Every person that makes up your target audience isn’t the same. You need to separate them into groups to make sure you’re giving them the right marketing mix. Without segmentation, it’s incredibly easy for your message to become lost, and this puts your marketing at risk of becoming irrelevant to the majority of the people you’re trying to reach.
This blog answers the question, “what is customer segmentation?” and explains the benefits of dividing your target market into smaller, manageable groups.
Customer segmentation definition
Customer segmentation is the process of dividing your target market into smaller, more manageable groups of consumers based on the common features they share to optimize your sales, marketing, and advertising efforts. Simply put, each segment’s customers have similar characteristics that brands can leverage to improve their efforts.
The purpose of segmentation is to introduce tailored messages that will be received successfully. Customers are divided based on having similar features that cause them to have the same product/service needs. This is especially beneficial for companies that have a product with multiple uses or benefits for different types of users.
Customer segmentation is not the same as buyer personas. While buyer personas describe a brand’s ideal customer, customer segmentation groups these people based on the common features they share to make it easy for brands to reach them with their growth marketing strategies. Segmentation gives companies a narrow target for their marketing efforts and can, therefore, better customize their products and services to meet the target’s preference.
Seven common approaches to customer segmentation
There are many approaches you can take when segmenting your market. We’ll walk you through the 7 main customer segmentation models to get you started.
1. Demographic segmentation
Demographic segmentation divides a target market based on issues such as age, gender, income, education levels, family size, ethnicity and more. This is the most widely used form segmentation because most products cater to specific individual needs related to at least one demographic element. Body wash is a great example of a product that’s segmented based on demographics. Generally, you’ll find body wash for men and body wash for women.
2. Geographic segmentation
Target users are grouped based on pre-defined geographic borders. This type of segmentation may be basic but still very effective since by knowing where their customers live, companies understand their needs better and can target them with location-based ads.
You can define a market by their location such as town, county, or country. You can also classify them based on the climate of their area or the population density.
3. Technographic segmentation
Customers are categorized based on their ownership, usage, and attitudes towards information and communication technologies. These technologies are a defining force and central focus in a wide range of occupations and lifestyles. This information also helps marketers understand the best channels for reaching their customers.
4. Behavior-based segmentation
Behavioral segmentation focuses on your consumer’s specific reactions and how they go about their buying processes. It captures issues such as their attitudes towards a brand, how they interact with it and how knowledgeable they are concerning industry issues.
This information is important because it’s related to how consumers interact with your products. It will empower you to market your products more effectively since you know their behavior.
5. Psychological segmentation
This segmentation deals with the intrinsic traits of your target consumers. Customers are divided based on their values, interests, personality traits, attitude, and lifestyle. Think about the lifestyle of an individual who lives in a big city working in the corporate world versus that of someone who lives in a rural town and manages a farm for a living. These two individuals have different needs on a daily basis, and marketers need to recognize those differences to succeed.
Use focus groups, surveys, interviews, and audience testing to understand your audience at this level.
6. Needs-based segmentation
The target market is divided based on the validated drivers that consumers express for a specific product. Customer needs are discovered and verified through market research.
7. Value-based segmentation
Customers are segmented based on their economic value. Having customers of the same value in the same segment makes it easy to target and market to them.
The benefits of customer segmentation
A customer segmentation strategy helps teams develop highly targeted marketing plans and campaigns. Below, we outline the benefits of defining your target market into cohesive segments.
Understanding who wants to buy your product or service and why
Customer segmentation analysis gives you a clear idea who wants your products and why they need them. With this information, you will know how to differentiate your company and stand out as the best solution for their problems. This will result in better client satisfaction and better performance against the competition.
Creating well-targeted marketing messages
Besides helping you improve your products, customer segmentation will help you create more focused marketing messages customized to each segment. Even if your product features and benefits are the same, you need to target the different customer segments with specific information. The result will be high-quality interest in your products which will bring in more sales and revenue.
One of the customer segmentation examples is that if one of your segments is senior technicians, they may respond better to technical information about an item in the form of infographics or whitepapers. On the other hand, project managers may respond better to information about cost savings and product efficiencies in the form of a blog, video or case study.
Allowing your sales team to focus on qualified leads
By spending more time on your most successful customer segments, your sales team will be able to pursue qualified leads and increase its win percentage. They will target the right segment with the right product and marketing messages, ultimately boosting your revenues.
Getting higher revenues
Any company’s overall objective is to get higher revenues, and customer segmentation is key to achieving this. It will ensure your marketing dollars are invested in the right initiatives to target the right people, resulting in a higher ROI. You will be guided to stay away from the wrong segments and focus on better ones to get you more revenue.
Analyzing your customers at depth will also help you uncover unknown problems they face that your company can solve. This discovery can lead to new commodity lines that can catapult your brand growth and boost your revenue.
Your four-step customer segmentation strategy
To help you identify your best segments, we have broken down the process into 4 clear steps.
1. Understand your customer segmentation
Preparation is crucial to your customer segmentation undertaking. Without it, the whole process lacks direction. Start by defining your market to see where your brand fits within the current landscape. Do consumers have a need for the product you plan to provide? How large is the market? These are some of the important issues you need to consider before you set up your customer segments.
2. Divide your customers into appropriate groups
After studying the market, it’s now time to divide your customers into appropriate groups. Identify the variables that you will use for the segmentation. It could be demographics (statistics that describe a population), geographic (location issues), technographic (technology adoption) or any other segmentation criteria that we have mentioned in this post.
It’s common for brands to use more than one segmentation technique, so don’t feel confined by one method. Play around with each technique till you find the perfect mix for your brand.
3. Find ways to target each of the segments
With your customer segments properly defined, you can start targeting them with the right content and marketing messages. From your market research, you will know what appeals to each segment, and this will guide you as you prepare your product offers and marketing material.
You should also pay attention to the channels that are ideal for reaching each segment. Don’t use the same channels for all your segments since what works for one group may not work with the other. Find the preferred communication channels for each segment and use them to target customers effectively.
Engage a growth marketing agency to discover the best ways to target your audience in each customer segment.
4. Optimize as needed
Once your marketing strategy is in place, implement conversion tracking to determine its effectiveness. If you’re not relating to your customers as you had envisioned, you will need to relook your strategy and optimize as needed. Change what isn’t working and amplify what is to bring more customers on board.
Just remember, success won’t last long if you aren’t testing and optimizing your strategy constantly. To remain competitive, you must always be on top of your game.
Good growth marketing takes skill
Creating an excellent growth marketing strategy doesn’t come easy. Fortunately, with the right tips and tricks, you can get exponential growth for your business from end-to-end. Our guide, What is Growth Marketing? Your Complete Guide to Business Growth, will help you take your marketing to the next level.
We have answered the question, “What is customer segmentation?” to help you understand the importance of dividing your target market into identifiable segments. Customer segmentation isn’t easy. That’s why you should let experts guide through the process.
The growth marketing experts Growth Marketing Genie can segment your audience and craft tailored messages that resonate with the needs and interests of each segment.
Are you ready to take your marketing to the next level? Learn how to create an effective marketing strategy to provide a seamless customer journey across your segments.
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