealing with businesses)
- Behavioural
The four basic market segmentation strategies are based on different characteristics one can focus on when dividing up an audience. Thus, they are based around geographical area, psychographic features, demographic characteristics, and behavioural insights.
What is geographic market segmentation?
Geographic segmentation divides your audiences into geographic locations. This can be as wide as different countries to as as narrow as zip codes. It can be an effective way to provide products, services or marketing campaigns for people situated in specific locations. It can be easy to implement, and geographic regions are already divided up. Much like demographic segmentation, it is descriptive, but it can’t derive insights into why a segment behaves in a specific way.
| Pros | Cons |
|---|---|
| Better targeting: Local needs, language, and trends can be addressed easily | Limited market reach: Geographical methods of marketing will limit their reach on purpose, opting for a region-to-region approach |
| Better ROAS: Ad spend and marketing are more focused and targeted | Complex logistics: Varying your approach based on regions can limit your available marketing messages |
| Better customer outreach: Regional markets have similar characteristics | Potentially increased marketing costs: Comparing each geographic zone and catering to them can cost a lot |
| Finds new markets: Helps identify geographic areas with more potential and focuses the products and services | Risk of stereotyping: You may infer characteristics that are not there based on geography |
| Better testing: Allows for better A/B testing based on location-specific variables | Difficulty adapting: What works for one region may not adapt well to another one |
Clothing brands and retailers tend to use geographic segmentation, which helps them cater to specific areas to optimise revenue. Gathering geographic data can be done through census programs, marketing researchers, and through regional surveys. Some information can also be available at your local city hall or with local institutions like regional newspapers.
What is psychographic market segmentation?
Psychographic segmentation in marketing refers to the grouping of segments via characteristics such as personality types, interests, or social status. This form of segmentation draws out the motivations behind behaviours, making it great for building a better overall understanding of target audiences.
| Pros | Cons |
|---|---|
| Resonant messaging: Unlike other forms of segmentation, psychographic segmentation can explain behaviour, which allows for customer-centric messaging | Costly: Focus groups and conducting large-scale surveys can cost thousands of dollars |
| Holistic view of audiences: Psychographic marketing styles allow for a deeper understanding of the audience, which can provide more accurate targeting | Possibility of Errors: Even with the right data, misinterpretation and false interpretations can be an issue |
| Efficient marketing spend: There is less waste when an audience is understood psychographically, allowing for less wasted readership | Subject to change: Psychographic features can change over time as people’s tastes change, trends go out of style, etc. |
| Audience-centric development: With the exact needs of the audience in mind, new products can be created that match precisely what they crave | Takes time to analyse: Producing a psychographic profile can take a bit more deduction than other forms of segmentation |
Psychographic segmentation is difficult to collect as a primary source researcher. However, there are many companies that have collected troves of info already. Psychographic data sources include independent research orgs, free public libraries, business journals, and research institutions.
Psychographic data also varies in how it looks. Rather than listing characteristics, it often infers personality traits. Where a demographic trait might be one’s gender, a psychographic feature will be something like a preference for quality vs. affordable goods or tastes in art and entertainment. These can provide insights that are more in-depth and applicable; however, they are often difficult to gather.
What is demographic segmentation in marketing?
Demographic market segmentation is a means of dividing up your target into statistical characteristics such as age, income level, job type, and geographic location. From these characteristics, one can derive a series of commonalities that can be used to create a demographic profile.
| Pros | Cons |
|---|---|
| Easier collection: it is easier to conduct the deeper behavioural analysis or psychographic research | Can contain misleading correlations: Similar traits in demography do not always translate to similar behaviour |
| Less costly: The approach works the same across small and large audiences | Can suffer from errors of generalisation: Demographics rarely capture intent, urgency, or constraints |
| Easier implementation: Clear rules make segments easy to build, explain, and use | Attributes change: Many demographic attributes can change quickly, such as age or employment type |
| Scales cleanly: The approach works the same across small and large audiences | Does not explain motivation: This data is more descriptive and cannot explain why people buy or act in certain ways. However, results are better when compared alongside behavioural and lifecycle signals |
Demographic data is collected regularly by various institutions, such as the U.S. Census Bureau, the FBI, or the EU. Companies also use marketing and customer research firms to collect demographics on populations. Similarly, academic researchers have demographic data from research instruments, surveys, and data collection programs. Political orgs also have their own means of collecting data.
What is behavioural market segmentation?
Behavioural segmentation classifies behavioural patterns of consumers as they interact with a company or institution. These patterns can include their knowledge of, attitude towards, use of, likes/dislikes of, or response to a product, service, promotion, or brand. To this end, it can help understand the particular needs and desires of customer groups and inform future product development.
Behavioural segmentation can help tailor products or services to customer specifications and optimise the buyer’s journey. It allows for better marketing strategies when used in conjunction with other types of segmentation. You first need demographic or geographic data to create a behavioural profile with solid assumptions. This data is available from online sources, although this can raise data privacy concerns. In non-online contexts, it can require massive surveys or in-person analyses of how people buy.
| Pros | Cons |
|---|---|
| Improved targeting: Based on their behaviour and preferences, specific audience segments can receive relevant marketing messages and offers. This boosts engagement and responsiveness | Costly and detailed data-gathering: Pinning down behaviour makes data-gathering difficult. These aren’t just numbers. It’s complex quantitative information that needs diligent analysis |
| Better personalisation: Higher engagement and satisfaction levels can be achieved with services based on customer behaviours and preferences. Tailored messages and offerings build stronger customer relationships and loyalty. | Behaviours are complex: The complexity of human behaviour can make it hard to make accurate assumptions. Similarly, behaviour can change over time, which can make behavioural data more time-sensitive |
| Increased ROI: Identifying high-value customer segments can maximise their return on investment (ROI) and target customers in the precise way they prefer | Limited scope: Customers with similar buying behaviours may have different motivations and values. Other forms of segmentation may be required to dig deeper |
| Better insights: Allows for data-driven decisions and marketing strategies through leveraging customer data. It provides trends, patterns, and opportunities for growth | Data privacy concerns: Cookie tracking can help collect customer data, which raises privacy concerns. Customers may feel uncomfortable knowing that their behaviours are being tracked and analysed |
| Competitive advantage: Gaining a better understanding of their customers and delivering more personalised experiences allows businesses to differentiate themselves | Flattens individual behaviour: Large-scale behavioural data often generalises complex individual behaviour if you’re not careful. |
What types of behaviour does behavioural segmentation measure?
- Purchasing behaviour: How audiences and customers buy
- Benefits sought: What interests them and what benefits they derive
- Buyer journey stage: Where they are in the purchase funnel stages
- Usage: How they use the product
- Occasion or timing: When they buy the product (some products are seasonal or see an uptick on holidays)
- Customer loyalty: The level of distinction customers make between one product and its competitors
- User status: Whether users are active, churned, or occasional users
Purchasing behaviour is its own wide category of psychological research. Purchasing behaviour can be broken down into 4 main categories:
- Complex: Complex behaviours come from customers who are putting in a lot of thought into their options. This is often the case for expensive products such as cars, where a lot of factors are considered, and the expected impact of the decision is high.
- Variety-seeking: When there is room in the product class to try out varying options, it can result in variety-seeking. One may try different types of shampoos to see which one they like, since the price is relatively inconsequential. This behaviour is also more common with
- Dissonance-reducing: This one applies to major purchasing decisions, but with less product differentiation between brands. For example, when purchasing a new bedroom set, a customer might base their decision on price rather than the quality of the product.
- Habitual: This is for products with a large personal preference component. The products may be identical, but brands hold sway over buyers’ habits. Coke and Pepsi are a perfect example of this, as many studies have shown that many customers prefer Pepsi without knowing it, but have an emotional attachment to Coke.
Are There Other Types of Audience Segmentation?
A few others include:
- Transactional segmentation: This one is based on purchasing behaviour and patterns. Different customers buy things in different ways, including stats such as order frequency, average order value, and customer lifetime value. While this one requires a lot of data-gathering, it can be great for setting up loyalty programs, discounts, and other financial benefits.
- Firmographic segmentation: Firmographic segmentation is similar to demographic, but it applies to B2B audiences. This classifies companies using attributes like industry, company size, revenue, and number of employees. Unlike demographic sources of data, one might look at business registries or Fortune 500 lists.
- Buyer journey: Buyer or customer journey uses different stages of the sales funnel to describe potential. This goes from awareness to consideration to decision, which can be used to change the willingness to consume a product or join an audience. This ensures you’re delivering the right information at the right time to nurture leads and drive conversions.
How to do audience segmentation
To segment a market, you can follow these steps:
Step 1: Gather Audience Data
Fostering effective segmentation in marketing requires a proper data collection procedure. Start by collecting comprehensive customer information from existing sources. Pull demographic (age, gender, location), firmographic (industry, company size), and transactional data (purchase history) using CRM, automation, and analytics tools. Track behaviours like website engagement and app usage. Run surveys, interviews, and social listening for preferences and pain points. Add industry research for context.
Step 2: Identify Segmentation Criteria
In terms of how to segment your audience, there are numerous ways to do it, which is why we have segmentation criteria based on what might suit your objectives:
- Socio-demographic: If age, income, education, family status, etc., play a large role, this is your best bet.
- Geographic: This is great if you are going to a new location or your product is limited by where you can deliver it.
- Behavioural: If there are complex buying behaviours to address in your industry. This can be especially pertinent if the product is mainly differentiated by brand loyalty or complex messaging.
- Psychographic: If values, interests, and decision styles play a role. Some companies, like Patagonia, have found audience niches by playing into values and social responsibility.
- Firmographic: B2b companies have different needs. You should look into company revenues, employee count, types of clientele, and services needed.
It’s best to focus on 2 to 3 key variables tied to your business goals, and then expand.
Step 3: Create, Test, and Refine Segments
You can divide audiences into groups based on criteria. Start by analysing segment size, needs, and personas. You can test tailored messaging, content, and channels; track performance. Iterate using A/B tests and analytics. Align sales, product, and other teams for consistency.
You can apply segmentation in different media types:
- Account-based marketing (ABM) for personalised outreach.
- Social media for platform-specific targeting.
- Email for customised nurtures.
- PPC for efficient ads.
- Direct mail for relevant lists.
Some best practices include:
- Limit to 3-5 segments initially to balance targeting and scale.
- Customise messaging and offers per segment.
- Match channels to segment preferences (e.g., email vs. social).
- Set measurable goals like conversion rates; monitor and optimise continuously.
- Set your target market and market segmentation goals early.
If you’re looking for a company to handle your audience segmentation needs, you might be interested in our marketing services.
