Market Segmentation Mistakes to Avoid

Most companies base their market segmentation on available fields in their CRM, their clients' purchase history, or other digital behaviors identified within their business. Those with marketing automation tools may also base their segmentation on a particular system that factors in a few other dimensions as well.

But are you getting the most out of market segmentation, or are you leaving money on the table?

Here are seven common market segmentation mistakes to avoid.

1. Not having clean data

Basing decisions on data that contains duplicates, data that's outdated, or data that's not normalized makes for inaccurate segmentation. Nothing's more embarrassing than sending two different promotions to the same person at the same time!

Make sure your data is clean, accurate, and streamlined.

2. Defining a market segment by instinct—without backing it up with data

Although segmenting on the basis of customer profiles or personas constructed on assumptions is a good starting point, especially when you are just starting out, it is unwise to finalize your segmentation without first doing analysis.

For example, defining as profitable a segment that actually brings in the least amount of revenue is a mistake that only looking at actual numbers can show you is a mistake. Therefore, customer data must be analyzed when creating your segments.

If you are lacking data because you are just starting out or you're running a small business, you should conduct tests prior to finalizing your segments. Your tests could include sending email marketing campaigns and looking at results, running limited digital marketing campaigns and seeing what kind of interest they generate, having your sales team call a different management level than they normally would, and so on.

3. Analysis of your data is not based on the right goal

The people in your various segments should be defined and targeted based on different goals within your business. Each of those different segments should then be marketed to in accordance with your goals for them.

For example, if you have a segment of customers up for renewal that you want to close, you should be sending them renewal information and marketing promos related to their renewals. You wouldn't send them information about your newest products or upgrades when the goal is renewal. However, once you close them on the renewal, they would go into a new segment that might be sent that info.

4. You've based your ideal market segmentation profile on the small amount of data you have and nothing more

Your ideal segmentation may be based on variables and fields that you have not collected information on yet. For example, if you are trying to get rid of an inventory of women's shoes, but you don't collect data on the gender of your customers, it will be impossible to send an email campaign only to women on your list.

You should always be evaluating your ideal customer profile and your needs for segmentation, and making sure your data collection is getting the valuable information you need from customers.

5. Channels are sometimes ignored when developing market segments

Not all of your customers are interested in hearing what you have to say from all the various channels you use. Rather, you have to use the channel that will connect with them, based on their past history.

For example, if you run a travel agency, you may have customers who, despite receiving emails from your company, open emails only from their travel agent with whom they book. It would therefore be pointless to send a mass email to these folks directing them to book online when you know that they prefer to call their travel agent. However, you might want to have their travel agent email them your promotions directly.

6. Timing is critical when engaging with prospects as well as current customers

Regardless of the channel used to communicate with a customer or prospect, it is wise to additionally segment an already defined segment based on engagement time. You could use frequency of purchase, last purchase date, or renewal date, but having this additional segment will help you get the right information in front of the client at the right time, leading to a greater chance of making that sale.

7. Not following up on a market segment's performance after you have launched a campaign to that segment

That failure can be costly. People will often compare segment A to segment B; however, a more valuable method is comparing the same segment over a period of multiple campaigns to determine whether those campaigns are a match for the segment.

Doing that will allow you to track overall improvement in your marketing to that particular segment. If performance of that segment goes up, you can identify what you're doing right and duplicate it. If it goes down, you can figure out what the problem is and fix it in future campaigns.

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Review your segmentation practices to see whether you can give them a facelift. When segmentation is done right, it will boost your ROI and make your marketing efforts much more worthwhile.

If you lack analytical capabilities in-house, consider bringing in a consulting firm or other outside help to help save your team the headache of analysis while allowing you to benefit from proper segmentation in your business.