Market Segmentation & How It Amplifies Your Brand

What does market segmentation mean? When we talk about the market, we’re not talking about bazaars, though who doesn’t enjoy a weekly stroll at their local night market. The term market that we mean is the sum of people or population inhibiting a large area, usually a country or an international region.

Market segmentation, therefore, is the activity of dividing up this population into groups that share common traits and characteristics. People have different needs depending on their lifestyle, gender, personality and many other differentiating traits. Companies segment the market so that they can develop a specific strategy that answers the segment needs and position the brand closer to the segment.

Types of Market Segmentation
There are more than one ways to segment the market, depending on how the brand positions itself and what it aims to do.

1. Demographic Segmentation
   This method divides the population according to age, race, nationality, income, gender and life cycle (first day of school, graduation, wedding, retirement etc). It is considered the simplest form of segmentation and it works for many brands in various industries like F&B, FMCG and technology.A simple example is Garnier. While the skincare brand’s main branding leans towards women, we see a slight difference in their Garnier Men product lines. Their men’s products use a different tone of voice, colour scheme and advertising that fits better with their masculine imagery.
2. Behavioural Segmentation
   This method classifies groups of people using their buying patterns, usage (how frequently they use the product), benefits that they’re looking for and their decision-making abilities.This type of segmentation is useful among seasonal buyers, such as during Christmas, Black Friday, Valentine, Raya and Lunar New Year but it’s also useful since it helps to identify what benefits are sought after by customers. Shampoo companies, for instance, may target hijab wearers and frequent hair-treatment goers with different brands and product benefits.
3. Distribution Segmentation
   This approach segments people through the brand’s main distribution channels, whether the brand will be marketed online, through postal mail, in a brick-and-mortar store, or a combination of them.Many multi-level-marketing companies use the distribution segmentation to identify how many of their potential customers would buy from a mail-ordered catalogue or during conferences. Fashion brands such as Victoria Secret had also dabbled in the mail-order catalogue business before the advent of the internet.
4. Geographic Segmentation
   This approach segments the market into regions, subregions, language, and culture. Even in one country such as Malaysia, there are different areas that respond differently to the same product or services. Urban and rural groups have different needs, and they are also influenced by the dominant culture and language of the region.Marketing your products in Kelantan, for example, means following the norms and rules there, which include printing your advertisements in the Jawi script. Meanwhile, Maybank had made this heartwarming commercial back in 2007 entirely in the Iban language, one of the first to do so nationally. It shows that in their Malaysian market segmentation, East Malaysia and their culture is a strategic segment for the brand.In Kelantan, a northeastern state in Malaysia, billboards, signboards, and advertisements are shown in the Jawi script, which still uses the Malay language. This Milo ad in Kota Bharu, read as ‘Melangkah Jauh’ or Leaping Far, is an example of such billboards dotting the roads of the rural state.
   

   Photo Credit: abunuha.wordpress.com

5. Psychographic Segmentation
   This type of segmentation is very popular and useful, but more complex than other segmentation methods. It groups people according to their lifestyle, interest, values, opinion, and personality. Psychographic segmentation also includes traits used in behavioural segmentation when they at times overlap.Many brands use psychographic segmentation to make their offers unique and niche to appeal better to one segment. Organic and eco-friendly brands often appeal to those who value healthy, natural and fair-trade materials. Another example, GoPro, appeals to those with a curious personality who wants to express themselves through unconventional ways of taking videos, either during a daring adventure like skydiving or simply looking at everyday life in a different perspective, like strapping a GoPro inside a washing machine.

How Does Market Segmentation Improve Your Brand?

It answers customers’ needs and wants more effectively
Segmenting your customers means you’re addressing the group’s unique needs. One group might need a product benefit that other groups do not, so fulfilling that particular need makes them happy. After all, isn’t that the goal? To produce a product or service that is needed and relevant to customers. When your customers are satisfied, you achieve customer retention and increase the likelihood of repeat purchases.

Staying relevant across a customer’s life cycle
One of the benefits of knowing your customer’s lifecycle is that you can tailor your products to fit a specific need in a customer’s lifetime, across his or her life events.

Through the right segmentation method, your brand will be relevant across their lifetime, from childhood to adulthood. Many car brands produce different types of cars that fit into different age groups and lifecycles. Perodua, for example, has small-sized cars for first-time owners like the Axia, a sedan for young families like the Bezza and a Multi-Purpose Vehicle for older and larger families like the Alza. By making cars that answer customers’ many needs across their life stages, Perodua has fortified their brand loyalty among millions of drivers nationwide.

Increase brand value by gaining market share
With products that are engineered specifically for clearly defined and viable market segments, brands like Perodua can stand to gain sales from this segment. Large sales increase market share, which then increases their brand equity. Although it’s not the only way to increase brand value, a recognisable brand and market dominance is a good approach. Perodua boasts a 35% market share in Malaysia, a strong competitive advantage. The number of Myvis zipping around Malaysia is a testament to Perodua’s savvy market segmentation efforts.

Solidify a strong brand presence
As your brand gains market share and brand recognition, you will establish yourself as a force to be reckoned with. Competitors will have a formidable foe and your brand will be better known among the target audience. Back in the 1990’s, Perodua was known as the butt of the joke, due to its tiny Kancil car. Over the years through strategic innovation, Perodua started to manufacture better-performing cars and gained market share. With this increase, Perodua had made itself into a strong brand, no longer a joke, but the pride of the nation.

Nurture Innovation
Rather than coming up with new products on whims and guesses, a better product can be created based on a gap or a need in the market segment. Through market segmentation, you will be able to identify which part of a customer’s life that can be developed or improved, and spot opportunities to deliver a relevant product.

Let’s escape the automotive industry and look at the music-streaming business. Swedish brand Spotify was able to detect a whole segment of music-listeners that love personalised playlists. Since their target audiences are millennials and young people, Spotify identifies another major characteristic synonymous with Generation Y; social media. By integrating their app with Facebook and other social media, plus allowing listeners to sign up and listen for free, Spotify had taken over earbuds and headphones everywhere, leaving other brands like Apple Music with a lot to catch up to.

Some brands go really specific into their market segments, a method called hyper-localisation. Grab, for instance, won their ASEAN market share by having different strategies in 7 countries, segmenting them based on each nation. They understand the radically different culture, economy and uniqueness of each southeast Asian country and realise that lumping them all into one segment is a broad generalisation. This was one of the factors that led Grab to win customers over Uber, resulting in the acquisition in March 2018.

Market segmentation, therefore, has a lot of benefits for the brand and business. By dividing up your customers, you will be able to reach out to them better, get to know them more specifically and direct all your branding efforts towards satisfying them the best way you can. Take a look at your target audience. What method of segmentation are you applying to them? How is your brand reflected in each customer segment?