When it comes to running customer satisfaction surveys, market segmentation is often a key deliverable from the data.
It’s just as it sounds–segmenting populations to better understand the survey feedback. Not only will this allow more insight into the feedback, but it will also let you know more about who your customer base is.
By finding out more information about your customer base, you can cater to their needs at an elevated level.
In this blog post, we’ll cover the following topics:
- Common forms of segmentation in marketing
- Using a third party to assist
- How often you should measure segments
Keep on reading for all the details and benefits of market segmentation.
Types of Market Segmentation
As we stated earlier, all surveys involve some type of segmentation of customers. Usually, you want to look at the results overall–making sure they're representative of your audience and your customer base.
There are many segmentation cuts you can make when running customer surveys, the most popular being demographics. To have a successful market research project, you need to know your customer’s background and how that affects business.
Recently, it was found that 91% of consumers prioritize relevance when buying from a brand. Understanding your demographics will help you determine what’s relevant to your customer base.
Common examples of demographics include:
- Household income
Knowing these demographics–who purchases from you, where they come from, and how they relate to your brand–is essential for any business that wants to succeed.
Other important cuts include:
Believe us, there’s way more where that came from. There are tons of cuts that you can run aside from demographic segmentation, with many different results to compare. Below, we’ll cover the few that are mentioned above.
Segmenting a geography segment can be especially helpful when clients are cutting their customer base by branch locations, regions, states, or countries (if they’re running an international study).
Understanding the concept of secondary markets in segmentation is also important.
Take our example: with some credit unions or banks, a certain amount of the branches are in one state. So, you can group all of the customers from those branches into a primary market, and compare that to their secondary markets.
For instance, the behavioral demographic would compare those who liked to do things in person, versus those who like to do things on a mobile device.
Customer Purchasing Frequency
Another behavioral evaluation is a customer’s purchasing frequency–the people who buy your product more frequently than others.
So, if you compare people who are weekly purchasers to those who purchase less than every six months, there are many behavioral ways to cut that data.
You may be wondering how competition can be cut into a segment. Allow us!
In the case of these segments, some surveys will ask what competitors of the brand participants are using? Customers will be cut into segments: those that use brand A versus brand B, and through that, important comparisons between brands can be found.
This is major information, here.
Knowing how your customers are interacting with rival brands can give you fresh insight into how you do business.
For instance, up to 50% of customers will head over to a competing brand after a single poor experience. Through the use of proper segmentation, you’ll be able to understand key insights into creating loyal customers.
💡 The Key Takeaway: There are many different segmentation cuts you can make to help improve your customer organization. Which cuts you choose to make depends on your research goals and how you want to connect with your customer base.
Why Hiring a Third Party Team Matters
Unless you know all things market segmentation, chances are it’s not top-of-mind when you’re starting your research project.
While having objectives for your project is key, it’s important to understand how segmentation plays into the fabric of your research. When working with an experienced third-party team, you’ll learn these important elements–along with the benefits of market segmentation.
One of the many interesting things about segmentation cuts is that they can be included as questions in the survey. For instance, they will often be placed at the end of the survey for cross-tabulation.
However, in some cases, clients will already have those cuts in their database–how handy, right? This is helpful for a third party team to know, as they can successfully use this information without having to create additional questions.
After all, if you already have specific information on your end, an outsourced team will not have to include it in the survey. Instead, a cross-analysis can be run on the back end.
💡 The Key Takeaway: Working with a third-party research team matters for many reasons–one of which is that they know how to successfully segment a company’s customer base. They’ll help you understand the importance of market segmentation, and how you can benefit from it.
Mistakes to Avoid
Small Sample Sizes
We’ll tell you the biggest one first: small sample sizes!
When cutting data, you don’t want sample sizes below 20 or 30. However, this can be situational. Meaning, that if there’s a company with 100 employees, there will be sample sizes below 20 or 30. Since businesses range from tiny to massive, cutting segments should be handled with care for the best results.
You guessed it–a third-party firm is essential in this process to help avoid confusion.
With larger customer bases, thinking about those cuts ahead of time makes a big difference. An outsourced team can help you set up soft quotas for specific demographics.
Take a look at our margin of error sample size calculator to learn more.
Another mistake that's made is knowing if a difference is statistically significant or not. When significance testing is run, it's basically telling you a certain group gave you a net promoter score (NPS) of 42 and this age group has an NPS of 52.
New to NPS’? Watch our quick explainer video:
In many cases, you may feel like that NPS difference is a huge deal–it’s not the end of the world, we promise.
But if it's not statistically significant, what this means is that there’s a difference within normal sampling error. If you find that’s the case with your project, don’t worry. There's nothing considerable with that difference that you should read into.
However, if you run comparisons between different cuts and segments and the differences are statistically significant, take note. That's the data telling you something's going on between those two audiences outside of the normal sampling range.
💡 The Key Takeaway: As with any form of research, mistakes can be made in market segmentation. Keep an eye on sample sizes and significant NPS differences within findings.
How Does Market Segmentation Evolve?
Within the past two years or so, segmentation has risen in popularity because so many consumer behaviors changed as a result of the pandemic. Customer bases made a huge shift to online platforms, and brands are still trying to understand that.
How often you choose to examine segmentation depends on your business model.
For example, a quickly-evolving tech company would keep a closer pulse on customer segments. In this case, segmentation should be evaluated on a yearly basis. A static company–say an accounting firm–may need to update segmentation every two or three years.
The less your customer base changes, the less you may need to look at segmentation.
💡 The Key Takeaway: There’s no correct answer here. How often you evaluate segments all depends on the type of company you’re at.
Contact Our Market Research Company
The benefits of market segmentation are many. Without understanding how segmentation works, you could be missing out on key information about your customer base.
Located in Syracuse, NY, Drive Research is a market research company. Our team of pros understands the value of market segmentation and how it can benefit your customer outreach. Together, we’ll work to create a high-quality project that includes these important cuts.
Want to know more about our market research services? Reach out to us through any of the ways listed below.
- Message us on our website
- Email us at [email protected]
- Call us at 888-725-DATA
- Text us at 315-303-2040
George is the Owner & President of Drive Research. He has consulted for hundreds of regional, national, and global organizations over the past 15 years. He is a CX-certified VoC professional with a focus on innovation and new product management.
Learn more about George, here.