Honing in on the right marketing strategies to boost sales and expand your brand's reach can feel like a daunting task. It's rife with challenges, and there's no single process or strategy that provides perfect results for every business. However, customer segmentation enables you to narrow your focus so that it's easier to find the right strategy and message for your audience.
What Is Customer Segmentation?
Also known as market segmentation, this is the process of grouping customers based on specific characteristics or variables with the goal of personalizing marketing messages. You can also use the customer journey lifecycle to gain insights on how to divide customers into groups.
The most common factors to consider include:
- Geographic location
- Purchasing behavior
- Psychographic reasoning
- Economic status
For B2B companies, consider the following factors:
- Customer lifetime value (CLV)
Since market segmentation enables you to personalize marketing campaigns, it becomes a valuable tool in customer acquisition and retention. Better ad targeting leads to higher click rates and conversions. Moreover, personalization significantly impacts the purchase decisions of consumers. 78% of customers say they are more likely to buy from a company that sends targeted offers. Review the following best-practices to devise more effective campaigns that are appropriate to your customers.
For more on the different types of customer segmentation models:
Establish a Framework
Before you begin the process of market segmentation, you must first establish a framework that will guide you. Develop your segment hypothesis, identify variables, and validate them with thorough research. Your hypothesis should be clear, logical, and testable so you can use it as the basis for your segmentation. A claim as simple as “customers who belong to the 30-50 age group tend to be a higher value segment” can already help define segmentation variables for a cosmetics brand. Your variables can include the following:
- Demographics (age, gender, education, occupation, income, marital status, etc.)
- Geographic location (country, state, region, climate, market size)
- Behavioral data (Do they browse our items? Do they leave products in the cart? When do they buy our products? What is their thought process? Are they price-sensitive? Do they use coupon codes?)
Utilize Your CRM
If you already have a customer relationship management (CRM) tool, you’re already one step ahead in the market segmentation process. Your CRM data should be full of information on demographics and customer history. You can use this data to create a comprehensive list of your customers and determine who should be part of the analysis. Check if you can filter existing records by age, location, recent purchases, estimated customer lifetime value, or whatever variables you wish to use for your groups.
If you still don’t have a CRM platform, consider getting one. It can become an essential tool in growing your business.
After acquiring and measuring your customer data, analyze the buying behaviors of your consumers. Segregate them based on the parameters you have set, such as age, gender, income, marital status, education, or occupation. You should also consider each group’s thought processes and craft some buyer personas that will help to focus your messaging.
With your buyers in mind, you can modify your range of products and services so they provide greater appeal to those customers — especially the ones in higher-value segments. Analyzing and understanding customer behaviors will enable you to innovate more easily and offer products and services that are sure to entice (translation: boost your revenue).
For more on how to create a behavioral targeting strategy:
Leverage Automation Tools
There are plenty of tools you can use for analytics and marketing automation. For instance, there are free tools like Google Analytics and Shopify Analytics, that help to gain more demographic and behavioral information about your target market. You can also use marketing automation tools to streamline your marketing efforts, like email campaigns, and employ more advanced customer targeting techniques. Companies like AdRoll also enable you to automate nearly every aspect of your advertising campaigns — content management, budget allocation, deployment, tracking and reporting, and optimization —saving you significant time, money, and resources.
With the right tools at your disposal, you can better understand how consumers interact with your brand online. Then, leverage that information to make critical adjustments to your marketing strategies, including special offers, personalized messaging, and proper timing of your communications. For optimal results, look for automation tools that easily integrate with your platforms and channels.
Design Creative Content
Once you segment your customers, design content that will appeal to each group, starting with those in the high-value segments. Put yourself in the shoes of the group you are creating content for, and try to see your brand from their perspective. Be creative, and use eye-catching visuals to grab their attention. Always remember that useful, quality content is defined by what is valuable to your audience. You can also include promotions or discounts that target their preferences and reflect their buying behaviors.
To explore the different types of content you can create:
Do a Test Run and Track Results
Do a test run on the potentially lucrative segments you’ve identified. These segments should form a significant percentage of your customer base. Run the targeted content to your chosen segments, and wait for the campaign period to end.
After the campaign is complete, analyze the results. Check which content was read the most, which emails led to which purchases, which customers opened particular emails, and other patterns formed during the test run. This analysis will provide valuable insights into how to improve your market segmentation plan and sales funnel.
Repeat the Process
The best modern marketers master the art of iteration and refinement. Use the insights you have gained from your test run and apply them to your next test. If your campaign was successful, you might choose to apply the same variables to a different segment of customers. If you determine that there was room for improvement, identify the campaign’s weak spots, and redesign those elements. Then, test your changes.
Perform this refinement process at regular intervals, and be sure to keep your information up to date. Regularly segmenting and testing will help you define the right marketing campaigns for your brand and audience. This will enable you to adapt to changing consumer behavior and keep your business growing.
Customer Segmentation Leads to Better Targeting
Effective customer segmentation can transform your business by making it more relevant and appealing to your customers. When executed well, a stellar segmentation strategy will increase revenue and keep your company ahead of the competition. The key is reaching the right people with the right messaging and continuing to learn from your audience as their preferences evolve. Ultimately, this will help your business save money on marketing costs, build better relationships with your customers, and significantly boost revenue.
Last updated on August 16th, 2022.