What Is Benefit Segmentation? (With Advantages And Examples)

By Indeed Editorial Team

Published 6 July 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Benefit segmentation is a useful, customer-centric marketing strategy that companies use to identify and target market segments. When implemented effectively, this approach can generate sales and business revenue by increasing customer engagement and conversion rates. Understanding the advantages and applications of benefit segmentation can help you use this approach to create effective marketing strategies. In this article, we answer the question 'What is benefit segmentation?' describe the importance, advantages and challenges of using this approach, explain how different market sectors apply benefit segmentation and provide examples.

What Is Benefit Segmentation?

Answering the question 'What is benefit segmentation?' can help you explore its potential application and understand the benefits of using it to create marketing strategies and targeted marketing campaigns. Benefit segmentation is a process that involves the segmentation of a market based on the perceived value that consumers believe they may receive from a product. The beneficial features or characteristics and advantages that a product can provide to consumers determine the product's value.

A business can use this approach to ensure lead acquisition and customer satisfaction by identifying which customers are most likely to benefit from its products. This can vary based on demographic factors such as age, profession, income, family size and geographic location. By identifying what different consumers want, a business can focus its products and marketing strategies on specific customer groups.

Related: What Is Market Segmentation? (With Types And Benefits)

6 Advantages Of Benefit Segmentation

Advertising, marketing, sales and research and development departments can use benefit segmentation to improve a company's market performance by improving the return on investment of resources. Benefit segmentation can help a company gain a better understanding of the different needs of its customer base. There are numerous ways businesses can benefit from this approach. The following are six examples:

1. Promotes product sales

Customers search for products based on their wants and needs and the benefits or value they believe they may receive from using the product. Businesses can emphasise specific product features to attract customers and encourage them to purchase the product. Consumers are more likely to buy a product that has recognisable and unique benefits that differentiate from other products on the market.

Related: How To Promote Products Online (Tips For Product Promotion)

2. Increases consumer engagement

After identifying the specific benefits of a product, a business can devise methods to promote those benefits to certain demographics. They may engage the target market through advertisements, social media campaigns or other marketing content. Increasing user interaction and customer engagement improves a company's brand visibility and customer base and encourages brand loyalty.

Related: What Is B2C? (With Types Of Business-To-Consumer Marketing)

3. Leads to improvement in product development

When a customer buys a product for a particular purpose, they may provide a review or feedback on its usefulness and quality and speak enthusiastically about its benefits. Feedback helps product developers recognise a product's strengths and flaws, which they consider when manufacturing future products. Product developers can also explore ways to improve a product based on customer reviews.

Related: New Product Development Process: Steps, Benefits And Tips

4. Provides detailed data

Customer reviews, including rating scales, provide data on customer satisfaction. Market researchers and data analysts can use this detailed information to develop comprehensive analytical reports. These reports can provide management with valuable information regarding product performance and the potential for future product designs.

Related: Top 20 Big Data Tools: Big Data And Types Of Big Data Jobs

5. Enables personalised advertisements

Different products have different benefits and appeal to different customer groups. Businesses can create advertising content that targets a specific audience by demonstrating specific benefits relevant to that customer base. Personalised marketing strategies and advertising campaigns can help to ensure a business promotes its products effectively, targets the relevant customer group, reaches a wide audience and increases sales and revenue.

6. Increases sales

A product's featured benefits and target audience enable sales representatives and marketing professionals to develop sales campaigns that encourage customers to purchase a product. Sales professionals research the product's features and benefits to provide accurate and detailed information to their customers. Consumers may be more likely to buy a product when they have sufficient information regarding its uses and value.

Related: What Is CRM? With Benefits And How To Develop A Strategy

Importance Of Benefit Segmentation

Benefit segmentation is important for businesses for numerous reasons, including:

  • Lead conversion: Benefit segmentation helps sales representatives to convert leads into consumers. The goal of marketing campaigns is to reach customers who are likely to engage with a brand, and this approach makes it easier for sales representatives to generate revenue.

  • Customer engagement: Benefit segmentation is an effective strategy for engaging customers. Identifying the value a product provides to a particular group of people enables a business to develop marketing campaigns that target that audience and differentiate its products from those of competitors.

  • Product development: Benefit segmentation helps to identify underserved markets within a customer group, and companies can use this information to explore the possibility of developing new products for those markets.

  • Customer retention: Increasing customer satisfaction can reduce bounce rates and increase customer retention by converting one-time buyers into repeat customers. Offering specific demographic groups products that fully meet their requirements fosters brand loyalty.

Related: What Is Market Penetration? (Plus How To Calculate It)

Challenges Of Benefit Segmentation

The following are some of the challenges of applying benefit segmentation:

  • Production volume: Because there is a limited number of buyers in each segment, companies may opt to reduce the number of products they produce as it is often not feasible to conduct large-scale production for multiple customer segments.

  • Production costs: Businesses can avoid increased production costs if they focus on specific segments rather than attempting to create a vast range of products to meet the demands of many customer groups.

  • Stock and storage: Maintaining excess stock reduces cash flow and can result in limited storage space and stock issues. Businesses can avoid this by limiting the number of products they produce and focussing their production efforts on particular segments.

  • Marketing costs: Marketing products to specific customer groups can help a business avoid the increase in advertising expenses that is likely to occur if it develops multiple marketing campaigns for numerous customer segments.

Common Benefit Segments

Benefit segments typically exist for specific products, but there are some common approaches you can use to identify consumers. This includes the following:

  • Status seekers: This group wants products that reflect a high social status.

  • Pleasure seekers: These individuals search for brands that provide the highest quality products.

  • Innovators: Innovators look for the latest and most advanced versions of products on the market.

  • Smart shoppers: Smart consumers look for the best deals and features available in the market.

  • Brand connectors: This group seeks brands that mirror their lifestyle and personal image.

  • Brand loyal: This segment prefers well-known, reputable and dependable brands and the product's attributes.

Examples Of Benefit Segmentation

The following are examples of how companies may apply benefit segmentation:

Technology

Benefit segmentation is typically evident among manufacturers of technological equipment. Information and technology professionals, general consumers and gamers are examples of people who may derive distinct benefits from the products they use. For example, a gamer may want products with high resolution, customisable features and refresh rates, and an office professional may prioritise sound isolation, robust design, versatility or security. As a result of divergent demand, technology companies produce different types of computers and accessories and segment them based on their target markets.

Skincare

There is an extensive range of skincare products on the market that target particular areas of the body or specific skin conditions. Skincare brands consider their customers' needs when targeting market segments. For example, they may create face creams for customers with dry skin and serums for customers seeking anti-ageing products.

Streaming platforms

Streaming platforms for television shows, movies and music provide content to satisfy various audiences. Some platforms may offer both family-friendly and explicit content. For example, movie platforms may offer both content types, or music platforms may allow users to select random song selections or create their own playlists.

Apparel

Companies that produce clothing and footwear may use benefit segmentation to divide products based on factors such as purpose or climate. They may provide clothing made of moisture-wicking fabric for hot weather, items with thermal insulating qualities for cold weather or apparel for specific professions. This may include apparel such as laboratory coats.

Personal care

Companies that manufacture personal care products may target different customer segments based on the benefits they want from the products. For example, many companies produce care products that disinfect, cleanse or moisturise. Once a company knows what its customers want, it can customise products to target each market segment.

Fitness equipment

Companies that produce fitness equipment segment their products according to factors such as the customers' skill level or intended activity. For example, marketing strategies for a company selling yoga mats may highlight the benefits for Pilates enthusiasts. Additionally, they may have market segments with products for both amateur and professional athletes.

Pet supplies

Different animals require different products. Companies may provide specialised products and services for a certain size of animal, an individual species or for pets with specific dietary requirements. By segmenting the market, a company is better able to meet the needs of each segment. For example, a pet supplies business may provide various pet food products to suit both older pets and baby animals.

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