Market segmentation profitable niche finding

Market Segmentation Part 2

This post is a continuation of our segmentation series. If you haven’t already, you may want to check out the first post—Market Segmentation—Focus Where it Counts

In our first post regarding Market Segmentation we discussed the general idea of isolating certain portions of your customers to gain a better insight into their unique preferences. This method of qualification can be used to help you find more interested parties, more in-demand products, and also offer valuable insights into the benefit of your marketing focus and advertising investments. We left off discussing how segmentation can help understand how seemingly dismal conversion rates are really just sometimes a case of misinterpreted data, or at the very least mis-represented data.

To quickly illustrate an example of how market segmentation is applied in the real world, take a website that I recently had the pleasure to work with, The Organic Newsroom who graciously said I could use them as an example. They are a Health-oriented site, focusing on content marketing. That is to say, they market the information they produce as opposed to selling an actual product. While this dynamic is a bit different, all the principles are the same. Now, there is an ocean of Health-websites, many of which are impossible to compete against such as WebMD, Healthline, and even the ever-cheesy Livestrong.com. To get around this obvious hurdle, The Organic Newsroom has focused their attention on the alternative health segment, and even further so—the treatment of health concerns with natural supplements. So they are here: Health->Alternative Health->Supplements & Dietary Nutrition.

Now, in reality they are even further segmented than this, but that’s good enough for our discussion here. This organization, which is a for-profit outfit, has the refreshing goal of simply spreading their information far and wide. For instance, they have a article which compares 8 of the best vitamin brands available. It plunges in depth about all of them, and helps any potential reader learn the pros and cons of each. They in turn make small affiliate commissions from any referrals they may give to supplement retailers. In essence, their goal is to help people learn, and their profit model is facilitating a way for their readers to apply that knowledge. Forgive my tangent, it’s just that in my line of work you very rarely get to work with companies with earnest missions, unless you consider “helping” America’s youth find the latest pair of Jordans to be noble.

I helped the Organic Newsroom to gain a better understanding of their site’s audience, by analyzing affinity categories and interest groups (two powerful segmentations made available in Google Analytics) which can help elucidate audience interests. This helped them better understand how to reach audiences that would most-benefit from their content, and enable them to focus their energy on making that content most-available there. This enables them to spend more time producing content, and less time worrying about conversion rates, audience engagement, and other aspects that can create a void of division in business directions. This type of focus also helps more people that are interested in your unique product or service find your site or store, which in turn greatly increases your organic referrals—through online links or just plain old word or mouth. Ultimately though, this method is a means of analyzing the sources of your traffic, and any additional data that is attached to that data just makes life even easier.

Traffic Sources

We’ve seen how some traffic sources can behave drastically different than others, such as one source representing a strong buyers intent while another offering nearly none. Sometimes however, your business may not necessarily need target interest, and you’re after a strictly numbers game type of consumer base. Take, for example, a small news and media organization that I recently had the pleasure of working with. Without being too specific, they were a fairly old-school Local TV new channel which had an online presence, but certainly nothing that would be considered competitive to major regional affiliate networks. They had all the tools in place, had a website just like you’d expect to see from a larger agency, but had an old school mindset and hadn’t really committed themselves to the investment of reaching out to the new iPad bearing, click-happy, techies that the entire world seems to have transformed into overnight.

They were getting roughly 80,000 visitors to their site a month when I came in, which isn’t all that bad. However, for the amount of content they generate, it was pretty dismally short of where I had a feeling they could be at. They had a presence on social networks, but it was heavily automated, and didn’t really engage the audience with pictures, questions, or other methods proven to increase audience excitement. Now, before I continue you should know that the methods used here can very easily be abused, or taken to extremes, which often results in a very spammy vibe which could hurt the reputation of a business. As with anything, one should exercise a degree of caution and modestly dredge onward.

My first step was to segment out the sources of their website traffic into broad categories; Social, Referral (links from other sites), Direct, and Organic Search. These should be viewed as top level sources, and not to be viewed as overly insightful in most cases. The breakdown was as follows: 35% Direct, 30% Referral, 20% Social and ~15% Organic Search. There are some other random source types in there, but I’m ignoring them right now. Immediately, for previous experience in this field, I knew that their social traffic had the a tremendously underutilized potential. For instance, a single article on a site like Reddit can sometimes generate over 50K visitors a day. Given, that’s a black swan event; they still didn’t have many “spikes” in traffic to get everyone excited. I know these types of results peel back ears, and I wanted to get a further commitment from them, so that’s where I started. I’ll skip the numbers for now, as we’re focusing on segmentation, but within the first month with very little effort their social traffic quadrupled, and new visitor counts grew by 35%.

Referral traffic is a bit tricky to tear apart sometimes, as it represents visitors from other sites that can be tricky to find sometimes. In addition, there are often thousands of referring websites for larger sites such as the one I was working on, and data can become a bit obfuscated by its sheer volume. I approached it by taking the top 25 referring domains, by number referred, and analyzed them with a custom piece of software that counted the unique pages on each in which they were referred from, and then weighs that against the overall referred amount, returning a “friendly” figure between 0 and 1. So basically if if 1500 hits came from a site that had 1500 links on 1500 pages, I’d get a big fat 0 on my number chart, which basically lets me know that for every link on that site I would only be able to expect a single person. For a site that had 1500 hits, from 10 links, on 10 pages, I’d get a number closer to 1. Don’t worry about the math, it’s a bit relativistic and not really practical, meant only to be representative. So my end result is a list of those 25 domains I’ve chosen, with 25 paired values associated with their link “value.” While Google Analytics doesn’t really have a easy button for this, this is a type of segmentation that can show you the value of a single link from any given source. Ultimately, I found that the third site from the top of my list was a user generated content site which was bringing nearly 1100 visits per link to my clients site. There were only 8 links on the site in total, but I could also ensure that many more would be added at aptly timed intervals.

So, technical babble aside, segmentation of traffic sources allowed me to find a site that was bringing a lot of traffic to the site with very few links. In addition, this site offered the ability for anyone to add as many links as the wanted. This meant that I could add links to my clients site there as often as I wanted, an get roughly 140 visitors per link! That was nearly $75 of paid search traffic per link, FOR FREE. That adds up fast, even for a larger company like my clients.

At the end of the first month, their  traffic had grown from 80,000 to over 200,000, with nearly 65,000 coming form social networking sites alone! This client’s revenue was generated by the ad spaces on their site, which gave them a tremendous incentive to get more people on site, even if it meant a less targeted amount. Now, before you think that I’m some wizard of money making, let me break down the profit increases vs. visitor increases for you. With a roughly 250% increase in overall site traffic, there was seen a 15% increase in overall advertising revenue, which can’t always be broken down as easily as other facets of this project. The overall click-through rate of the site’s ads only dropped by from ~2% to 1.75% which is pretty good considering all the different channels that got added to the traffic flow. One of the largest factors that seems to stand out in this data is the amount of fixed price ad space that is being sold by my client. In other words, the amount of ad space they sell for a monthly rate, regardless of views or clicks. I’m assuming they’ll want to consider changing their approach, as the power of market segmentation has clearly shown that they have the potential to earn much more than they are currently.