Segmentation Strategy that Works for Small Retail Businesses
Small-to-medium businesses (SMBs) may appear small on the surface, but they account for 90% of all businesses in North America. This broad group of companies understands how difficult it is to maintain a strong brand; it necessitates passion, self-discipline, and leadership. It also necessitates in-depth industry knowledge and the capacity to adapt to changing consumer demands.
According to a new report, retailers, many of whom are small businesses, are having difficulty keeping up with the constantly changing technological landscape, which has boosted consumer demand for personalization and omnichannel experiences. Only 12% of those polled said they were “very effective” at providing personalized experiences to their customers, a startling figure given that 72% of consumers only interact with customized messaging.
How can small firms adapt to the changing tides of consumer markets and provide the individualized service that clients demand? The answer, many experts say, is a market segmentation approach.
What is Market Segmentation?
The process of splitting customers or audience members into groups based on shared interests and traits is known as market segmentation. Marketers use segmentation to break down enormous volumes of consumer data into smaller, more manageable segments so that they can better understand the needs of each group and tailor their experience accordingly.
B2C small retail business marketers use four different sorts of data to develop segments:
- Demographic data: The simplest and most freely available form of data used for segmentation is demographic data; this includes name, age, gender, income, marital status, education, etc.
- Geographic data: You could logically assume that geographic data covers the physical location of a customer; however, it incorporates much more. There are five elements at play here: location, climate, urbanicity, language, and culture.
- Behavioral data: The actions that your customers take speak volumes; whether it’s viewing a particular product page over and over or opening an email six times but not taking action, you can determine a lot about the marketing a person will respond to from their behavioral data.
- Psychographic data: This data point digs even deeper into the psyche of customers than any other type of segmentation data. Psychographic data takes its cues from psychological theories and helps you to discover who your customers really are; their likes and dislikes, opinions and lifestyles, motivations, and perceived values.
How Market Segmentation Benefits Small Retail Businesses
- Develop a deeper understanding of your customers
- Optimise your user experience (UX)
- Break into new markets
- Improve customer retention
What Are The Best Ways to Develop Segments for Your Retail Business?
Define your objectives
Before you do anything, make sure you know what you want to achieve. Your segmentation strategy has the potential to increase the success of your marketing efforts tenfold; however, if you don’t plan and track your goals and objectives, how will you know which wins are attributed to which activities.
Experts recommend setting SMART goals to help you stay on track with your segmentation strategy.
The SMART acronym stands for:
- Specific: Increase the chances that you are able to accomplish the goals for your business by making sure they’re well-defined. Determine the who, what, where, when, and why.
- Measurable: Develop criteria for measuring progress toward your goals. Detail the key indicators that help you decide if and when you reach your goal by quantifying them.
- Achievable: Create goals that are attainable and achievable by ensuring that you have the skills and resources to reach the goal.
- Relevant: Align your company goals with the overall objectives of your business and the realities of the market.
- Time-bound: Give yourself a deadline for reaching your goal to provide a sense of urgency and the opportunity to schedule the steps you plan to take to achieve the goal.
Developing a Segmentation Strategy
Who is your target audience? If you can’t answer this question, you’re going to struggle to create accurate segments based on their characteristics.
Conduct adequate market research before undertaking any segmentation activities: speak to your existing customers directly and use secondary sources to support your findings with data.
It can be beneficial to create user personas for your target audience at this point so that you can visualize and empathize with them as real people with real needs. Finding the segmentation strategy that works for your small business is dependent upon who your customers are, what they need, and what type of communication they enjoy.
Execute your Go-to-market (GTM) Strategy
Your GTM details the action plan for your small business’ segmentation strategy. Be sure to have considered all of the following areas in great detail before you launch any campaign:
- Target market
- Target audience
- Brand positioning
- Unique selling point
- The marketing channels you are going to use
Big data gains big results in the world of modern marketing; don’t think that your small business isn’t big enough to handle it.
Market segmentation thrives on the data that you already have access to and utilizing it to deliver a personalized experience to your target audience. By investing your time in any of the segmentation strategies that we’ve outlined above, your small business can reap great rewards such as increased customer loyalty, higher revenue, and improved UX.