Your audience expects personalized marketing from you.
They expect it. Research shows that 71% of customers expect businesses send personalized messages to them, while 76% are disappointed when they get generic communications.
What’s the problem? The challenge? It is impossible to reach your audience on the right level if you don’t know their priorities.
Don’t be alarmed if this sounds familiar. Customer segmentation is my solution. Customer segmentation allows you to better target your marketing campaigns by understanding your audience. Let me demonstrate how it works.
What is Customer Segmentation?
Segmentation refers to dividing customers into groups or “segments” based on common traits such as age and buying habits.
To better understand prospects, businesses use customer segmentation models. This allows them to target them with personalized marketing campaigns, including emails and ads.
Customer segmentation goes beyond reaching new audiences more effectively. Segmentation can be used to reconnect with customers who have lost touch and encourage them to buy again by sending them targeted messages.
Every customer is different. Each customer has their own buying habits and reasons to choose you over the competition. A customer segmentation strategy, which is a way to tailor your marketing to each individual, is the best option.
Why is Customer Segmentation Important?
It helps you improve customer service. Understanding your customers’ needs and wants will help you solve their problems.
Does customer service matter? Absolutely. One in five customers will abandon a brand if they have a bad experience with a company, according to research so the more you put into great customer service, the better.
Similarly, segmenting your audience helps build customer loyalty. How? Why? Because personalized messaging is more likely to make customers loyal. This is why 79 percent of consumers believe that personalization makes them more loyal.
What are loyal customers and happy customers alike? Customers who are loyal and happy will be more inclined to shop with you. Segmentation allows you to personalize the shopping experience, which increases conversions.
Are you still skeptical? Studies show that more than 60% of customers will be repeat customers after a personal shopping experience. The stats speak for themselves.
Customer Segmentation Models
Depending on your marketing goals and business needs, you can use different customer segmentation models. Here are seven of the most popular models.
1. Demographic Segmentation Model
Demographic segmentation refers to the division of people into different groups based upon certain demographic factors such as income, marital status, age, and occupation.
Let’s assume your audience is males and females between the ages of 30 and 65. To promote a product, you want to run TikTok campaigns.
- 61% of TikTok users were women.
- 11% of users are older than 50.
You will miss a lot of your target audience if you run only a TikTok campaign. Do some demographic segmentation and you can target Facebook too since 73% of those aged 50-64 use it.
Do you want to give it a try?
- Set your campaign goal.
- You can choose your variables: age, gender, etc.
- Choose your platforms to create personalized marketing campaigns such as email and social media.
- Google Analytics allows you to measure success and make adjustments as necessary.
The Pros and Cons Of Demographic Segmentation
It’s simple to use and allows you to adjust your tone to suit different ages and genders.
What are the main drawbacks? False assumptions can lead to inaccurate conclusions about a segment. Targeting such diverse demographics could cause you to lose your brand voice.
This customer segmentation model should be used in conjunction with other methods. It might be useful to learn about a customer’s purchasing habits, values, and where they live.
2. Geographic Segmentation Model
Geographic segmentation allows you to categorize your audience according to where they live, work, and shop.
This kind of customer segmentation analysis can be done very easily. The only problem? Ironically, it’s simplicity. Geographic segmentation by itself doesn’t tell much about your audience. However, you can combine it with other models from this list to get the most accurate picture.
How to Segment Customers Using Geographic Segmentation
Here are some ways to start with geographic segmentation.
- Determine your segments. Divide people by their climate, culture, language or geographical location.
- To determine the size of your community, gather data such as sales and website data.
- These segments can be used to send targeted messages to customers. For example, you could run paid ads based on where you are located, or, if your product is exclusive to a specific location, send your target audience an email with a promo code.
Case Study by McDonald’s
McDonald’s uses geographic segmentation frequently to reach different markets around the globe. Here’s an example of a McDonald’s Indian burger:
McDonald’s makes products that appeal to its diverse customer base.
I now see another benefit to geographic segmentation: exclusivity. Each item on the McDonald’s menu is unique to each location. This may make it more difficult to find and more valuable which could increase conversions.
3. Psychographic Segmentation
Each person has a unique personality, but there are common traits and characteristics. Psychographic segmentation refers to the formation of groups based upon common traits like hobbies, lifestyle choices and personality traits.
You can use psychographic segmentation to help you understand the psyche of a customer so that you can create highly targeted, relevant campaigns. The main problem is organizing and gathering the data.
How to Use the Psychographic Segmentation
These steps will help you get started with psychographic segmentation
- Identify your ideal customer. Who are you selling to What are they most impressed with your products? This stage might involve some consumer research.
- You can choose your segments such as hobbies or values.
- Find out where your audience is congregating. Reddit hosts over 1.5 billion users every month. 38 percent of Americans listen regularly to podcasts.
- Do some consumer research. You can send surveys or run Instagram polls to find out what your audience wants.
- To determine the best way to target your groups, you must evaluate the data.
Case Study: Patagonia
Patagonia, a brand of outdoor clothing, understands that its customers are concerned about sustainability. Their brand message has made sustainability a central part of Patagonia’s messaging.
You could segment your customers by whether they like to ride or hike, and send targeted campaigns that meet their needs.
4. Technographic Segmentation
Technographic segmentation refers to the classification of people based on their use of software, hardware and devices. This data is important. According to statistics:
- In the United States, 79 percent of smartphone owners purchased items online within the past six months.
- After one bad experience with their mobile phones, 40% of consumers will switch to another company.
- In 2022, tablet purchases are expected to reach $64 billion.
Marketers should be aware of how people access your content. This will allow you to optimize their UX (user experience) and target them more effectively. Technographic segmentation is a great way to do this.
How to Perform Technographic Segregation
This method can be used in a variety of ways, but I recommend this one.
- Get to know your audience. Identify your customers. They will decide which categories you select.
- Choose your segments: To segment technographically, you might use the following criteria: You can group people according to the type of technology they use.
- Collect data:Collect data to segment customers. This could be done by scraping websites or sending surveys.
With this data, it is possible to create your campaigns.
Example of a Technographic Segmentation Campaign
Let’s suppose you own a tech shop. Some customers use Norton 360 to protect their PCs. Avast Security Mac is another option.
Split your marketing campaign according to software. One email is sent to Norton subscribers, offering a discount for their annual subscription. Avast customers receive another email offering the same discount on Avast.
What is the result? The result? Emails that address your audience’s tech needs. This increases your chances of converting.
It’s possible to go further. You could also use analytics to see if your Norton PC customers are interested in mobile antivirus solutions. Send them a code from PCWorld to get a discount.
You can anticipate what your audience wants based on their tech preferences and meet their needs.
This is a great customer segmentation model. No. It has one major drawback: Only one aspect of a buyer’s journey is known about their tech preferences. It’s an important marketing tool to have in your arsenal.
5. Behavioral Segmentation
Do you want to understand how your audience interacts? Try behavioral segmentation.
Behavioral segmentation is the process of grouping people based on their behavior patterns. These patterns will reveal the feelings of your customers about your business, allowing you to determine how to reach them at each stage of their journey.
Like other models, behavioral segmentation is possible at any stage of your marketing strategy. It can be used to update landing pages or send promotional emails.
How to Use Behavior Segmentation
First, determine the behavior patterns you want to track. This can be done in many ways, but one way is to segment customers by their behavior patterns.
- Stage purchase
- Histories of purchase
- Purchase frequency
- Response to marketing campaigns before
Let’s say, for example, that you have customers who are engaged. There are three possible groups that you could have.
- Shop with you every month Active customers shop
- Only a few customers buy products every few weeks.
- Customers who haven’t bought from you in the last year.
The next step is to create three separate marketing campaigns. For example, you might offer loyal customers a discount and for infrequent customers, a discount to lure them back.
Track your analytics once your campaigns have been set up. If your campaigns are not producing the results you desire, you can adjust them and start again.
Netflix and Behavioral Segmentation
Netflix has more than 221 million subscribers and knows how to use behavioral segmentsation to meet customer demand.
- Netflix uses machine learning for tracking what customers are watching.
- Netflix’s algorithms allow them to personalize everything, starting with the homepage and ending with show recommendations.
- Netflix can track the impact of personalized recommendations and personalization features using A/B testing.
However, behavioral segmentation comes with a major drawback: You can always get the algorithms wrong. This disadvantage can be overcome if you keep track of your results and respond to them.
6. Segmentation based on needs
Marketing success often boils down to convincing prospects that your products or services are what they need. This is where needs-based segmentation comes into play.
Segmentation based on needs allows you to group people according to what they want from your product. What benefits they are looking for when they purchase something. They have pain points and problems that they need to solve.
The greatest challenge? The biggest challenge?
Let’s say, for example, that you are a food company. Two potential customers follow you on social networks. One wants fresh chicken and the other vegan food. While you might be selling meat products and non-meat items, the same advertising campaign will not appeal to all.
Maximizing your campaigns can be done by understanding the motivations and needs of groups.
Let’s do a simple comparison. Heck sells non-vegan and gluten-free vegan meat. Because they know that customers love to go to the gym and want high-protein snacks, they started a campaign to sell their meat in local gyms.
They are aware that other customers care less about their fitness and more about a vegan lifestyle so they often create social media posts about meat-free products.
Heck clearly took the time to learn about its customers and their motivations so that it can reach all segments effectively while maintaining a consistent brand voice.
Another example: Beauty store Revolution allows customers to shop by skin concern or by ingredient in order to target their needs directly.
Segmentation Pros & Cons
Do you think this customer segmentation model is right for you now that you know how it works?
There are obvious advantages. Segmentation based on needs allows you to market more accurately than targeting people by their age or geographical location. It is comprehensive and efficient, and could help you to build loyal customer relationships.
The biggest drawback? The main drawbacks? You should also keep in mind that consumer needs change, so your strategy must be reviewed regularly to ensure maximum effectiveness.
How to Perform Needs Based Segmentation
This is the simplest way to do it.
- Your products and services are the first thing you should focus on. Take a look at your products or services from all angles and list their benefits and features.
- These features can be used to create customer personas. You can segment customers based upon their behavior, age, and location if you have the data to do so.
- Reach out to customers to learn their priorities. For example, you might look at customer reviews or send questionnaires.
Once you have enough data, segment your marketing campaigns using these findings. You can track your campaigns and make adjustments as necessary.
7. Segmentation based on Value
You can better direct your marketing efforts if you know how much it costs for a client to lose their business. Segmentation based on value can be a great way to group customers based upon their business’s value.
Why would you group customers in this manner? There are two benefits.
First, you will know who spends the most on your products. This will help you identify which customers you cannot afford to lose. These customers can be provided with great customer service and targeted marketing campaigns.
Second, you can identify the most loyal customers and determine how much it will cost to keep their business. Knowing the relative value of a customer will allow you to decide whether it is worth targeting them with personalized messaging.
But is retention worth the effort? It can cost up to seven times as much to acquire customers than to retain them . So, yes, retention is important.
Here are some ways to segment customers on a value basis.
- Identify your campaign goals. Perhaps you are looking to target your most profitable audience and launch an advertising campaign for high-end products. Or you may want to entice customers to return to your store by offering loyalty discounts.
- Identify your segmentation criteria. You might use the above-described segmentation criteria to value-based market customers.
- Based on your research, determine how you will target customers. This could be done via email, social media or paid ads.
- Analyze your results by asking customers for feedback or running A/B tests.
Value-based segmentation is a great way to quickly identify your most valuable customers and target them more effectively. If you are a young startup, or a small business, it may not be possible to have sufficient data to create this customer model.
Case Study: Global Cruise Company
This is an example of basic value-based segmentation principles being used and how it can be applied to retargeting or conversion.
Merkle, a marketing firm, assisted a global cruise line to develop a value-based marketing strategy for their next campaign.
The company sent the same messages regardless of LTV (lifetime value) to all customers. They wanted to increase revenue by segmenting customers based upon their LTV so they could send targeted ads and emails.
Each customer was assigned a predicted economic value. They could then identify the most loyal and high-value customers to help them nurture through the sales funnel using smaller, more targeted campaigns.
These are the results The results? Five percent of loyal but lapsed customers returned and the purchase cycle was cut by 24 percent. It took only a few personalized messages based on the relative value of each customer to get it all done.
Customer Segmentation Most Frequently Asked Questions
What tools are needed to segment customers?
To segment customers effectively, you will need data. Analytics tools like Google Analytics are a must. Depending on your business goals and budget, you might also consider using dedicated customer segmentation software.
Is customer segmentation worthwhile?
Segmenting customers allows you to learn more about your target audience, and what is important to them. This allows you to create more effective marketing campaigns by focusing on each segment of your larger audience.
Which campaigns is marketing segmentation most effective with?
Segmentation works best when you use personalized ads that target certain people. You can also run multiple smaller campaigns to reach the right audience with highly targeted ads.
What is the purpose of customer segmentation in customer retention?
Customer segmentation ensures your existing customers don’t feel overlooked. To give loyal customers relevant rewards based on loyalty, you can segment them into smaller groups that will help increase customer retention.
Conclusion: Customer Segmentation
Customer segmentation is a great tool for improving your marketing. Segmenting your audience will allow you to learn more about your customers and run more targeted campaigns. This will help you convert more leads into customers.
Consider the following customer segmentation models and decide which one is best for you. My consulting services can provide guidance on choosing the right customer segmentation type for you.
Are you ready to create your customer segmentation strategy? What model do you think works best?
Title: How to Use Customer Segmentation to Improve the Performance of Your Marketing Campaigns
Sourced From: neilpatel.com/blog/customer-segmentation/
Published Date: Tue, 07 Jun 2022 21:20:23 +0000