Looking at the growth rate of the SaaS industry, you’d think that people are more than willing to spend money on software solutions that promise to make their everyday lives (and professional endeavors) easier. Not quite, though. Despite projections forecasting the total SaaS spend to reach $171.9 billion in 2022, most buyers still prefer free solutions. […]
What is Geographic Segmentation?
Market Segmentation is a method used by marketers to divide a target market into smaller groups based on common characteristics, in hopes of marketing more effectively to each group. Marketers know that individual consumers have wants and needs that are linked to their demographic and psychographic characteristics, past interactions with a company or brand, and the place where they live. Marketing segmentation tries to identify groups of people with similar wants and needs so that marketers can produce targeted messages that appeal to them.
Geographic segmentation is a type of market segmentation that groups prospective customers based on where they live. People living in the same environment tend to have similar wants and needs, and geographic segmentation allows marketers to target audiences in a country, city or region with messaging that appeals to their specific wants and needs.
Why is Geographic Segmentation Important?
Effective geographic segmentation is a crucial component of any marketing campaign. It ensures that marketing dollars are appropriately spent on targeting prospective customers with the most relevant message that appeals to their needs and is most likely to trigger purchasing behaviors. Without geographic segmentation, consumers would frequently encounter advertisements for products and services that are unavailable where they live.
Let’s consider two examples: a local pizza restaurant and a Fortune 500 software company.
A small restaurant may have a limited marketing budget, making it vitally important to get the most value for every dollar of marketing spend. To achieve this, marketing efforts must be highly targeted toward customers in the restaurant’s delivery area. If a restaurant in Denver is paying to advertise to consumers in Aspen, that money is wasted, because nobody is driving six hours to get a pizza. Effective geographic segmentation can help this restaurant identify and market to potential customers in the target region.
A Fortune 500 software company will have a bigger marketing budget, but effective geographic segmentation will be crucial in maximizing return on investment. International organizations face the challenge of marketing to companies and individuals in different countries around the world with different wants and needs, different languages and ways of communicating, different business cultures, different values, and preferences, etc. An advertisement that works well in America may not work at all in Europe or Asia. With geographic segmentation, this company could divide its target market by country and produce targeted advertisements to appeal to prospective customers in each nation.