Customer targeting and segmentation: Everything you need to know

The concept of customer targeting and target segmentation has been in the market for quite a long now and has mixed reactions regarding whether or not it is still relevant. While some experts believe that the technique of customer targeting has hit its dead end, some also argue that it works very well. To end the confusion, here is everything you need to know about customer targeting and segmentation. 

The market is saturated with competitors and the numbers keep scaling higher. Often it becomes difficult for businesses to retain their customers if they no longer fulfill their current requirements. Similarly, it is even more difficult for new businesses to penetrate the market. In such cases, customer targeting and target segmentation can help. 

However, some argue that customer targeting and target segmentation has become outdated. 

This article will shed light upon the basic concepts of customer targeting and target market segmentation, along with discussing its advantages, the reasons behind its inadequacy, and how to avoid them and use them correctly in a business. 

What is Customer Targeting and Segmentation?

Customer Targeting is simply described as the process where the business defines and identifies the types of customers they want to address. It is a group of people defined by various characteristics such as their location, needs, age, lifestyle, and other things. For example, if the business produces vegan food items, it will target the customers leading a vegan lifestyle or those willing to transit into it. Similarly, for another example, the target customer for Audi will be someone who belongs to an affluent class and is very much into luxury cars. 

Target market segmentation or target segmentation is the process of grouping the general audience into different categories. To perform target market segmentation, the business divides its potential customers into different categories and aligns its products and services according to their needs. For example, Samsung mobiles will essentially be the people who need mobile phones in their daily lives. However, these people will be divided into different segments by age, use cases, etc. 

Some customers buy mobiles to perform basic tasks such as calling and connecting with people. In contrast, some customers buy phones to fulfill specific tasks such as gaming, vlogging, etc. These particular groups can be categorized with the help of target market segmentation or target segmentation. 

Let us know more about customer targeting and segmentation advantages and how they can help a business boost its revenue. 

What are its advantages in a business?

• Brings accuracy to business

Customer targeting and segmentation help the business to bring more accuracy to it. Once business gatherers process the data, they will clearly understand their potential customers and what they need. Thus, a business could focus on those aspects and reduce efforts that do not yield results. 

• Getting to know customers better

The very base of marketing has always been knowing the customers who have evolved through the years and now have become more important as everything is available in the market in ample quantities. 

By customer targeting and target segmentation, businesses can understand their customers better and improve their products or services based on customers’ liking. 

• Increases customer loyalty

Holding on to the customers’ loyalty has also become massively tricky due to the emergence of multiple brands targeting a similar audience. However, adhering to the basics of customer targeting and target segmentation and leveraging the information collected during the process can majorly help a business grow with the trends.

The better a brand can understand the customers’ needs and serve them, the higher the chances are that the customer will prefer sticking to that brand and not going to its competitors.

• Cost-efficient and less skepticism 

Customer targeting and segmentation help a company grow its business intelligence to have a competitive edge by choosing the right resources and being cost-effective. As the business gets deeper insights into the market, it also comes across options and alternatives regarding resources and providers that can help the business gain better profits.

• Staying relevant and up-to-date

The preferences of the audience change over time. Thus, collecting data regarding it and utilizing them can help a business stay relevant and up-to-date. 

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Why customer targeting and segmentation might fail?

If companies do not avoid the following scenarios, their customer segmentation efforts will fail: 

• Targeting the wrong customer: 

Customer targeting and segmentation can only work well if the business spots the correct target audience. If the business is trying to target a customer base that cannot purchase its products or services, then the technique will most definitely fail. 

• Targeting a specific customer base:

Often narrowing down to a specific customer base that is significantly small in size can put a cap on the profits of the business and thus, defeat the whole purpose of customer targeting and segmentation. 

• Targeting too big customer base:

If the target audience is too big and vague, it will become difficult for the business to gather valuable information from the collected data. 

• Choosing demographics over  psychographics

Often businesses categorize the customers based on their demographics, such as age, gender, location, income, etc., rather than psychographics such as personality, lifestyle, values, and morals. 

By doing so, the businesses eventually club and target the wrong people, decreasing the method’s efficiency.  

• Only doing customer segmentation and not customization 

Merely segmenting and targeting the customers based on your product offerings will not suffice. The business also has to customize its products and services based on the preference of its target audience. 

How to do Customer Targeting and Segmentation?

To avoid the mistakes mentioned above, here are some practical tips that can be followed to efficiently perform customer targeting and target market segmentation. 

#1. The first step of customer targeting and segmentation is to look at the products and services you provide and identify the ideal customer. Utilizing the concept of buyer persona can be very helpful. Once the buyer persona is finalized, it is time to segregate your target audience from the general audience.

#2. Analyzing past purchasing behaviors is a must. Once your buyer’s persona is set, it can be difficult to identify which people match those characteristics. In such cases, gathering data regarding the past purchase habits of people can bring clarity to the scene. Looking at their spending habits, such as what products they frequently buy, their average spending, and if their spending has increased or decreased over time, can massively help segment them into the right groups. 

#3. Once you have successfully segmented your target audience using psychographics, focus on the details. With the help of understanding the values and lifestyle they carry, it can become easier for you to manipulate your product and services accordingly and make the customers biased towards you. Doing so can also help the business target those consumers whom they did not consider so far to be their target customers.  

#4. Choosing the right platforms and formats is utterly important. It is essential to analyze and understand how consumers prefer to consume content. For example, earlier, people watched long YouTube videos but now prefer shorter and concise reel videos. Thus, it is crucial to identify the trending platforms so that you can utilize those to connect to your customer base. 

#5. Continuously analyzing your segmentation and targeting method is also a must. You must identify why your target users did not react the way you thought they would and rectify your strategies in future campaigns. 

Conclusion

To conclude, it can be stated that, even though there is some contradiction regarding the effectiveness of customer targeting and segmentation, leading businesses still use it. 

The success and failure of the technique solely depend on how adaptive the business is and whether or not they are following the proper steps. 

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