Easy Market Research for Your Online Store-Part 2: Reach more customers through market segmentation

Posted by Megan Nyquist on June 19, 2018

In the first part of this series, we discussed strategies for overall market research. In this post, we'll dive into how to better understand your customers, so you can market to them more effectively.

Online stores commonly make this mistake when marketing their energy and water efficient products: They assume that one marketing message, which they spent all this time and money developing, applies to their entire target market.


But the truth is that efficient products cater to a variety of segments within the larger utility market-from homeowners to offices to large-scale factories, education facilities and more. And the message that works for a homeowner wanting the latest thermostat technology, for instance, will not connect with a factory owner looking to cut operational costs.

The key is to conduct market research to understand not only the overall market for your products but the different segments as well.

What is market segmentation?

Market segmentation is the process of dividing your target market into small persona. The division is typically based on shared characteristics like demographics, interests, needs, or priorities.

To boost the sales of your online store, look at your existing customer base. Segment them by the type of consumers they are: residential (e.g., homeowners), business (e.g., small businesses, startups, etc.), or industrial (e.g., warehouses, factories, etc.).

Study the buying behavior and patterns of each segment and tailor your marketing message accordingly.

To find out more about each segment, ask the following questions:

  • Who are the major decision makers?
  • What decisions do they influence?
  • What is their level of influence?
  • What evaluation criteria do they use?

The biggest benefit of segmenting your market is finding out which products each segment prioritizes and is looking to buy. This will impact your marketing strategy as well as store development.

For example, homeowners are more likely to buy energy saving lights than industrial-grade faucets.

3 Ways to segment your target market

When it comes to segmenting your target market, there are three ways to gather data.

1. Vertical segmentation:
Vertical segmenting is when you narrow your selling focus to a target group of consumers in a smaller demographic. For an online store directed towards businesses, vertical segmenting is usually based on the type of businesses in your target market. They could be retailers, restaurants, construction companies, etc.

Use can your primary data (billing information, past buying history, etc.) to find out more about your customers to segment them properly.

Let's say you discover that the low-flow showerheads in your online store are primarily bought by construction companies.

This gives you the insight and data needed to tailor your marketing message to the construction industry because you now know they're interested in those showerheads.

2. Custom segmentation:
Once you've segmented your market vertically, you can further narrow your market through key characteristics like geographical location, energy usage and demographics.

Custom segmentation gives you deeper insight into your target market. It can show you how your customers interact with your products specifically, what their reasoning for buying those products is, and how they use them.

3. Micro-targeting:
Micro-targeting uses your online store's primary and secondary data to predict actions your target market may take.

It's a more technical form of segmentation that involves creating a propensity score to predict the probability of your target market taking a specific action. The higher the score, the better the chances your target market will do what you want them to do.

Micro-targeting combines the information you discover in vertical segmentation (type of business) and custom segmentation (demographics, geographical location, etc.) to create a score.

To find out the propensity score, use your data to answer the following questions:

  • Which customers have taken this action in the past? Who are they? Where are they located?
  • What are the traits or characteristics of the customers who have taken this action in the past?
  • Which of those traits seem to matter most in predicting action?
  • Who else in the population shares the same traits? 

For more guidance on how to design your online store, download our e-book, Best Practices for Designing Your Utility's Online Store

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