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How Market Segmentation Increases Your ROI in the UAE

If you’re in the process of building your business and deciding what products or services to offer, then you’ve probably already decided on a target market: a clearly defined group of customers you want to serve. 

Oftentimes, your target market starts out broad and you’ll have a sense of whom you want to avail your products or services. It makes sense to target a wider audience; after all, the more people you reach, the more chances you have at capturing customers, right? 

While that may be true, it can be costly to run marketing campaigns that reach a wider audience. Not only will it cost you more in the way of marketing spending, it makes it harder for you to make an impactful impression than if you’d selected a handful of niches.

This is where market segmentation comes in. We’ve prepared this article to explain what market segmentation is, and how it could be the key to increasing engagement, conversions, and your ROI. 

What is market segmentation?

Market segmentation, put simply, is a marketing tool used to divide your current and potential customers into different groups (and even subgroups) to target them more effectively. It’s being more specific about who your customers are, where they are, and how you can help them address a problem or satisfy a need. 

Usually, your products or services appeal to a certain group or segment in the market that share similar characteristics. For example, if you’re selling basic netbooks, you can generally sense that your market will be comprised mainly of students or professionals on the go. But even traveling professionals can be subdivided further into finer groups: consultants, startups, accountants, restaurant owners—the list goes on.

Segmenting based on profession or industry can be the first step, but oftentimes, you’ll also have to decide on the specific locations (or hotspots) that you want to focus on to further narrow down your segment.

You can also refine further by looking at age, gender, socioeconomic status, marital status, and the like.

Identifying these key characteristics will give you a better understanding of how different portions of your market respond to your marketing. Consultants in Abu Dhabi, for example, might respond to campaigns in a way that differs from startup owners based in San Francisco—even if they belong to the overall group of “professionals who travel.” Market segmentation ultimately provides you inputs that you can use in determining your KPIs.

Methods of market segmentation

You can perform market segmentation by employing different methods. These methods usually range from looking at attributes ranging from the intrinsic (i.e. age, sex) to the behavioral (i.e. spending habits). Here, we outline a few methods you can start looking at.

market segmentation UAE

Source: Score 87

1. Demographic segmentation

The most common way to segment a market is through demographic segmentation. In essence, it’s segmenting a market using key population characteristics like age, gender, income, ethnicity, and others. Using demographics for market segmentation simplifies the population into easier-to-target samples. 

Typically, demographic segmentation is used for consumer products. It’s no accident that consumer goods companies have different product lines for men, women, and children. It pays to know the trends that shape the ways different demographic segments make purchases

2. Geographic segmentation

Another common way to segment your market is by using your customers’ location. This is one of the easiest methods to execute, for both traditional and digital campaigns—all you need is a zip code for the area you want to scout or for the types of people you want to target in your online campaigns.

This works by identifying the similarities that you can gather from people in the same neighborhoods and how much traffic you can get from targeting one location. This article discusses geographic segmentation in greater detail.

3. Psychographic segmentation

You can also use psychographics to segment your market. You can do this by tapping into your customers’ beliefs, lifestyles, attitudes. If you run a health food store, you’ll want to target people who already are, or on the path to being health conscious.

Segmenting using psychographics requires you not only to understand your customers’ current needs, but also following their journey as their preferences evolve over time. The more you understand how your customers think, the better they respond to your campaigns.

4. Segmentation based on current customers

As we’ve already talked about, you most likely have an idea of what your target market looks like. This also means that you have strategies that are already working. Looking at trends from your own set of data will provide you insight on which segments of your customer base are generating more sales than others. 

These are the top factors you can start using to improve your market segmentation: revenue per purchase, purchase frequency, and source (i.e. how they entered your sales process). There are more behavioral factors that are worth considering if you want to get more specific when it comes to your market. 

How to apply market segmentation to your business

Now that you know what market segmentation is and what methods you can try out, we’d like to share a few tips on how to execute them to maximize your ROI. 

1. Start with your ideal customer 

When you think about your products or services in relation to their end users, you’ll be able to come up with a profile for your ideal customer. Your ideal customer is someone whose problems you directly address with your product or service as the solution. They’re not one time buyers nor passive receivers of your message. They actively engage your brand.

In the consumer funnel, they’re the ones who have the greatest potential to become advocates for your company.

marketing find your ideal customer

Source: AWeber

2. Create a prioritization matrix

In a less-than-ideal world, you’ll still end up wanting to target multiple customer segments. A prioritization matrix allows you to have a clearer understanding as to which segments will provide you with more value than others, so you can start with high value ones first, then test other potential segments later on. 

Source: Mind the Product

3. Run A/B testing for campaigns

If you’re still torn between two types of customers, you can try doing A/B testing. A/B testing, in this context, means sending out the same campaign message two different customer segments. 

Evaluating the responses you get from one campaign from different customer segments will narrow down which segment you’re capturing more.

4. Use lookalike audiences 

If your current customer base is giving you the conversions you need, what you’ll want to do is maximize Facebook’s lookalike audiences. What this does is using your current customer data to replicate the characteristics of your customer base and target their lookalikes.

If your current segmentation is working, it’s highly likely that an audience with a similar profile will also respond the way you want them to.

Conclusion

Knowing what market segmentation is and how to apply it will give your business and campaigns more focus. It’ll also save you time and energy by knowing the exact customers who are more likely to generate sales for your business than others. Having this clear direction will ultimately increase your future campaigns’ ROIs, ensuring that your efforts don’t go to waste especially to create ads campaigns in the UAE.

If you need help navigating the world of marketing, then you’ll be happy to know that Igloo is an agency dedicated to helping businesses like yours do better at marketing. Contact us today to get in touch with an expert!

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By Bassem Saber Digital Marketing Expert

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