How do you optimize your marketing mix and budget allocation using segmentation and targeting?

1 What is segmentation and targeting?

Segmentation is the process of dividing your potential customers into groups based on their characteristics, behaviors, needs, and preferences. Targeting is the process of selecting the most relevant and profitable segments to focus your marketing efforts on. Segmentation and targeting help you to tailor your marketing mix, which consists of the four Ps: product, price, place, and promotion, to suit the needs and wants of your specific audience.

2 Why is segmentation and targeting important?

Segmentation and targeting are essential in marketing analytics, as they can improve customer satisfaction and loyalty by offering products and services that match their expectations and values. Additionally, they can increase market share and revenue by reaching more customers who are likely to buy from you and spend more. Segmentation and targeting can also reduce costs and waste by allocating your marketing budget more efficiently and avoiding spending on unresponsive or unprofitable segments. Furthermore, they can enhance your competitive advantage by differentiating your brand and value proposition from your rivals.

3 How to segment your market?

When trying to segment your market, there are many approaches you can take depending on your objectives, data availability, and resources. Demographic segmentation involves variables such as age, gender, income, education, occupation, and family size. Geographic segmentation requires variables like location, climate, region, and urban/rural. Psychographic segmentation requires variables like personality, lifestyle, attitudes, values, interests. Behavioral segmentation is based on variables like purchase behavior, usage, loyalty and benefits sought. Combining these methods can create more refined segments; for instance you can combine gender and age with lifestyle and benefits sought.

4 How to target your segments?

Once you have segmented your market, you need to evaluate and select the segments that you want to target. You can use criteria such as size, growth, profitability, accessibility, and compatibility to compare and rank your segments. Tools such as market maps, SWOT analysis, or scoring models can help with this. When choosing a targeting strategy, you can opt for undifferentiated targeting and apply the same marketing mix to the whole market; differentiated targeting by applying different marketing mixes to different segments; concentrated targeting with a single marketing mix to a single segment; or customized targeting by applying individualized marketing mixes to individual customers.

5 How to optimize your marketing mix and budget allocation?

Once you have decided which segments to target and how to target them, you need to optimize your marketing mix and budget allocation to maximize your results. To do this, you can use marketing mix modeling, marketing attribution, and marketing experimentation. Marketing mix modeling uses statistical methods to analyze the impact of your marketing mix variables on sales or profits, and identify the optimal combination of product, price, place, and promotion for each segment or campaign. Marketing attribution uses data-driven methods to track and measure the contribution of each marketing channel or touchpoint to conversions or retention. Marketing experimentation uses scientific methods to test different versions of your marketing mix elements and measure their effects on key performance indicators. Additionally, dashboards, reports, or analytics platforms can be used to monitor and evaluate your marketing performance.

6 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?