Dealership Market Segmentation 101

One of our most visited blog posts talks about using market segmentation and customer profiles to attract used car buyers.  The study was pretty general, and split pre-owned car buyers into only four categories.  Since there seems to be an interest in the concept of market segmentation, I wanted to give a brief, simplified overview of how to conduct one for your own dealership.

Let me define what I mean by market segmentation.  It involves taking your customer base, both past and future, and separating it into smaller segments of people grouped by shared characteristics.  This allows you to market to, appeal to, and focus on the specific groups that are most likely to buy, increasing your marketing ROI.

Even Ford is tightening up their segmentation.  Rumor has it that when the 2009 F-150 is released, the marketing focus will be on promoting it as a work truck, not trying to appeal to everyday drivers who will most likely be turned off by it’s low MPG rating.

The first step in creating a market segmentation is to decide what you will “segment” by.  Start with a huge bucket list of criteria and characteristics you can use to separate and group your customers.  Throw in everything you can think of; you’ll narrow it down later.  The two types of characteristics most likely to be helpful to your dealership are demographic (age, gender, location, etc.) and psychographic (lifestyle, family stage, personality, etc.).

From the long list you’ve created, decide which factors are most important and relevant.  For example, if you live in an area where the population is generally homogenic (made up of similar people), then dividing people by zip code wouldn’t make much sense.  Take these chosen factors, and start separating your customers into groups, creating customer profiles.  This may take some playing around with to determine which factors will most appropriately group your customers.

You can do a market segment for your entire dealership, or drill down into Make or even Model to determine who your customers and future customers are.

Often the most difficult part of segmenting your market is getting information about your customers.

  • Use Your CRM: Do some data mining, especially if your dealership has been good about collecting and recording customer information there.
  • Research Online: The US Census website has a wealth of demographic information.  While this may not be specific to who is buying or will buy from your dealership, it will help you get an idea of who is buying on a more general level.  For more local info, try doing an online search for “demographic data” and your location.
  • Ask: Send surveys, take notes while selling, call your customers, or even shoot them a quick email.  This is often the most effective and accurate way to interpret who is and who will be buying.

When the market is slow, it pays to know who you’ve sold to and who you could be selling to.  Exploring market segmentation can help you drill down your marketing and sales techniques, focusing where you need to, and ultimately, increasing your sales.