Everything About Customer Segmentation

Types of customer segmentation

There are various approaches to customer segmentation. It is possible to limit customer groups to their identity and activity, or increase their specificity by including more detailed segments, with each type having finer factors. Examples of customer segmentation may involve the ensuing subsets:

The demographic category comprises of elements like religion, age, ethnicity, education level, family size, race, and income.

• Gender: Ensure that this segment is inclusive, with plenty of categorization choices, so you can capture every gender and make customers comfortable.
• Age: This category will direct you to customers’ likely budgets and their most preferred products.
• Marital status: You can segment this as “married,” “in a relationship” and “without a spouse.”
• Occupation: Segmenting customers according to their occupation will give you an idea of customer income and budgets and their interests and availability.

Geography pertains to the locations of nations, regions, urban areas and villages.

• Preferred language: Knowing this about your customers will help you to communicate better with them. For example, you can use English and Español in a business you run within the United States.
• Location: Knowing where your customers are and how to find them will aid your marketing approach. Your marketing approach to New York residents should be different from your Alabama customers.
• Transportation: Knowing how customers commute will also enhance your marketing and sales. For example, you can use out-of-home advertising on trains, billboards and subway stations if your customers use the train or buses more for transportation.

Psychographics comprises of factors such as personality traits, interests, lifestyle, social status, and values.

• Interests: These are the things, such as sports, games, pets and activities, that customers enjoy. You can, thus, direct your ads towards their areas of interest or collaborate with relevant institutions. For example, you can run a cross-promotional campaign with a seniors’ home if a customer loves spending time with seniors.
• Values: You can determine customer values from surveys or one-to-one interviews. Then, pay attention to fine-tuning your product or service to meet their specific needs.
• Personality traits: You can also segment customers based on their personality traits. Doing this will help you market to them in a way they can better relate to and respond.

Behavioral pertains to inclinations, routines, expenditure, utilization of products, and preferred advantages.

• Website activity: To determine this, you will need to track the activities of your customers, such as the elements or pages they interact with the most whenever they visit your website.
• E-commerce activity: Here, you’re monitoring their actions when visiting your online store. It may be based on the products they’ve purchased or the ones they’ve seen but are yet to purchase—their abandoned carts.
• Frequency of purchases: The more purchases a customer makes, the more valuable they are to your business. So you’ll need to determine customer value and consider rewarding customers who have made regular or repeated purchases with exclusive offers.
• Recent customer engagement: Insight into a customer’s most recent interaction with your business will guide you on what to do next with them. You can reward a positive reaction with promotions or have your customer service team work on strengthening the relationship with a customer whose recent interaction with your business was negative, such as returning an item or dropping a negative review.

Technographic encompasses the utilization of mobile devices, personal computers, software, and applications.

• Device type: You can divide customers based on the specific type of device they use to interact with your website, which can be a phone, tablet or computer. Knowing this will direct your focus. For example, if most of your customers visit from their phones, you need to consider introducing a mobile app and ensuring that your site is mobile-responsive.
• Browser type: Customers use various browser types, including Google Chrome, Mozilla Firefox and Safari. Find out the ones your customers use to better drive your site layout. You might need to test your content to ensure that they display properly on these browsers.
• Original source: Customers can find you via social media, search engines or even referrals from other customers or websites. You need to know how they discover you so you can optimize the conversion path.

The requirement of the customers must be kept in mind when offering a product or service to diverse customer groups. The selection of segments may differ according to the organization’s size and industry, thus requiring different approaches to segmentation.

• Product features: Some customers have certain requirements or buy your products because of specific features they have or needs that they help them fulfill. Find out what these features are, so you can keep your products as inclusive as possible.
• Service needs: For some, it is in how you interact with them, such as your smooth onboarding process, effective customer service or prompt deliveries.
• Delivery method: Customers have specific needs, such as how and when you deliver their products. You need to categorize individuals according to their specific shipping needs.

Customer segmentation procedures

To pursue customer segmentation, organizations can utilize the subsequent methods.

• Decide what data to collect and how to gather it. Segment data is collected through either direct or indirect methods. Direct collection involves customer surveys, while indirect methods are insights gained from data that isn’t directly obtained but can still aid in understanding potential customers, such as through social listening. Customers can also be segmented using predictive factors.
• Develop methods of data analysis for segmentation. Methods of segmentation should focus primarily on a customer’s experience as opposed to only demographic factors.
• Establish effective communication among relevant business units about the segmentation. Customer segments should be organized by buying characteristics. Certain business units, such as customer service or marketing, should also avoid having a narrow initial focus.
• Implement applications to effectively deal with the data and respond to the information it provides. An organization should be able to adhere to the new segments effectively while leaving room to broaden or narrow segments over time.

Benefits of customer segmentation

The benefits of customer segmentation are as follows:

• Efficient use of marketing resources. By enabling companies to target groups of customers, a customer segmentation model provides for the effective allocation of marketing resources and the maximization of cross- and up-selling opportunities.
• More accurate deal offerings. When customers groups are sent personalized messages as part of a marketing mix that’s designed around their needs, it’s easier for companies to send those customers special offers meant to encourage them to buy more products.
• Improved customer loyalty and retention. Customer service, loyalty and retention are improved as a byproduct of customer segmentation’s personalized nature. For example, marketing materials sent out using customer segmentation tend to be more valued and appreciated by customers who receive them, as opposed to impersonal brand messaging that doesn’t acknowledge purchase history or any kind of customer relationship.
• Competition. Customer segmentation also enables a business to stay a step ahead of competitors in specific sections of the market by identifying new or existing products that potential customers could be interested in or by improving products to meet customer expectations.

Companies not only aim to classify their customers into quantifiable divisions based on their requirements, actions, or characteristics but also endeavor to evaluate the economic benefits of each group by scrutinizing its income and expenditure outcomes.

Segmentation based on values assesses various customer groups in relation to their revenue generation and the expenses involved in initiating and sustaining connections with them. In addition, it enables businesses to identify the most and least lucrative segments so they can modify their marketing expenditure correspondingly.

The management of customers can be significantly impacted by customer segmentation as it allows for the classification of customers into groups which possess similar requirements. Consequently, a company can tailor its marketing approach to suit the needs of each group and concentrate on their specific necessities at any given time. Based on the company’s resources or demands, it can direct its marketing efforts towards either small or large, specialized customer segments.

Companies engaged in B2B marketing focus on specific factors such as decision-makers’ job titles, the industry sector, whether the company is public or private, company size and location, as well as buying patterns and the technology available to them.

When it comes to marketing to individual consumers, businesses focus on their profiles, attitudes, lifestyles, and potentially even their geographic location. By segmenting customers by region, B2C companies can adapt their promotions to align with relevant events and preferences. Additionally, B2C companies can personalize their offers further by considering the primary language spoken in each area.

There are two main options for B2B customer segmentation: vertical and horizontal alignments. Vertical segmentation involves identifying industries or job positions that are likely to be interested in the company’s products and targeting marketing efforts towards those who are most likely to make a purchase.

Vertical segmentation offers the advantage of allowing companies to provide industry-specific services. For instance, the financial services and healthcare industries have distinct requirements. If tailored services were provided to each segment, it could lead to higher rates of adoption and satisfaction.

Horizontal segmentation involves concentrating on a single job title across various industries and organizations. This approach provides the advantage of enhanced attention to the requirements of specific job titles or roles. For instance, directing efforts toward chief financial officers facilitates the creation of product collateral, website messaging, and email newsletters that are customized to their role.

Customer segmentation tools