Market Segmentation Definition: What is it and Why it Matters to Your Business

June 1, 2017  |   LiveRamp

What is market segmentation?

Market segmentation is dividing your target market into meaningful groups based on certain indicators like behavior, demographics, and preferences.

Picture an audience of just ten people. One member is a single, working woman in her 30s, another is an affluent retired man, and yet another is a teenager just starting high school. The same messaging isn’t likely to resonate with all three people, let alone the seven others in this audience.

So how do you figure out how to separate your audience effectively and not speak to all of them as one big, homogenous blob? Enter segmentation.

Why market segmentation matters to your business

Market segmentation is the cornerstone of targeting and, when done properly, can lead to a more personalized marketing experience for the consumer.

Most marketers are already segmenting their audiences. This can look like an email to recent buyers for 5% off their next purchase or targeting a specific geography for an event invitation.

Using identity resolution also allows marketers to use segmentation in their display and search campaigns. Some will upload their entire database, while others will get more granular, segmenting out various groups for a more personalized ad experience.

Why do customers care about segmentation?

We live in a world that is consumer-based: consumers are increasingly used to getting what they want from marketers (or at least what they think they want). Segmentation allows marketers to use what they know about their customers to talk directly to them and fulfill this expectation.

Giving customers what they want isn’t just good for business, it’s also good for customer relations. By showing someone an ad for something they want, they’re more likely to believe in your brand, and even better, they might just make a purchase.

Thankfully, it can be as simple or as complex as the data you have, so marketers at every stage of sophistication can benefit. Read more here about 10 segmentation tactics you should consider.

Check back soon for more terms and how each one applies to your marketing strategy or, to get a head-start, check out the glossary now.