Choosing Target Customers with Segmentation Analysis
Your perfect customer is out there right now, looking for exactly the product or service that you offer. No matter the current state of the economy, they need what you offer. In fact, they need it now and they have money to buy it. Your only challenge is: how to locate those ideal customers and connect with them effectively.
There’s an old saying, “To a person who only has a hammer, everything looks like a nail.” In that light, consider this: to ask an advertiser how to best connect with the right prospects, they will advise that you invest your money in an advertising campaign. This advice makes sense at first glance, and of course it’s not entirely wrong. The trouble is: this advice misses the mark because it fails to tell the whole story.
Here’s the rub: on average, 50% or more of even the best-intentioned advertising campaign reaches the wrong people – those who have no inclination or means to buy the product or service being advertised. What’s worse, a huge percentage of the right target audience never hears or sees the advertising message at all.
A sounder piece of advice from our fictitious, well-meaning advertiser would be: invest in an advertising or marketing campaign that precisely targets those members of your target audience who possess a combination of these two factors:
- are more likely than the average person to become your customer
- are more likely to spend significantly more money (per order/month/year) than does the average customer
Identifying and then contacting these ideal prospects – while stepping over those who do not meet these criteria – is the fine art of market segmentation.
The practice of market segmentation has actually been around for decades in various forms. However, recent advances in marketing analytics have resulted in the identification of extremely highly-targeted prospect lists. These advances are the result of a confluence of three major factors:
- The advent of enormous consumer databases on the part of credit bureaus and other commercial data organizations which – like it or not – possess copious amounts of extremely detailed data about each and every one of us
- The development and refinement of advanced segmentation clustering systems which effectively break each household into one of a set of 70 or so distinct clusters based upon a combination of income, psycho-behavioral, family status, urbanicity (population density around household) and age-related factors
- The development of advanced data analysis techniques which can be used to make sense of all of this information in a way that is reproducible, verifiable and actionable in the context of advertising and marketing campaigns
The result? Entrepreneurs and companies who harness the power of advanced market segmentation can realize a 20%-500% “lift” on the effectiveness of their marketing efforts. This leads to gaining more customers at a lower cost, significantly driving up the return on investment (ROI) of your advertising campaigns. If you want sharply reduce your advertising “waste” and be more effective in your advertising, you need to give market segmentation a look.
Contact MindEcology today to get started.