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What are the benefits of Market Segmentation and Targeting?
Home » Advertising & Marketing » Market Segmentation and Targeting » What are the benefits of Market Segmentation and Targeting?Posted by Your Guide on October 31, 2005 3:32 PM
The main benefit of market segmentation and targeting is, in essence, better marketing. Because the focus is specifically on the desires and needs of a niche group, the likelihood of higher response rates increases accordingly. The more highly targeted the segment, the higher the probability that the company’s marketing and advertising promotions will match with the needs of that group or audience. Typically, this higher response rate is common the more marketers drill down in their segmentation. Using a combination of the geographic, demographic and psychographic variables, it is now common with modern databases to effectively predict the likelihood of purchasing.
This pattern of predicting – or predictive modeling as it is called – has opened a new realm of marketing for businesses. A relatively recent development, these predictive models are based upon decision trees, which ask a series of questions and create a pathway in which the deeper the profiling goes, the more specific the target audience. While a target audience is the end result, all of the computer models and statistical equations are built upon highly specific market segmentation principles.
In an age where strong ROI is the expected norm, companies must work harder to ensure that marketing dollars spent make the highest impact possible. Database marketing, predictive modeling and customer profiling all require strong market segmentation principles. When effectively utilized, it is possible to market to smaller segments while increasing revenues. Marketing managers and directors who learn the principles of market segmentation and target marketing will see their stock rise in the coming decades as direct marketing becomes more and more the norm.
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