As the definition designed by Shopify Customer Segmentation “is the process of dividing customers into groups based on common characteristics so companies can market to each group effectively and appropriately.”
In case of b2b marketing, there are mainly types of market segmentation that are majorly based on the
- Location
- Products previously purchased by company
- The number of employees
- Industry
Whereas in case of b2c marketing, the demographics of Customer Segmentation include:
- The stage of life
- Location
- Marital Status
- Gender
- Age
Why Is Customer Segmentation An Important Business Function?
Customer Segmentation enables the marketers to tailor the marketing efforts in an enhanced way targeting specific audience groups. These efforts encircle around and connect product development and communications that help a company to:
- Design communication plans that will be targeted to the specific audience.
- Create communication messages that are tailor-made for invoking interest of the segmented customers.
- Selecting the most effective channel(s) of communication like emails, radio ads, social media.
- Identifying the ways for improving products or innovating new product/service opportunities.
- Establishing better customer relationships.
- Testing the price options
- Focusing on the most prospective customers
- Improving on customer service
- Cross-selling and up-selling other services and products
- Surfaces or brings forward unexplored/hidden business opportunities
- Enabling business decisions with holistic customer view
- Information on the market trends based on consumer taste
- Assessing the progress of the implemented strategy also highlighting the loopholes
What Are The Methods Of Customer Segmentation?
To start, the process requires company for gathering the information about customers they want to target, following by analysing that data for identifying the patterns for segment creation. Aspects like:
- Purchased Products
- Geography
- Job Title
- Marital status
- Age
- Education
Are few of the criteria.
Methods For Customer Segmentation include
- One-to-one telephonic interviews
- General research based on published market information
- Surveys
- Focus groups
How To Use Customer Segments
The most common aspects for customer segments reflect how the company pitches to an individual. A small initiative (business) like a newly-opened cafe will try to hook customers from younger crowd. So, he prices will be kept low on the menu and the promotional methods will mostly be on the social media. In the case of a comparatively bigger set-up like a specialty restaurant, the target customer segmentation is broadened to working adults from multiple age groups. The advertising method will be more sophisticated and the channels will be many for spreading the word like billboards, glow signs, social media, radio, television etc.
Customer Segmentation can be used in all business, no matter how big the industry is or whether they are online or brick-mortar based. As mentioned earlier- the process starts with data collection (through customer segmentation report) and ends with appropriate planning and usage of the same in the most effective way.
“We needed a new way to understand our customers in a structured, shared manner”
– Source
An Extensive View On 3 Most Popular Customer Segmentation Models
1. Segmentation On The Basis Of Touchpoint
This step requires learning about the customers’s interaction with the business after he or she has made a purchase. The channel can be from anywhere- emails, social media, website, text messages or even apps. The patterns of these interactions give a crystal-ball view of how and where the target customer can be made interested. This analysis is also helpful for the business as it gives a clear picture on the retention details. Even the changing taste and evolving choices of the consumers can be gauged from this step. After you have studied this, create a plan of action on how to trigger the marketing campaigns on the target’s behaviour.
Layer the behaviours of different customers and then you will fetch the data on what they needed in that entire lifecycle. Remember, the more granular figure you get, the chances of effective campaign will increase.
For example: After a week, if your customer does not visit your app or website even for once, you should mark it as a red flag. The key is to keep the interest green and for that there is no better option than segmented email campaigns.
2. Segmentation On The Basis Of Purchase
This process focuses on the sales patterns and not interaction pattern like the previous one. This segmentation helps the business to build profiles. Once you understand what, when and how the customers have made their final calls for purchase, your future marketing models will be productive and effective. You will be able to mark your most frequent buyers, make out purchasers with highest purchase value and also the savers. Chalk out the most striking plans for each group so that they stay motivated to make consistent if not frequent buys.
Once the pattern is figured out in this step, it becomes easier for the company to take them to the next step of providing special offer for the product or service that they need. For example, the frequent coffee buyers will definitely keep coming back to you at least one in every month. With this segmentation, you can definitely give them a tour of your newly brewed flavoured coffees or even cold brew formulas.
3. Segmentation On The Basis Of Customer Goals
Based on the aspects like psychography, geography, behaviour and demography- the customer profiles are created by a business that are centred around the specific customer-goals. Once the database is filled with the profile details, there will be no shortage of data for creating the marketing plan. You can make good use of the customer segmentation tools like demographic tools by LinkedIn Website or Clearbit. The rich profiles you create for customer persona-based segments with the most relevant information shape the use of your product, job title, hobbies or location.
The onsite tracking tool of LinkedIn favours mainly the b2b companies to get the desired and relevant information of the job as well as industry seniority.
You can create the segments with different use cases as well as personas and use them as layers for the segmentation strategy. If you take advantage of this segment properly- you can resonate more with the customers more.
Graphical Representation On How To Validate These Models Further
Image: Source
Remember, IT IS ALWAYS A TEAM SPORT!!!
The process of segmenting customers is effective only when the endeavour is cross-functional from the very 1st step. The entire success of the process is solely dependent on the functioning of sales, marketing, analytics, products, and finance, buy-in and content teams. Since different customers have different needs, all of them can be met with the joint effort and unparalleled planning-service of these teams.
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