You know you want your dealership to step up its audience targeting, but how can you do that, and what’s the best way to reach them? One way you can clearly define and divide your target audience is through automotive market segmentation.
With market segmentation, you break up the data on your car dealer’s target audience into different buckets (or segments) – each bucket shares similar characteristics so you can assume that they’ll have similar reactions to your marketing and advertising efforts. Research shows that 81% of marketing executives said that segmentation was “crucial for growing profits.”
Let’s take a look at five common ways your dealership can segment a market:
To bring the subject to life we’ll pretend our dealership is targeting a zip code in the heart of New Orleans – 70117 – and see what each segmentation technique can tell us about our customers there. We’ll confine our sources to a handful of free tools and reports, all of which are readily available to you online.
Why this particular zip code in New Orleans? First, the music is good (does anyone else still have Juvenile on their playlist, or is it just us?). Second, New Orleans is a complex local market that you can segment in a few different ways.
Here’s the skinny on 70117:
Going from east to west, this zip code runs from Chalmette and the Lower Ninth Ward (which gained national notoriety during Hurricane Katrina), through Bywater and the Seventh Ward, to the chic Marigny District just east of the French Quarter. Interstate 10 runs through the zip code to the immediate north; the Mississippi River forms the border to the south.
Now that you’ve got the basic contours, let’s walk through some automotive market segmentation examples.
Auto Market Segmentation Method #1: Demographic Segmentation
Here we’re looking at demographic variables like age, gender, income, ethnicity, and so on.
In the 70117 zip code, you find a lot of low- and middle-income families. Income levels are lowest in the Lower Ninth Ward and increase as you move west through Bywater toward Marigny and the French Quarter. A car dealer marketer could look at this data and decide to emphasize vehicle affordability in its marketing or offer service center discounts to get more prospects on the lot.
You could also decide to split the zip code by focusing on the lower or higher income side. If your big advantage is with lower-income car shoppers, you might want to check out U.S. census tract data to figure out exactly where income levels change, and only target home addresses that meet your criteria. Or you could engage the lower-income and higher-income households in the zip code with different messaging.
Auto Market Segmentation Method #2: Geographic Segmentation
Here we’re looking at factors like state lines, city limits, and the distance from point A to point B.
Let’s say you own a small used car dealership in Slidell, Louisiana, approximately 35-40 minutes away from our zip code. You might look at a map and decide that there are enough used car dealers serving this market already and focus your marketing elsewhere.
By the same token, you might own a brand or specialty dealership in Slidell and decide that 70117 is a profitable geographic segment. A forty-minute drive isn’t that long if a customer has her heart set on a particular make and model; after all, the average car buyer visits 2.7 dealerships in her journey. If you sell elite and specialty vehicles, you might be able to target an even wider geographic segment than this.
If you have the time, try plotting your own customers’ addresses on a map. Chances are you’ll see clusters where you’re doing the bulk of your business; as well as no-man’s lands where you don’t get any customers at all. Most dealerships will find that their market terminates somewhere, be it two miles or a hundred miles out.
What you might not see is where you are missing out on opportunities to either further penetrate your own dealership backyard or conquest in another area.
Whether you want to stick with your existing geographic segmentation or grow your area is up to you. We can help in making that decision with a Dealer Scorecard analysis, which helps pinpoint where you might be losing market share and where you should be winning but aren’t. Sometimes that’s in your dealership backyard, and sometimes, based on the market situation, it might be further afield.
Auto Market Segmentation Method #3: Technographic Segmentation
This variable refers to the ways the market segment uses technology and can be crucial when coming up with a marketing strategy.
According to the mapping software company ESRI, most of the people in the 70117 zip code fit in a lifestyle group they call Modest Income Homes.
They find that Modest Income Homes “favor TV as their media of choice and will purchase a product based on a celebrity endorsement.”
This gives your dealership a crucial piece of information – most of the people in your market like television.
To target this segment, you might:
- Run a traditional TV commercial, preferably with a celebrity endorsement.
- Figure out if 70117’s television preference extends to other traditional forms of media, like print, or similar types of formats like digital video ads on news platforms.
- See if streaming services and devices have penetrated the market yet and target accordingly.
You could also look at the second-biggest segment of the 70117 market, which ESRI calls Emerald City.
For this group, “cell phones and text messaging are a huge part of everyday life.” And, “well educated, these consumers research products carefully before making purchases.”
The obvious assumption here is that the Emerald City segment will be researching their next car purchase on their mobile phones. Here, traditional TV ads might not give you as much leverage as display ads and branded content, but you might be able to split the difference with something like display ads via TV streaming technology.
Auto Market Segmentation Method #4: Psychographic Segmentation
Here we are targeting psychological characteristics, conscious and unconscious beliefs, motivations, and so on.
For Modest Income Homes, the dominant market segment mentioned above, traditional values are an important part of life. Your dealership, therefore, might find it productive to align itself with (or at least not go out of its way to alienate) traditional values. This finding might also guide you as you look for channels to market in.
The Emerald City crowd has different values. “They buy natural, green, and environmentally friendly products.“ And, “they place importance on learning new things to keep life fresh and variable.”
Most likely, these segments share certain values and diverge in others. The Emerald City segment will probably not be as persuaded by appeals to tradition, but the two groups might share complementary beliefs about the environment (e.g. fuel efficiency and low emissions messaging might appeal to both).
The choice here is whether you choose one psychometric group over the other, look for ways to hit two or more groups at once or avoid psychographic targeting altogether.
Auto Market Segmentation Method #5: Behavioral Segmentation
Here we’re looking at customer behaviors like consumption habits, time spent on a website, browsing history, and so on.
ESRI gives us a third lifestyle group we haven’t had a chance to talk about yet, City Commons. This group is made up of young single-parent and single-member households. Something the City Commons segment shares with the Modest Income Homes segment is that both shop at warehouse clubs like Sam’s Club.
If you’re a car dealer targeting these two segments in the 70117 zip code, you could try geofencing around warehouse clubs. The big ones have auto centers, so you might get some conversions from people buying tires or getting an oil change. The strategy is to catch people while they’re actively thinking about their cars — and maybe considering an upgrade in their future.
Let’s Start Slicing & Dicing
You should have the gist now. At this point, you can start playing with different automotive market segmentation techniques, or you can give LOCALiQ Automotive a call. We can layer all of these segmentations against actual sales trends in your market. We’ll run a Dealer Scorecard analysis to help you identify the right opportunities where you can win market share, pinpoint segments for those opportunities, and give you the tools to get in front of them. Reach out today!