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The Use Of Data Mining In Market Segmentation And How It Works For Your Business

Fred Chua | Sep 25, 2017 257 views No Comments

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Before businesses and companies release their products and services, they first decide on whom to cater those. Different products and services, even if from the same company, can be marketed towards different group of people.

That is why companies and organizations use different methods to know where they can best market their product. One of the most used methods is market research. This is where businesses gather, analyze and interpret all the information collected. After that, companies now need to group their customers for an easier marketing. That method is called market segmentation.

What is Market Segmentation?

According to Statistical Concepts, Market Segmentation is the “process of partitioning markets into groups of customers and prospects with similar needs and/or characteristics who are likely to exhibit similar purchase behavior.”

Market segmentation is an important task in marketing. It permits marketing staff to know what marketing method they can use to a particular group in the market. They can mix and match different combinations of product’s price, promotion, and place. They also use market segmentation to know which customer can maintain its loyalty or the customers that will likely be more willing to buy their products.



Market segmentation is not only used for business-customers relationship. They are also used for business-business relationship. The same statistical method is used for segmentation but the characteristics like the demographics and categories will be different.

Data used for market segmentation is usually from an account or CRM (Customer Relationship Management) database. Sometimes they also use external databases like researches and surveys. The ones from databases are usually the product of data mining.

What Is Data Mining?

In a simpler term, data mining is where systems study large databases to have new information that can be used for businesses. These new information are used to forecast and calculate new trends.

A lot of benefits can be derived from using data mining. One obvious benefit is that it will be easier to discover unseen relationships and patterns in databases. It can be used for making predictions about future trends and for marketing teams to devise their tactics to fit in with it. Also, it will set apart a company from its competitor because of the data they know.

How Can Data Mining Improve Market Segmentation?

For marketing purposes, data mining is such a huge help. Using the database of Customer Relationship Management (CRM), the demographics — age, sex, religion, income, occupation and education, geographic, psychographic, and behavioral information of the customers will be helpful in segmenting them. The segmentation process will be faster and easier. Also, with the new data and information that comes with data mining, it can also help with the market segmentation.

As for its business purpose, knowing your target market and their needs and wants is a lot cheaper than releasing different products and services that will cater to different customers. It will help businesses and companies use the full potential of their resources while still making sales rather than trial and error way.

Moreover, it will be easier for marketing teams to sell the services and products because the market has one desire and wishes from companies.

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