What product segmentation strategy entails
Once you've decided that segmenting your products is a good idea, you need to begin the segmentation process. But how do you do that? What steps are involved in product segmentation, and which strategy should you take? After all, if you choose the wrong approach, you could end up spending a lot of time and money for very little ROI. Four key elements of a good product segmentation strategy are presented below.
Analysis of product usage & why people buy your product
Your existing customer base can already tell you a lot about how you should go about segmenting your product, at least initially. Look at how your current customers are using the product. Examine what industries they're in, which features each customer segment is using the most, and think about how those features can be expanded to better reach the industries in question.
Customer & market segmentation strategy
The first step relies very heavily on having a quality customer and market segmentation strategy in place. Tools like ProfitWell Segmentation can easily and accurately segment your customers across industry, location, gender, and 147 other traits. ProfitWell Segmentation is a free product that will give you all the tools you need to effectively segment your target customers, market, and products. Some important areas to consider for product segmentation are:
- Demographic segmentation - These are the basic demographic categories that most people think of when they think of segmentation. It includes items such as the age, income, marital status, and gender of your customers. This information will be useful in determining which customer segments a given product will appeal to.
- Psychographic segmentation - This type of segmentation breaks your users down based on their interests and activities. This one is particularly useful for determining how you can cater to those aspects of your customers' personality and bring a new product segment to market targeted directly at them.
- Behavioral segmentation - Segmenting by behavior is all about examining how customers behave when they interact with your product and your company. Combined with psychographic segmentation, you can get clues about which features and aspects of your product are most important to customers with a given set of interests.
- Geographic segmentation - It may not seem like segmenting your customers by geographic location can tell you much about how to cater a product to them, but different cultures often have very different approaches to a given problem. Examining how customers from different regions interact with your product can tell you a lot about how you might cater it to people in that region.
Price segmentation strategy
Once you've used your data to flesh out some ideas for different product segments, you need to decide how to price those products. While it may be tempting to set an across-the-board price for all similar products, you'll likely be leaving money on the table. A thorough analysis of willingness to pay and market realities, such as that provided by Price Intelligently by ProfitWell, will give you a clearer picture of how to optimally price each product segment for maximum growth potential.
Product positioning & effective marketing strategy
With the product segments created, priced, and ready to launch, it's time to put your marketing department to work. You'll already have information about the buyer personas your product segments are aiming to attract, so that's a great start. Again, the extra work of marketing separate products might seem like a burden, but if you've done everything correctly, the end result will be more sales and less churn.