Audience segmentation

What is audience segmentation?

Audience segmentation is the process of categorizing a brand's total addressable market into distinct groups based on specific criteria that influence purchasing decisions or engagement behaviors. 

Unlike mass marketing approaches that treat all customers the same, segmentation recognizes that different customer groups have varying needs, preferences, and behaviors that require tailored marketing strategies.

At its core, audience segmentation allows marketers to:

• Deliver more personalized messaging to different customer groups

• Allocate marketing resources more efficiently

• Improve conversion rates through targeted campaigns

• Develop products and services that better meet specific customer needs

• Create stronger customer relationships through relevant communications

Why is audience segmentation important?

Audience segmentation represents a strategic approach to marketing. It turns broad customer bases into targeted, actionable groups. Instead of creating generic messaging to everyone, segmentation lets marketers deliver relevant messaging that resonate with specific audience subsets.

Enhanced marketing focus and effectiveness

Audience segmentation matters because it turns marketing from a broad, unfocused approach to highly targeted communications.

This approach is often better than using broad content that is aimed at “everyone," as businesses tend to generate 10%-15% more revenue with it. Audience segmentation involves:

• Empowering marketers to define clear target audiences with specific characteristics

• Developing tailored messaging that addresses segment-specific interests

• Creating more focused campaigns and customer journeys that achieve higher engagement rates

• Delivering the right content to the right audiences at precisely the right times

Digital advertising platforms using audience segmentation typically achieve higher click-through rates than non-segmented campaigns. For example, marketing teams implementing behavioral segmentation in their display advertising might see better conversion rates compared to general audience targeting.

Improved customer loyalty and experience

Well-executed segmentation significantly enhances the customer experience by making interactions more relevant and meaningful:

• Customers receive content and offers that matter to them

• Personalization demonstrates that brands understand their specific needs

• Relevant communications build stronger emotional connections with brands

• Personalized experiences increase customer satisfaction and loyalty

For example, a coffee shop rewards program uses transaction history to segment customers based on purchasing behavior and preferences. 

The mobile app tracks favorite drinks, visit frequency, and spending patterns to deliver personalized offers. For frequent morning visitors who typically order espresso drinks, they might send an early promotion for a new espresso-based beverage, while occasional weekend visitors who prefer cold drinks receive different promotions for iced beverages.

Improved conversion rates and ROI

Perhaps the most compelling business case for audience segmentation is its direct impact on conversion rates and ROI.

• Personalized offers based on segment characteristics convert at higher rates

• Focused messaging reduces wasted ad spend on uninterested audiences

• More efficient resource allocation improves overall marketing ROI

Segmented email campaigns typically achieve significantly higher open rates, click-through rates, and lower unsubscribe rates. For e-commerce marketers in particular, segmented campaigns targeting product interest groups or purchase history cohorts often generate substantial revenue increases compared to non-segmented campaigns.

Better product development and pricing strategies

Audience segmentation provides invaluable insights that extend beyond marketing to influence product development and pricing:

• Identifying specific needs within segments can inspire new product features

• Understanding segment demographics helps determine appropriate price points

• Recognizing emerging segments can uncover new market opportunities

• Segment-specific feedback can guide product improvements

For example, software companies can use audience segmentation to inform their pricing and product strategies. After analyzing their customer base, they can identify distinct segments ranging from casual users to enterprise professionals.

Instead of offering one-size-fits-all expensive software packages, they launch tiered subscription options tailored to each segment's needs and price sensitivity. They create different plans for hobbyists, specialists who need only one audience segmentation tool, and professionals requiring the full suite.

Types of audience segmentation

There are various types of audience segmentation, each with distinct advantages for different marketing objectives.

Demographic segmentation

This traditional approach categorizes audiences based on quantifiable population characteristics such as:

• Age

• Gender

• Income level

• Education

• Occupation

• Family status

For example, a financial services company might create different retirement planning products and marketing campaigns for distinct age groups: early career professionals (25-35), established professionals (36-50), pre-retirees (51-65), and retirees (65+).

Geographic segmentation

Geographic segmentation divides audiences based on:

• Country or region

• City or metropolitan area

• Climate zone

• Population density (urban, suburban, rural)

• Cultural boundaries

For example, a clothing retailer might adjust its product offerings and marketing messaging seasonally based on regional weather patterns, promoting swimwear in southern regions while displaying winter coats in northern areas.

Psychographic segmentation

This approach focuses on psychological characteristics, including:

• Lifestyle choices

• Social values

• Personality traits

• Interests and hobbies

• Attitudes and opinions

For example, a sustainable home goods brand might segment its audience based on environmental values, creating different messaging for deeply committed environmentalists versus those who are just beginning to consider eco-friendly purchases.

Behavioural segmentation

Behavioral segmentation categorizes audiences based on their actions and engagement patterns:

• Purchase history

• Brand loyalty

• Product usage rate

• Browsing behavior

• Decision-making style

For example, an airline might segment travelers based on booking patterns, distinguishing between last-minute business travelers, advance-planning vacationers, and deal-seeking occasional travelers. Each segment would receive different promotions and offers based on their typical booking behavior.

Audience segmentation vs. customer segmentation

The terms "audience segmentation" and "customer segmentation" are often used interchangeably in marketing contexts. 

However, it's important to note that they have subtle differences. Customer segmentation typically refers specifically to dividing existing customers into groups, while audience segmentation encompasses both customers and potential customers (prospects).

In practice, the difference is primarily one of scope:

• Customer segmentation focuses on people who have already purchased or engaged with your brand

• Audience segmentation includes both existing customers and potential customers who match your target profile

For most marketing applications, these terms function as synonyms, with both referring to the strategic practice of dividing a broader market into more defined subgroups.

Benefits of using a tool for audience segmentation

It's possible to perform segmentation manually, but specialized tools make the process much more efficient and offer various advantages for marketing teams.

• Faster campaign development and deployment - Dedicated segmentation tools significantly accelerate the marketing cycle by automating complex data analysis that would take days or weeks to produce manually. For example, marketers using GrowthLoop's segmentation tools can launch campaigns quickly, creating and activating audience segments in minutes.

• More accurate segmentation - Specialized tools enable far more nuanced segmentation than manual methods. They can process vastly larger datasets for more accurate segment creation and identify complex patterns humans might miss. It applies advanced statistical methods to validate segment distinctiveness and continuously refines segments based on new behavioral data.

• Real-time insights and adjustments - Modern segmentation tools provide dynamic capabilities that change marketing agility by letting marketers visualize audience size in real-time as segment criteria are adjusted. It also allows them to update segment membership automatically as customer behaviors change and A/B testing across different segments simultaneously.

• Improved cross-channel coordination - Modern segmentation tools excel at unifying marketing approaches across multiple channels. They activate the same segments across email, social, advertising, and other platforms and ensure consistent customer experiences regardless of touchpoint. In addition, these platforms can coordinate message timing across different channels and measure cross-channel performance by segment.