Breaking your target market down into smaller, more digestible chunks is no small feat. It’s a large, time-consuming task requiring plenty of data, know-how, and patience.
As a result, there are a fair few pitfalls littered throughout the segmentation process.
We’ve collated a list of the ten most common market segmentation errors you’ll need to avoid if you want to create relevant, useful segments that inform your marketing strategy and drive revenue.
We cover:
- Not having enough data.
- Not having clean data.
- Segments at odds with your org’s goals.
- Segments without longevity.
- Segments without specificity.
- Updating segments too infrequently.
- Segments that rely solely on past buyer behavior.
- Not using psychographic data.
- Focusing only on bottom-of-funnel leads.
- Not sharing findings effectively.
Buckle up. It’s time to chunkify. 🍪
1 - You don’t have enough data 👩💻
A single data point doesn’t make a trend.
But just how much data do you need to come away with statistically significant findings?
The answer: more than you might think. In fact, the more data you have the better. When you work with greater volumes of data, you mitigate the influence any one outlier can have on your findings. 💽
Imagine gathering data on just five customers to determine your customer segments, for example. That’s just not enough to start determining the shared characteristics that’ll help you segment your sample.
Even 500 might not be enough to get a truly accurate picture. When you work with tens of thousands of data points, though, you start to get a very clear idea of how to demarcate each segment.
2 - You don’t have clean data 🧼
Once you’ve set up an efficient and automated data collection process, it’s easy to get overwhelmed by the sheer volume of data you’re dealing with.
That’s why it’s not enough just to capture the data. You need to standardize it, sorting it into a format that’s usable - ideally right as it comes in.
If you don’t, it‘ll be impossible to draw accurate conclusions.
Data on market participants from source X might columnize the data differently than source Y. It’s up to you to pull your disparate data sets together and standardize them. That means across data formats and column names, but it also means removing duplicate entries.
This can be a lot of work, but it’s necessary if you’re going to draw accurate conclusions about your data.
Fortunately, if you’re working with tabular data, tools exist that can help you merge, de-duplicate, and perform many other seemingly time-consuming tasks quickly.
Pandas is a python library that makes working with tabular data a breeze.
Though the learning curve is steeper than your typical spreadsheet software, you don’t have to be a coding genius to learn it. In fact, many people find it easier than working with spreadsheets once they get over the initial learning curve.
3 - Your segments don’t align with your business objectives 🙅♂️
Remember in school when you were given back a poorly graded assignment and told you’d answered the question you wanted to answer, rather than the one you were actually asked?
With large, effortful tasks like customer segmentation, it’s easy to fall into the same trap. It’s easy to lose sight of why you’re performing the task in the first place. By the time you near the end, you might be so motivated by the thought of handing over your final deliverable that you rush the process.
While you might identify some clear, accurate, and informative market segments from your research, it’s still up to you to make sure these align with your business goals and objectives.
For example, if your business is looking to break into the enterprise space, but you’ve a long history of serving SMBs, you’ll have an abundance of data from SMB-related segments, but comparatively little from enterprises. It’s up to you to put in the effort to acquire that hard-won data since it now aligns most closely with your business objectives.
In other words, don’t let survivorship bias creep into your market segmentation strategy, where you more heavily weight readily available data versus what’s most pertinent to your business’ goals.
4 - Your segments don’t have longevity 📼
Every segment has a shelf life, especially in today’s markets, but that doesn’t mean you can’t craft your market segments with longevity in mind.
Right now, yours might be a small outfit serving local businesses. But your executives might have aspirations to distribute internationally.
That’s why it’s important to ensure you’re working the aims of your executive team into your market segmentation efforts.
This way, your segments stand a chance at staying relevant to your business as it scales.
5 - Your market segments aren’t specific enough ☝️
Without some breadth, your market segments won’t stand the test of time. If your business scales quickly, you’ll find yourself needing to update each segment more and more frequently.
The temptation here is to make your segments broader and less specific so your segments don’t become obsolete too quickly.
But your segments now suffer from a different problem: they’re not specific enough. And if your segments are too broad from the beginning, your attempt to give them more life will fall flat. They’ll never be relevant enough to perform their function in the first place.
Instead, keep segments focused on the relevant factors that drive your customer base’s purchases (whether demographic, psychographic, or behavioral).
Then, just make sure these segments align with your org’s vision for the future, rather than sacrifice specificity for breadth.
6 - You don’t update your customer segments ⏰
Some, rather than update segments frequently, choose to never update them at all.
No matter how aligned with your company vision your segments are, they’ll still need a refresh every now and then. If your segments are even a few years old, they’re at high risk of becoming out of date.
One of the most common market segmentation mistakes lies in thinking segmentation is a ‘one and done’ type of task. Check back in with your segments annually. The better the job you do at creating segments that are specific and align with your business’ goals, the less work it’ll be to bring them up to date at each audit.
7 - You rely on past behaviors to predict future events 🔁
Many businesses rely too heavily on behavioral segmentation.
Don’t get us twisted - behavioral segmentation is powerful. Geographic and demographic segmentation have their place, but they can’t really compare to behavioral segmentation when it comes to predicting buyer behavior in a way that’s specific.
For example, while it might be necessary to segment your audience according to which continent they live on, and it might broadly affect their buying decisions, it’s much more powerful to split your audience into categories like:
- Those that have signed up for your newsletter.
- Those that have joined your Slack workspace.
- Those that have brought a product in the past.
All of these are behavioral factors, and all this data is available if you know how to track it.
But that’s the problem. Since it’s readily available, businesses come to rely on it heavily and, in some cases, exclusively.
Past behavior is no guarantee of similar future behavior. And without paying adequate attention to market and industry trends, you might miss a coming shift in buyer behavior that renders your behavioral segments useless.
That’s why it’s important to incorporate other types of segmentation that can survive such fundamental shifts in the market.
8 - You don’t use psychographic segmentation 🧠
While many businesses put behavioral factors at the top of the hierarchy, past behaviors aren’t always reliable predictors of future behavior.
Instead, understanding the fundamental emotional motivators that drive your customers’ buying decisions gives you a better understanding of how they might act no matter what’s going on in the world around them.
Enter psychographic segmentation.
Psychographic segmentation focuses on your target audience’s values, beliefs, and lifestyles to better understand what drives them to take action and make a purchase.
The drawback? This kind of data is perhaps most difficult to come by of all. But it’d be handy to have, right?
Of course, you don’t have to buy aggregated data from shady tracking companies to get your hands on some psychographic data. You can perform your own primary research, consisting of qualitative customer interviews, surveys, and focus groups if you wish.
However you choose to acquire psychographic data, you differentiate yourself from the rest. This constitutes its own small competitive advantage, helping you reap the rewards of more accurate market segments.
9 - You focus only on bottom-of-funnel leads 🕳️
In a similar vein to how psychographic segmentation can get you closer to the deeper influences driving buyer decisions, you should also make sure you’re not only focusing on those who are close to the end of the buyer’s journey.
The very language we use to describe leads (“buyer’s journey”, “buyer decisions”, “buyer behavior”) has us focused on the end of that journey. But there are other factors influencing buyers before they’re even aware they’re in our funnel.
The solution? Include a target segment for those in lower stages of awareness. Those who might not know they need a problem solved yet. They make up a large portion of your potential future customers. If you can market to them effectively, you can tap into a commonly overlooked resource for massive revenue potential.
10 - You don’t make your findings digestible 🥦
You’ll learn a lot during the segmentation process. But you need to be able to distill your findings into a format you can share rapidly with the rest of the business.
That’s why it’s crucial to take things further. Don’t just create your market segments and stop there.
Derive customer personas from your segments. The process makes each segment personal, distilling a group down into a single memorable avatar. This makes the key decision drivers for this segment easier to understand, communicate, and remember.
This helps your segmentation efforts pay off, as every team from marketing to sales understands how to quickly bucket their new leads and ideal readers into categories with pre-defined hopes, frustrations, and values.
