When it comes to marketing in the ecommerce space, only the most clever, savvy businesses rise to the top and stay there. One way to ensure that your business succeeds among the rest is by controlling marketing costs through proper segmentation. 

This article will explain the importance of market segmentation, discuss various segmentation strategies, and highlight common pitfalls to avoid when building marketing campaigns for your ecommerce business.

What is Market Segmentation?

Market segmentation is a strategic approach businesses can use to divide their total addressable market into smaller groups based on shared characteristics. These groups, or segments, enable companies to create tailored products, offerings, and advertisements that resonate with specific audiences, ultimately driving a higher return on investment (ROI) if used correctly. 

Digital marketers can segment their audiences for various purposes, such as advertising campaigns, email marketing, and even content marketing–such as targeting blog articles and social media posts for specific buyer personas and purposes.

Benefits of Market Segmentation

The importance of marketing segmentation shouldn’t be ignored by marketers and ecommerce businesses. Proper segmentation can ensure that you’re targeting the right people–i.e: those who are most likely to buy–while you’re not spending excessive amounts of money on advertising to people who may not be interested in a specific product, campaign, or promotion. 

Understanding market segmentation is extremely important for any ecommerce business looking to get ahead when the stakes are high, and competition for attention online is fierce. By implementing targeted marketing strategies, ecommerce businesses can achieve numerous benefits, including:

• Improved Customer Engagement: Tailoring messages and offers to specific customer segments increases engagement rates and fosters stronger relationships. People who can’t relate to your messaging won’t engage with you. Exclude them and include them where they’ll fit a bit better. Remember that never targeting certain people is just as valid in some situations as well. You may find that sometimes, not saying anything is better than saying something at all. 

• Enhanced Product Development: Insights gained through market segmentation can inform product design and feature prioritization, ensuring that new offerings meet customer needs. Suppose you’re focusing your marketing efforts on a specific target audience, yet they’re not resonating with your offerings. This should trigger a review to regroup and change either your marketing messaging or the product itself. 

• Increased Marketing Efficiency: Focused campaigns designed for individual segments drive better results while reducing wasted resources. Instead of opening up your marketing efforts across multiple channels and tactics, focus on what works best for each individual segment based on market research. If your target customers resonate more with social media, you might not want to spend time and money on email marketing when you want to reach them with a product or offer, for example. 

• Competitive Advantage: Demonstrating core competencies within niche markets helps build brand authority and will distinguish your business from your competitors. In today’s impersonal world, there’s nothing like feeling seen and understood. If you can successfully relate to your potential customers, you’ll notice an uptick in brand loyalty and sales. 

Types of Market Segmentation

While there are infinite ways a business can segment its customers based on factors that are unique to its audience and niche, here are a few more universal types of segmentation to start with:

1. Demographic Segmentation: Dividing consumers based on age, gender, income level, education, occupation, family size, and ethnicity. 

2. Geographic Segmentation: Grouping consumers based on geographical location, including country, state, city, climate, density, or region. 

3. Psychographic Segmentation: Classifying individuals based on lifestyle, values, interests, attitudes, beliefs, personality traits, or behaviors. 

4. Firmographic Segmentation: Characterizing organizations by industry, sector, size, structure, purchasing patterns, or revenue. Common in B2B marketing. 

5. Behavioral Segmentation: Sorting consumers based on their behavior towards products, services, or brands, such as user status, usage rate, loyalty, or readiness to buy. 

6. Media Segmentation: Splitting audiences based on the media (social media platforms, email, newspaper, television, radio) they consume. Essentially, segmenting your audience based on where they can be reached best. 

Common Marketing Segmentation Mistakes and How to Fix Them 

While many marketers have encountered a CEO who insists they try the “spray and pray” method of emailing all their contacts for every promotion, regardless of any campaign segmentation, there are a few other, less obvious mistakes your ecommerce business can make without realizing it. Here are a few examples:

Not Defining Proper Objectives

Before starting to split and sort your audience into more manageable and specific buckets, take some time to think about why you need to do so and what you wish to achieve. Is the goal to increase conversion rates? Boost cross-selling? Increase brand awareness? 

While you could break up your audience into segments based on various factors, you’ll start to realize that without a clear goal, your messaging to each group will be more similar than different, making your overall segmentation efforts fail. Tailor your efforts to specific needs and behaviours as they relate to your campaign's goal(s) if you want to ensure success.

Similarly, you could have issues by not properly breaking your individual campaigns into the right segments. If you’re mixing up your brand campaigns with your product campaigns, you may find that you’re simply not reaching the right people for the right reasons, or you might end up overpaying on keywords that aren’t in line with each campaign’s true objective if you’re running ads, for example.  

Forgetting to Audit and Improve

So, you’ve sat down, analyzed your target market, laid out your goals, sorted everyone into buckets, and set up some campaigns. Now, you need to consider that marketing segmentation isn’t a one-and-done process. 

Industries, consumer behaviours/expectations/preferences, markets, and competitors change constantly, and what might have worked last year may not continue to do so next year. Due to this, it’s important to consistently audit your lists and segmentations and make changes as necessary. 

These kinds of audits can often take a back seat to more pressing matters, but you should aim to take stock of what’s working and what needs to be changed at least once a year. Otherwise, you might miss out on growth opportunities and revenue in the long term. 

Not Branching Out

If you only build lists and segment your audience based on preconceived notions of your ideal customers, you may be missing out on some of your brand's best customers. 

Take stock of the people you consider “non-customers” and consider ways to represent them and capture their attention when building campaigns. Are you launching any new products that they might be interested in? Are there ways you could tailor an existing campaign to fit their needs? 

Businesses often survey their own databases and ignore everyone who may not be tracked yet, but including them in their own specific segment might yield some great results. 

Overcomplicating Things 

Granularity can be wonderful, but sometimes marketers can take it a bit too far and get lost in their own complexity. Avoid segmenting too deeply with an overload of different variables and models, and take a step back every now and then. 

Start by focusing on the most important variables, then add layers of complexity as you get comfortable or learn more about a specific market or audience. If your segments are too complex, you risk wasting money on campaigns tailored to very specific types of people who may or may not even really exist. 

Controlling Marketing Costs Through Proper Segmentation

In addition to improving marketing efficiency and enhancing customer value, market segmentation plays a critical role in controlling marketing costs. Implementing a well-planned segmentation strategy allows businesses to allocate budgets intelligently, minimize wastage, and maximize returns on investment (ROI). Below are four ways to control marketing costs via effective segmentation.

Target High-Value Segments

Prioritize high-value segments displaying strong demand potential, willingness to pay, and alignment with your unique selling proposition (USP). 

Investing heavily in low-potential segments dilutes your overall marketing performance and increases unnecessary spending. Instead, concentrate on capturing share-of-wallet among valuable segments, enabling focused messaging, targeted promotions, and efficient media buys.

Use Promos and Discounts Where They’ll Be Most Effective

Promotions/discounts are a great way to motivate customers to spend, but not all consumers need special offers to make a purchase. To increase your profits, identify existing customers who make regular purchases regardless of what discounts or promos you’re running and suppress them from any discount-related messaging or sale announcement emails since they’ll likely buy anyway. 

Leverage Multiple Channels Strategically

Segmentation helps identify the ideal mix of online and offline communication platforms catering to unique audience preferences. For example, younger generations may favor social media, whereas older groups might prefer traditional TV ads. 

Understanding channel utilization patterns can help you tailor your marketing spend according to platform effectiveness and reach. Additionally, tracking response metrics per channel can shed light on areas needing improvement, further refining your company’s future budget allocations.

Optimize Content Creation & Distribution

While high-quality content is great for driving engagement and conversions, creating unique materials for every segment can quickly increase marketing costs. Effective segmentation identifies overlaps between customer requirements, allowing asset repurposing across similar groups. 

Additionally, distributing content at well-planned moments along the buyer journey minimizes redundancy and reduces production issues and bloat, leading to leaner operations and lower costs.

Conclusion

Implementing effective market segmentation strategies empowers ecommerce businesses to elevate their marketing game, reduce costs, and foster lasting customer relationships. From capitalizing on high-value segments to optimizing content distribution, following these tips can significantly improve your bottom line.

As an agency specializing in crafting comprehensive omnichannel ecommerce experiences, we at Blue Badger understand the unique challenges of ecommerce growth. Beyond building and optimizing marketing campaigns, our services encompass custom theme and app design, strategic planning, conversion rate optimization, ERP integration, PIM implementation, and more. Get in touch with us today to learn more