Question

Explain how a financial products broker might segment customers and potential customers. Which segments would be the most attractive to them, and why? (Explain different marketing methods and approaches to promoting or selling financial products and services).

Answer 1

Market segment

A market segment is a group of people who share one or more common characteristics, lumped together for marketing purposes. Each market segment is unique, and marketers use various criteria to create a target market for their product or service. Marketing professionals approach each segment differently, after fully understanding the needs, lifestyles, demographics, and personality of the target consumer.

A market segment is a category of customers who have similar likes and dislikes in an otherwise homogeneous market. These customers can be individuals, families, businesses, organizations, or a blend of multiple types. Market segments are known to respond somewhat predictably to a marketing strategy, plan, or promotion. This is why marketers use segmentation when deciding a target market. As its name suggests, market segmentation is the process of separating a market into sub-groups, in which its members share common characteristics.

To meet the most basic criteria of a market segment, three characteristics must be present. First, there must be homogeneity among the common needs of the segment. Second, there needs to be a distinction that makes the segment unique from other groups. Lastly, the presence of a common reaction, or a similar and somewhat predictable response to marketing, is required. For example, common characteristics of a market segment include interests, lifestyle, age, gender, etc. Common examples of market segmentation include geographic, demographic, psychographic, and behavioral.

Customer segmentation is a successful marketing tool when implemented correctly. Selecting segments and placing your customers must be done with precision. Here are 5 ways to tackle this vital.

1. Demographics.  Divide your customers into demographic groups. Consumers primarily purchase product based on needs and wants that are related to where they live, how old they are, their gender and their level of education. Too many brands wait until the point of transaction to turn anonymous site visitors into known connections, or rely on inaccurate third-party data for demographic insights. Collecting basic information at site entry can go a long way in developing customer relationships and more effectively segmenting your user base.

Gender: It may seem obvious, but keeping gender in mind when segmenting campaigns can have a significant impact on results and save you from wasting campaign dollars.

Birthday: Who doesn’t like to be remembered on their birthday? You already know of companies that keep track of your birth and send you best wishes—and if they’re ambitious, a coupon for free stuff.

Language: Language is the backbone of effective communication, but many brands overlook the opportunity to collect data around their customers’ preferred languages and segment their audiences accordingly.

Location: Separate clients based on location, whether it’s a small neighborhood or a whole country. Marketing client segments would be influenced by factors such as population density and climate. Thanks to the smartphone, marketers are now able to influence consumers’ real-time decisions by reaching them on-the-go.

2. Behavior. Sort different types of behavior into groups. Not only does this take standard of living into account, but also purchasing and usage trends. Actions speak louder than words – and demographics. This age-old adage rings true for marketers, especially when consumer actions can be tied directly to purchases and other KPIs. Businesses that successfully segment users based on behaviors are able to more effectively nurture customers at different stages in the purchase funnel. Segment each contact by identifying product purchasing histories. Divide them into groups depending on which products they use, how often and how they use each product.

If you’re a B2B or B2C company with multiple product lines, segmentation could be a powerful tool for you. Chances are, prospects and potential customers are more interested in one of your products than the others. Once you’ve determined their interest (perhaps if they request a demo, visit pages on your site for a certain product, do a search for your product, view a pricing page, or make a purchase), place them on a list specific to that particular product. That way, you can send them the most relevant information for their needs, and may even be able to upsell them on another product later.

Online users that actively and consistently engage by taking actions like leaving comments or writing reviews should be recognized and rewarded as brand advocates.

Brands can grow consumer relationships and repeat conversions by sending their existing customer base thank you notes, exclusive discounts and personalized add-ons. Existing customers can be further segmented, rewarded and nurtured based on frequency, number and volume of purchases.

3. Benefit groups. This segment considers the ways in which a product is beneficial to the customer. The more benefits a product has, the more places and ways an advertiser can place the product. As a result, the marketing efforts for 1 product will gain a better response than a single position in the market.

4. Social Data. Social networks house an incredible wealth of consumer data, which is consistently updated in real-time as users login and engage with their connections. By allowing visitors to your site or app to verify their identities using existing social accounts, your brand can request access to specific social data points that can be used to more strategically segment your audience:

Interests: Insight into consumers’ favorite brands, sports, TV shows and more enables you to reach consumers with highly relevant and influential messaging.

Friends/Followers: A customer’s number of friends or followers across a given social network can be used to identify and nurture her as a potential brand advocate.

Education: Not only is education a helpful factor in determining economic standing, but it also makes it possible for brands to customize campaigns and content based on consumers’ alma maters – a strategy that can be leveraged by sports retailers, non-profit organizations, ticket vendors and more.

Relationship Status: Relationships are indicative of life stages that can be used to reach the right audience with the right message at the right time.

5. Value.  Create segments that are valuable enough to market. You don’t want to direct marketing efforts toward a low-volume customer segment that is not worth the effort. Consider the customer count or the dollar value that the customer brings when calculating the value of a segment. If the value is not worthy of the marketing efforts, then don’t consider the segment.

The Four Types of Market Segmentation

The four bases of market segmentation are:

• Demographic segmentation
• Psychographic segmentation
• Behavioral segmentation
• Geographic segmentation

Within each of these types of market segmentation, multiple sub-categories further classify audiences and customers.

Demographic Segmentation

Demographic segmentation is one of the most popular and commonly used types of market segmentation. It refers to statistical data about a group of people.

Demographic Market Segmentation Examples

• Age
• Gender
• Income
• Location
• Family Situation
• Annual Income
• Education
• Ethnicity

Where the above examples are helpful for segmenting B2C audiences, a business might use the following to classify a B2B audience:

• Company size
• Industry
• Job function

Because demographic information is statistical and factual, it is usually relatively easy to uncover using various sites for market research.

A simple example of B2C demographic segmentation could be a vehicle manufacturer that sells a luxury car brand (ex. Maserati). This company would likely target an audience that has a higher income.

Another B2B example might be a brand that sells an enterprise marketing platform. This brand would likely target marketing managers at larger companies (ex. 500+ employees) who have the ability to make purchase decisions for their teams.

Psychographic Segmentation

Psychographic segmentation categorizes audiences and customers by factors that relate to their personalities and characteristics.

Psychographic Market Segmentation Examples

• Personality traits
• Values
• Attitudes
• Interests
• Lifestyles
• Psychological influences
• Subconscious and conscious beliefs
• Motivations
• Priorities

Psychographic segmentation factors are slightly more difficult to identify than demographics because they are subjective. They are not data-focused and require research to uncover and understand.

While demographic and psychographic segmentation focus on who a customer is, behavioral segmentation focuses on how the customer acts.

Behavioral Market Segmentation Examples

• Purchasing habits
• Spending habits
• User status
• Brand interactions

Behavioral segmentation requires you to know about your customer’s actions. These activities may relate to how a customer interacts with your brand or to other activities that happen away from your brand.

Geographic Segmentation

Geographic segmentation is the simplest type of market segmentation. It categorizes customers based on geographic borders.

Geographic Market Segmentation Examples  

• ZIP code
• City
• Country
• Radius around a certain location
• Climate
• Urban or rural

Geographic segmentation can refer to a defined geographic boundary (such as a city or ZIP code) or type of area (such as the size of city or type of climate).