Segmentation is the process of defining and subdividing a large homogenous market into clearly identifiable segments having similar needs, wants, or demand characteristics.
The importance of segmentation is that it allows a business to precisely reach a consumer with specific needs and wants. This enables the company to use resources more effectively, make better strategic marketing decisions and realize new revenue streams.
Four basic factors are required for effective market segmentation. They are:
- Clear identification of the segment
- Measurement of its effective size
- Accessibility through marketing efforts
- Dedication of company resources
Whose done it well? Here are 6 segmentation case studies that opened up new revenues for brands.
- BUSTEDTEES: Ecommerce retailer BustedTees has a global customer base. It used to send all of its emails at the same time of day. The company segmented its email list by time zone then set its campaigns to be delivered at 10 am local time. BustedTees added an extra layer of segmentation using past data on individual open times to develop a personalized send time for each subscriber. The results were:
- 8% lift in email revenue overnight from personalised send time.
- 17% increase in total email response rate.
- 11% higher clickthrough rate.
- 7.6% increase in post-click site engagement.
- CANON: The quick rise of Smartphone cameras was eclipsing the development of the digital camera market. The kids segment was an under-developed market. Canon was trying to extend its target segment from parents-to-be to parents with kids, targeting mainly 5-9 years old and their parents. Dubbed Kidictionary, a three months contest asked participants to interoperate an ordinary word in a creative way through photography, and then to share online and social media. In order to drive better engagement, the company planted the seed via key opinion bloggers and online advertising to draw eyeballs. The campaign website pulled in 3,559 (64.3% ) new visitors and 1,976 (35.7%) returning visitors. In total, the site recorded 5,535 visitors per month and over 180 visitors per day. Total submission on the “Kidictionary” reached 344 and 348 users.The campaign gained 40% market share on low-end DC compared to last year.
- DOGGYLOOT: Flash sale site Doggyloot segments and personalises its emails based on the type of dog that its customers own, so people with big dogs get different emails to those who own a terrier. In order to collect this information the company offered incentives to its existing email list if they shared their dog’s size and birthday. The campaigns segmented into three groups based on dog size, and yielded results:
- Open rate up 10.2%.
- Clickthrough rate is 410% higher than average.
- Contributes up to 13% of daily total revenue.
- JOHNNY CUPCAKES: Clothing retailer Johnny Cupcakes had an email list of 80,000 customers. However, the data was incomplete and everyone received the same marketing messages. In order to make its emails more effective, Johnny Cupcakes initially used vendor software to mine additional information from its customers’ social profiles. It was then able to find out data on gender, customer interests, brand preferences and media habits. For the first time the business could run a product launch campaign with separate emails for men and women who had expressed an interest in baseball. This fairly simple segmentation resulted in:
- 42% increase in clickthrough rates.
- 123% increase in conversion rate.
- 141% increase in revenue per campaign.
- LEGO: By carefully targeting its intended audiences and using the social media platforms where these consumers actively participate, the Lego Group was able to effectively reach its customers and offer them the kind of online experience. The company used six distinct personas to categorize their customers based on purchase and usage rates: These six personas ranged from consumers who were highly involved with the Lego Group’s products, such as those who helped shape product design to those having no experience with the brand. By actively engaging these people and giving them special attention, the Lego Group stood the best chance of encouraging them to be the company’s most ardent advocates. The Lego Group became the world’s fourth largest toy manufacturer, capturing approximately 6.9% of the global market share of toy sales and continues to sustain a high growth rate, as well as showing a net profit of about $688 million dollars for the year.
- ROYAL CANADIAN MINT: By identifying key characteristics of high-value new and existing customers, the Mint wanted to create custom models to develop effective up-sell and cross-sell strategies throughout the consumer lifecycle. By turning to PRIZM and TKTK the Mint was able to score the best unaddressed admail segments as having the highest concentrations of those prospects and top performing segments. These same insights also helped the mint develop messages that would resonate with those consumers. The data analytics helped the Mint add 140,000 new customers in a single campaign. The Mint was able to identify 15 percent more prospects for major coin purchases—and predicted higher revenues over the next year.
To these case studies convince you of the effectiveness of market segmentation? Is your brand ready to realize new revenue streams through segmentation?