Benefit Segmentation: Definition, Advantages and Examples

Benefit segmentation is a customer-centric approach to marketing that identifies and targets customers based on the perceived value of a product.

Benefit segmentation is used in a variety of industries, from food and beverage to automotive to retail.

By understanding what benefits different customer segments are looking for, successful businesses use differentiated marketing strategies to create products that appeal to each segment making them more likely to be successful in the marketplace.

When done correctly, this targeted marketing approach has the potential to increase sales by increasing customer engagement and increasing conversion rates.

When combined with other types of segmentation, like Needs-based Segmentation, Price-based Segmentation or Occasion segmentation can truly drive growth in sales, profit and customer satisfaction.

In this article, we will discuss what benefit segmentation is, how it can help you target your customers more effectively and provide real-life examples so you can see how it works in practice!

What is Benefit Segmentation?

Benefit Segmentation is a marketing strategy that divides potential customers into different groups based on the perceived value of a product.

Customers purchase a product (or service) based on the benefits that they believe they can get from using the product. This is the product’s Perceived Value.

Different customers can have different Perceived Values from the same product.

For instance, here are the Nike ZoomX Vaporfly running shoes.

A serious runner could purchase these shoes based on their technical benefits: their comfort, lightness and breathability.

Someone else could purchase the same model of shoes for its aesthetics: attractive shape, vibrant colors and a cool look.

So, two different legitimate customers see different Perceived Values in the same product.

By segmenting the market based on different benefits perceived by different customers, a company like Nike could promote the same product differently to each segment.

Customers in each segment will now look at the same product differently and purchase it for entirely different reasons.

Advantages of Benefit Segmentation

Greater customer satisfaction

When customers feel that they are getting what they want out of a product, they are more likely to be satisfied with it.

With Benefit Segmentation you can drive greater customer satisfaction by highlighting the benefits that are most important to them.

As we’ve seen in the example from Nike, a customer who is interested in fitness might be more likely to purchase shoes if the advertising emphasizes how light and comfortable they are – as opposed to emphasizing their attractive design.

So, with Benefit Segmentation you can satisfy each customer segment with the same product – albeit with different reasons.

Reduced customer churn

When customers are satisfied, they are more likely to return, recommend the product to others, buy again in the future and not switch to a competitor.

So Benefit Segmentation can increase customer retention because satisfied customers are likely to remain customers in the future.

More Sales (and Easier to Sell)

In addition to increasing customer satisfaction, Benefit Segmentation can also increase sales by attracting more potential customers from a segment and by driving greater conversion rates.

Benefit Segmentation also makes it easier to sell because the marketing and sales messages can be tailored to the needs of each segment making them resonate more.

Increased opportunities for cross-selling and up-selling

When you target each segment based on their Perceived Value for different benefits, you open up opportunities for cross-selling and up-selling.

You can now present customers in a segment with other related products that might pique their interest.

Let’s imagine that you have a store that sells computers.

If a customer purchases a laptop together with anti-virus protection software, then maybe it means that they value computer security and data protection.

This could be an opportunity for you to offer them a firewall protection product as it offers a similar benefit to the anti-virus software.

Higher profitability

Benefit Segmentation can give you higher overall profitability because you can focus your marketing and sales efforts on the most profitable market customer segments and products.

But you can also increase profitability per product.

With Benefit Segmentation, you are identifying which benefits are most important to which customers and then designing your marketing and sales programs specifically around those benefits.

This means the perceived value by each segment is going to be high. This can give you the opportunity to charge a premium price because customers are going to feel they are getting high value from the same product.

You can also take the same product and modify it slightly to meet the needs of each segment. Now each segment can feel that they have a product that’s unique for them. This can give you the freedom to charge more and increase your profit margin per product sale.

More effective marketing

Benefit segmentation also allows companies to better understand their customer base and tailor products or services that meet the specific needs of each segment.

Once you identify how your customers value different benefits, you can build a more effective marketing strategy for future campaigns by targeting people who are likely to respond positively to certain messaging.

For example, you may find that a segment of your customers values “high-quality” and “innovative” benefits while another segment is more likely to buy your products or services if you offer low prices.

By tailoring specific messaging for each group and even offering separate products, you can increase your return on investment (ROI) for marketing campaigns and improve your customer satisfaction in both segments.

Examples of Benefit Segmentation

BMW

German luxury car brand BMW uses benefit segmentation to target different market segments depending on the type of vehicle they sell and whom they are targeting.

BMW has a line of luxury cars for wealthy buyers, a line of sports cars for people who enjoy speed and excitement, and a line of eco-friendly cars for people who want to save money on gas and help the environment.

Each line of BMW cars is designed to meet the needs of a specific market segment.

Benefit segmentation allows BMW to effectively target different tastes in cars at varying price points that different customer segments are comfortable with.

And their new slogan “Sheer Driving Pleasure” is designed to appeal to a broader set of segments rather than the original and extremely successful slogan “The Ultimate Driving Machine”.

So, BMW now appeals not just to those seeking amazing German engineering but also to those who love driving for the sake of driving and those who feel that owning a BMW is a status symbol that they have arrived.

Evian

Bottled water company Evian uses Benefit Segmentation to appeal to different market segments by proposing different benefits for each segment for the same product – water!

The ‘Prestige’ range of bottled water is a premium product that appeals to a higher-end market that may want to show off the Evian brand to their dinner guests. This market segment is attracted to the ‘benefit’ that the water has traveled all the way from the French Alps to their dinner table in attractive, stylish bottles. 

Evian also has a ‘Glass Bottle’ range. This is for the environmentally-conscious consumer. It is an attractive design and appeals to those who want a ‘benefit’ of saving the environment. To this segment, Evian promotes the sustainable way in which it bottles water in the French Alps.

Evian also has a product range called ‘Kids bottles’, which targets parents with young children. This market segment enjoys the benefits of knowing that Evian water helps support a child’s healthy development. The bottle size is specifically designed for small hands and includes a distinctive label.

As you can see each line of Evian water is tailored to meet the needs of a specific market segment by highlighting the benefit that each segment cares about. In which case they are selling the same product – water!

Nespresso

Nespresso uses segmentation to target different market segments. Their machines are designed to make espresso as well as other types of coffee like cappuccino, macchiato, and café latte. Plus, their coffee is available in a wide variety of flavors.

However, from a Benefit Segmentation point of view, the above segments are all fairly similar as together they represent ‘coffee lovers’ who just happen to like different types and flavors of coffee.

So the two key segments that Nespresso targets by using Benefit Segmentation are:

1. Lovers of coffee who would like to bring the quality, flavor and the experience of enjoying an Italian coffee right from a café in Italy straight into their own dining room.
2. Those who like the idea of making coffee simply by putting a capsule in a machine and pushing a button without the complications and mess of handling coffee powder, water and a mocha machine.

These are distinct benefits that Nespresso offers.

The first segment loves the experience of a good cup of coffee and Nespresso gives them that.

The second segment likes the convenience and simplicity that Nespresso also offers. even though they may need not even like coffee but may serve it to guests.

Each benefit is tailored to appeal to a specific market segment with the hope of enticing them to try out Nespresso’s machines and coffee.

Summary

Benefit Segmentation is a marketing strategy to classify customers based on the perceived value they get from a product or service.

If properly executed, benefit segmentation can lead to greater customer satisfaction, higher customer retention, more revenue, increased opportunities for cross-selling and upselling, higher profitability and more effective marketing in the future.