hink about how many ads you see every day – they say the average person is bombarded with thousands of marketing messages daily! It’s a total sensory overload, and it’s harder than ever for companies to get your attention. I remember early in my career, I was tasked with growing a small retail chain and we were throwing advertising dollars at everyone, and you know what? It was a complete waste. Our return on that investment was awful, and that’s when we learned about consumer segmentation.
We discovered the magic of customer segmentation and market segmentation, which helped our business flourish better than it ever had! Today, personalization is mandatory, because a business cannot thrive without catering to their customers wants and needs. By truly understanding what makes each group of customers unique, companies can create marketing that resonates with those unique groups, which leads to more long-term success and better relationships. We saw a 300% increase in ad conversions! It’s effective customer segmentation in action!
What Is Customer Segmentation? (The Easy Explanation)
Okay, so what is customer segmentation? Basically, it’s organizing your customer base into separate groups based on various shared qualities. It’s like baking a pie. Once a pie is crafted in it’s entirety, you can use a knife to slice it up into more manageable pieces!
Market research will not only give you more insight into the process of reaching your customer-base/understanding your audience, but crafting relevant messages as well. Instead of a generic message, you can make a targeted communication that addresses desires of said segment.
You might think this strategy is only for very large groups, but the truth is that even business can use customer segmenting to benefit themselves ! As long as you understand who your customers are, that translates in to solid customer service!
Why Is Customer Segmentation Important? (The Benefits)
Here’s the deal: customer segmenting aids in business growth. Segmenting can help your business flourish with your marketing speaks more to the person you are serving!
The greatest asset is the level of Personalization that is attained. Customers like when they are served in a personalized way, since that makes them feel like a person! With segmentation, you can tailor your messages, offers, and products to accommodate distinct needs. For example, sending an email about winter gear to people in warmer climates won’t do well! That’s lost revenue!
Beyond personalization, there is also the improvement of your ROI which allows a better approach to your core audience and better sales overall, since everyone benefits from not wasting their marketing funds.
I’ve been there before. I once supported an e-commerce company that was having issues with converting customers into repeat buyers. After a deep-dive that found out the history of various customer’s purchases, we were able to create ad campaigns that were better! The final outcome? A 250% increase in the initial result!
Ultimately. customer segmenting is about increasing customer life value since the more you build a relationship, the more people are willing to give your company a shot.
Types of Customer Segmentation (With Examples)
Let’s look at the various ways you can segment your customers! There are four primary ways, each with unique qualities.
Demographic Segmentation: The straightforward categorization of age, gender, income, education level, job title, etc.
Example: clothing brands market to many demographics since some focus on younger demographics versus others that focus on luxury.
Geographic Segmentation: Divides audience by where your customers live or are located, such as climate, region, weather, etc.
Example: A travel company can segment a trip to an area with snow to those living in the desert. Or marketing travel out of a smaller region to those that live in more populated regions.
Psychographic Segmentation: Dividing customers by their lifestyle, values, interests, etc. This will enhance the way you present your marketing [launchnotes.com].
Example: If your customer highly values health then you can adjust how your fitness company shows it’s products to cater to them. Or showcase mindfulness exercises to those that value stress relief.
Behavioral Segmentation: Tracking customers and seeing which purchases they make, how often they visit your website, and engagement with marketing materials to create more individualized experiences.
Example: Make specific offers to certain users or personalize the page of e-commerce clients based on historical browsing experiences.
If you balance your approach with these 4 methods, you can greatly enhance the experience your customers have and build long-term bonds and experiences.
How to Implement Customer Segmentation (Actionable Steps)
Ready? You can segment your consumers even without some complex process!
1. Define Business Vision: What do you seek with the segmentation? Do you desire an increase? or the launching of a specific item? Plan your actions accordingly feedough.com.
2. Data Collection: It helps to keep customer surveys, engagement with marketing materials, and website statistics available. The more data available, the better.
Questions: Do you struggle to use the product? What do you think about our business operations?
3. Data Analytics. Comb through the data with various AI powered tools to figure out which market segments do what, and come to conclusions as a result.
4. Identify Segments. Based on the demographics you have collected, divide the different buyers into distinct groups and find their general preferences. After which you will see the best plan to approach them.
5. Devise Strategies: Build a marketing and advertising strategy for them, accounting for their needs.
6. Test and refine. You need to test all actions since you need to know that they are functional along the way and improve when necessary.
Once there was a subscription box business that I was assisting and our initial idea of their group was flawed. As humans, we tend to not seek help and just operate based on assumptions. We got customer data and found our previous segmentation was based in falsehood! Always give the data priority as opposed to your preconceived notions!
Challenges and Pitfalls of Customer Segmentation
Although quite useful, it can often present a set of problems. It is necessary to know the common hiccups and their fixes to proceed in a way that results are improved.
One of the most rampant issues, is not refreshing or double checking the accuracy of the data! If you don’t do this, you will get incorrect segments and bad marketing as a result.
Oversegmentation hurts too, which means taking something and splitting it up so much that it is essentially negligible. Ensure that you are not subdividing the data so much that you run into this problem!
Customer satisfaction is of the utmost concern since customer privacy laws are a big deal, so be forthright on how you utilize customer data.
AI tools like that of ChatGPT can assist in segmentation and remove much of the obstacles that would occur while segmenting.
7. The Future of Segmentation and Staying Ahead
As AI and technology continues to advance so too will segmentation. Learning this, keeping up to pace is necessary as you go!
There has been a rise in AI segmenting, since computers have come to the place where they have the power to organize information quickly and show human beings where those segments lie and what makes them distinct.
Predictive segmenting attempts to learn the future purchasing habits of clients, segmenting groups of people who are likely to do a variety of actions.
Real time segmenting allows for shifting categories on the fly as one acquires new information.
Keep learning, continue using new methods, and hone your AI practices to get more out of segmentation as you cater to your current consumers.
Conclusion
There much to know to be a master in customer segmenting, but doing it well is a must for any business if they seek to maximize not only potential profit but their audience’s fulfillment as their needs are catered to.
To capitalize on segmenting, the first step is to figure out the data, followed by finding the distinctions with segments. Reach out and ask questions about assisting your consumers so that your business will reach a brand-new horizon!