The 6 types of user segmentation and what they mean for your product

MYOB People by Nick,

Marketing helps you understand your user, focus your product on your user needs and take the product to market.

This post is set up to mimic what would you go through when segmenting your customers.

Marketing segmentation

Only few companies are big enough to supply the needs of an entire market.

Even the large one must break down the total demand into segments and choose those that the company is best equipped to handle.

Marketing segmentation is marketing strategy that involves dividing a broad target market into subsets of consumers who have common needs, wants, demand, or characteristics.

You can learn the basics of it in the book that become the bible for startups 25 years ago and it’s still valid. Crossing The Chasm, by Geoffrey Moore.

Entrepreneurs tend to have visions of global domination, and in that model you want to segment the whole world.

Because eventually the whole world is going to buy your product. It’s just a question of who’s going to buy it first.

The whole world thing is a great fantasy and it keeps you going at night and on the weekends, but eventually you have to light the fire.

When you light the fire, you don’t want to run a match up and down under a very big log, you’re just going to burn your fingers.

What you want to do when you light a fire is you get some kindling and then you get some crumpled up paper, and you get the match.

You hold the match in only one place until it starts to burst into flame. Then the flame can grow.

The key thing with the segmentation at the beginning for an entrepreneur is — where are you going to hold the match and how long are you going to hold it in place until it lights.

Sometimes you put it in the wrong place. So you have to move the match in the right direction and pace.

Entrepreneurs who are in love with their product have a very tough time with this problem.

Entrepreneurs who are in love with their customer, do not have this problem.

OK, so how do you start this fire?

Let’s explore the different types of segmentation.

Never Stop Learning by Mat Helme,

Market Segmentation Practices

1. Behavioural

Behavioural segmentation considers a few things such as the knowledge of your product. Users attitude towards your product.

How and how often they use your product or how they respond to your product. Their loyalty to the product.

You can also think about creating a segment based on what your customers will benefit from the product.

Behavioural segmentation is a great place to start when you think about segmenting your market.

Let’s take an energy bar for example. What’s important for you?

  • Do you look at the price?
  • Do you look at the calories?
  • Do you want something that has less calories or more calories?
  • Do you look at the protein?
  • Or maybe you don’t care , and you’re just hungry?

Our messaging for each of these segments is going to be different for each of it.

Also it’s going to be affected by the different benefits that these customers seek.

We also need to think about the places, online or offline, where our customers may be.

Let’s say is offline. We may consider to put a poster in a gym, marketing our energy bar.

On online, we might want to add an ad to a page that sells workout clothes.

2. Psychographic

This segmentation is achieved by studying activities, interests, and the opinions of your customers.

You’re thinking about the lifestyle of your customer.

  • How do they spend their downtime?
  • What are they influenced by?
  • What image are they trying to project?
  • What are the needs and wants of people in this common lifestyle group?

For example , usually people who buy a luxury car can not only afford it, thus defining their economics status, but it also shows a preference to spend money on more luxury lifestyle products.

So we can extrapolate that they may travel to high class destinations, wear specific brands, or visit certain establishments.

So, say we’re trying to sell a luxury car, if we want to market to people who can afford it, we’re going to consider doing that in other high-end places such as a luxury magazine found in the first class section of an airline, or sponsoring the valet outside of an expensive restaurant.

3. Demographic

The demographic segmentation is, you guessed it, based on your customers demographics characteristics. Things like age, gender, occupation, education level, income level and much more.

If you’re coming from a B2B point of view this could be the size of the company, the number of employees, or even the location of the company.

4. Geographic

This segmentation is based on geographic areas such as a country, regions, different cities, or postal codes.

Now, you can do a geo-cluster approach which combines Demographics and Geographic segmentations.

You’ll look at demographic information within a certain area to create a more specific profile.

5. Occasional

The occasional segmentation focuses on certain occasions that are completely independent of customer.

You don’t care at all about demographics and you just care about occasions such as going out for ice cream, taking a vacation, or as Coke famously did it, being thirsty.

Coke’s campaign doesn’t care if you are a man, woman, living in Uruguay or Romania or if you have high socio-economic status or low.

All they care about is are you thirsty; it’s very simple.

6. Cultural

With this you’ll classify the markets according to the cultural origin.

This can be incredibly powerful given that understanding a culture can give you so much insight to certain groups of customers and their behaviours.

When you use cultural segmentation, you’ll be able to communicate well with a given culture in the most effective way.

Cultures can be large, they can be nationwide or they can be small and reflect a particular region such as the Bay Area or even the startup culture.

Things to Remember When Segmenting

When defining your market segments, you want to make sure you don’t define segments that are too narrow.

Ask yourself, is my offering really different from one segment to another? Could be different by price or by features.

And if you realise that you offer the same to two different segments, maybe you should define them as one bigger segment.

For startups it’s crucial to measure not only the quantity of the potential segment but its quality.

A quality segment will help engage users quickly. Learn from them and iterate over your products.

Make sure you choose a segment that is accessible for you.

If relevant, choose a segment with the shortest sales cycle, so you don’t wait too long between the time your customer is exposed to the product until you can show value.

You can do that by choosing the segment that will consume a more simple product, or the segment that will be willing to pay maybe less but buy your product more quickly.

If you have a bit of a product, you better start with the smaller companies as your customers and reach out directly to the decision maker rather than going through a lengthily process of a big company.

In addition , try to find a segment that is less crowded , so you have no or few competitors.

For example, the messaging company Slack found great opportunity in the enterprise segment with very little competition.

They realised their value was to focus specifically on tech teams, small companies and startups that work quickly and needed communicate quickly with tech features integrated in their product.

Had they wanted to focus on consumers rather than enterprise, they would have been faced with a great deal of good competition like Whatsapp and WeChat.

Market Segmentation and Personas

Marketing segmentation is probably at the very, very center of a go to market strategy that’s successful.

A market segment is a group of people that have two things in common.

  1. They have a use case

They have a common set of needs that they would be fulfilling through a product like yours or someone else.

2. They talk to each other

A segment is actually a unit of conversation and the reason why that’s so important is if you can get your marketing message circulating inside a segment, the segment will circulate it for you.

No entrepreneur can afford to go out and pay to address every prospect that they want to sell to.

You have to have your community selling for you.

That means you have to be able to model the boundaries of that community and be able to aim your marketing communication activities in a way that community embraces them and it resonates inside that community.

When you are talking about your product, you’re saying things that apply to many communities, that will not resonate inside a community.

When you talk about the specific needs of that community in the language that community talks to itself about — this is how you resonate with that segment.

How do you start this?

As a startup, I think it’s best to start with persona and I think the persona is the target customer with a compelling reason to buy.

As you start to engage them with that persona.

You start getting quantitative around the discipline of segmentation when you want to scale.

When you scale you need to have a more analytical approach of targeting and segmentation but the beginning it’s more much qualitative.

Good luck, have fun and happy segmentation!

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