Segmentation: Moving from Beginner to Professional

Segmentation means "part of a whole", and in a marketing context, it refers to a part of a market. Manufacturers seek to find consumers who share common characteristics, such as needs, interests, and priorities, in order to develop and implement strategies for communication and influence. These strategies include adaptations in communication and the choice of communication channels for the groups being targeted at any given time.

Why is segmentation used?

To succeed in marketing and sales, manufacturers must adapt to different customer groups. The goal is to create more homogeneous groups where the level of need and interest is higher than in other groups and the market as a whole. Having interested prospects always increases the likelihood of a sale. Communication is also tailored to speak to the segment on its own terms and premises.

One of the more classic examples is gender-based segmentation.

How are segments defined?

The common denominators used to form segments have traditionally been divided into four categories based on the following criteria: geography, demography, psychographics, and behavior. Segmentation criteria are defined as rules for who to include in the segment and who to exclude. The size of the segment decreases as more criteria are defined. A segment is never static, and changes in a person's status can move them in or out of the segment. It is also entirely possible to create a segment based on a combination of criteria to create smaller, more targeted groups.

Traditional segmentation criteria

Geographic variables include area, urban/rural, population density, climate, national, and international. Certain types of products have a broad geographic market, while others have strictly local limitations. A local business selling a local, short-travel product will clearly benefit from advertising in the immediate vicinity. "Immediate vicinity" will also vary based on population density and geographic location.

Pin mode in Google Ads location targeting is a natural part of geographic targeting for a local business.

Demographic variables include age, gender, family status, income, occupation, education, family size, social class, and nationality. What these variables have in common is that they describe quantitative aspects of populations, such as size, composition, and trends. Education, occupation, and social class can indicate available resources, but demographic criteria say nothing about people's motives, desires, or needs. Furthermore, people in the same demographic group do not necessarily share the same interests.

Lifestyle, leisure activities, way of living, attitudes, personality, opinions, and values. These criteria can be difficult to define, measure, and work with. However, anyone with a hobby often needs equipment to practice it.

Brand loyalty, frequency of use, and brand affinity. Behavioral segmentation is about how we buy: how often, how loyally, and for what occasions. For example, customers who make repeat purchases are a much more interesting group than customers who have made one or no purchases. In these cases, it may be relevant to define a segment for loyal users and reward them with discount codes and similar incentives.

An example of building a loyal audience in Analytics, where Goal 10 is defined as a purchase.

Extended segmentation criteria

These are segmentation criteria that vary from system to system and are based on data generated by the platform. In Make, we use criteria such as registration date, last opened date, and last clicked date. This allows you to create segments containing contacts who have not opened or clicked an email after x days, as well as automation flows for new registrations. Such system variables are not part of the traditional set of segmentation criteria, but they are useful tools within the environment where the segments are built.

Differentiated vs. undifferentiated segmentation

Differentiated segmentation involves adapting marketing efforts by changing product features, price, messaging, and distribution methods to reach different groups most effectively. The same product will appeal to different groups in different ways. Some value function, others color, while some focus on comfort and convenience. It is also natural that some prefer to buy in specialty stores rather than generic retail outlets.

Identifiable – who is my target audience? Size-wise sufficient – is the target audience large enough? Stable – will the target audience persist over time? Accessible – how can the target audience be reached? Actionable – will it lead to more sales?

Many utilize undifferentiated segmentation, which in practice means treating all segments as a single market and communicating identically with everyone. Public transport companies are good examples of organizations that use such a strategy.

Building segments in practice – the prerequisites

Suppose you run a service that sells different magazines (Klara, Sporty, and Jakt og friluftsliv) and you are about to send out a newsletter for Klara Magazine. The target audience is defined as: Active, conscious women, 40+, who are highly focused on health, wellness, and self-care. To answer the questions above, we know who the target audience is, it is large and has remained relatively constant over the past two years, and it can be reached via newsletter. Since the dataset includes both men and women with completely different interests, it is also necessary to differentiate the recipients—meaning we need to create the specific segment we want to target.

The screenshots used are from Make, but the principles of building segments are always relatively similar across most platforms that feature such a tool.

Defining segmentation criteria – prototyping

Before you begin defining these fields, you need to look at the data you have and what you know about your contacts.

Let's first set up criteria based on the available data:

• Gender (mutually exclusive)

• Age (mutually exclusive)

• Interests (multiple choice, inclusive)

All women

AND (who are)

Age > 40

AND (who are)

Interested in health OR Interested in wellness OR Interested in self-care

• All women

• Who are over 40 years old and

• Who are interested in health, wellness, or self-care.

Combining this into a single sentence, it includes all women over 40 who are interested in health, wellness, or self-care. Any other contacts who do not meet these conditions will be excluded.

In Make, custom fields are the same as criteria. We use different terminology because we are not a marketing textbook.

Segmentation: Implementing a prototype in Make.

Logical AND/OR in segmentation

It is not always easy to know when to use "AND" and when to use "OR". In such cases, it helps to remember that "AND" narrows the group down, while "OR" expands it. With "AND", multiple criteria must be met, whereas with "OR", it is sufficient that just one of the options is fulfilled.

In the Klara magazine example, AND binds the rules together, while OR is only used within interests. A contact who is a 45-year-old woman interested in culture will therefore not fall into this segment. This is because AND connects gender and age with interests. If one of the rules is not met, the contact is excluded. This person had no interest in health, wellness, or self-care, and is therefore excluded, even though the first two criteria were met. If interests make the group too small, it is natural to remove that criterion from the segment definition and only include women over 40.

How to gather more data about users?

Before we delve into this, it must be emphasized that privacy and data protection must be taken seriously. This means users must be informed about what data is collected and how it is managed and used. This information must be easily accessible at the point of collection.

There are different ways to do this, but one universal truth remains: you have to give something to get something—exchanging value for information.

Profile

Experience shows this is not easy to achieve. While some may want more targeted marketing, very few will proactively update their profile, even when prompted. It is possible to turn this into a competition where you use the "last updated date" on profiles as a variable to draw one or more winners.

Competitions

Competitions are an excellent tool for gathering user data. In this context, the exchange involves prizes for information. When it comes to competitions, a couple of points are worth noting. First, which is obvious to most: better prizes yield more participants and greater incentive to share information. Second, timing matters. Running competitions during periods when they are expected yields a higher return than more or less random dates. During the Advent calendar season, competition for attention from other brands is much higher, but competitions do not completely exclude each other. Many potential customers participate in multiple calendars during the holiday run-up.

Membership, loyalty programs, and customer clubs

To build loyalty, initiatives that foster a sense of belonging and offer tangible benefits are standard practice. Remember that you do not need a massive member base to start a customer club. When it comes to partner agreements with other businesses, member volume matters, but if you are providing the benefits yourself, it does not involve external parties setting sales requirements. The core objective is simply to establish a customer base that makes recurring purchases.