The Power of Segmentation: Why One-Size Doesn’t Fit All
Companies that invest in segmentation research see stronger customer engagement, higher conversion rates, and better brand positioning.
It’s Business 101 that you can’t serve everyone. Whether you’re a mental health service provider, a non-profit, or a major corporation, you likely set out to solve a specific problem for a specific target customer.
But as your business starts, grows, and scales, you’ll notice that not every customer fits the exact consumer profile you designed from the beginning. In fact, you may even find that your solution appealed to a group with a slightly different problem, or that you are attracting customers who use your solution in a way you never considered.
Take this example: In its early years, Nike primarily focused on elite athletes, especially runners and basketball players. Their marketing and product development were tailored toward this narrow segment. However, as the brand grew, Nike realized that athletic wear wasn’t just for professional athletes—there was a much broader market, including casual exercisers, fashion-conscious consumers, and even people who simply wanted comfortable everyday wear.
In that example – and perhaps in your own business – that realization that your brand serves many target customers means that you have an entirely new customer profile to reach and nurture. Do you understand the nuances of how each of your customers interact with your brand? Understanding your audience is critical—but not just in broad strokes. Effective segmentation allows companies to tailor their messaging, marketing strategies, and customer experiences to meet the unique needs of different consumer groups.
Segmentation is the practice of dividing a broad audience into smaller, more defined groups based on shared characteristics. These groups allow businesses to create more relevant and effective marketing strategies. The four main types of segmentation include:
For example, take the hypothetical example of Andrea. Andrea is a married mother of two living in Seattle who buys most of her household goods on Amazon. She’s attends a unitarian church, works at a local university, and, in her free time, reads paperback thrillers that she purchases from her local used bookstore.
Companies that invest in segmentation research see stronger customer engagement, higher conversion rates, and better brand positioning. Here’s why:
All the time and money invested in attracting attention to your marketing will yield results more quickly and efficiently—because you’re reaching the right customers who are primed to take action.
One of the biggest myths about segmentation is that traditional demographic data is the most important factor. While demographics play a role, behavior often tells a more compelling story. Two individuals of the same age and income level may have completely different buying habits and brand affinities.
Take, for example, a consumer electronics company targeting young professionals. Instead of simply segmenting by age (e.g., 25-35-year-olds), behavioral segmentation can reveal whether they are tech enthusiasts who buy the latest gadgets or price-conscious buyers who wait for discounts. Instead, they focus their marketing spend on consumers who meet both criteria, improving their ROI.
This level of insight leads to smarter marketing decisions.
A well-segmented audience allows brands to sharpen their positioning. Instead of competing on price or broad appeal, companies can carve out a niche by addressing the specific pain points and desires of their most valuable segments.
In our experience, identifying different behavioral segments for a women’s health product led to more specificity for their product and marketing teams to truly serve this audience. Or, when working with a luxury cruise line, the psychographics resulting from their research allowed them to retain existing customers and understand the mindset of their future ones.
Let’s go back to that Nike example.
Once they realized their product appealed to more than just athletes, they updated their segmentation strategy. Now, their targets consisted of not just elite athletes (behavioral segmentation), but also lifestyle-focused individuals (psychographic segmentation). Nike launched successful sub-brands like Nike Women, Nike Training Club, and Nike Sportswear (which leans into athleisure).
This pivot helped Nike become one of the most recognizable and valuable brands worldwide.
Segmentation is a powerful tool, and we’re diving even deeper into this topic throughout March. Stay tuned for upcoming videos where we’ll explore segmentation in real-world applications and bust more common myths.
Want to learn how segmentation can transform your business? Let’s talk! Reach out to Sage Outcomes for insights tailored to your industry.
