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.
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?