Exploring the importance of customer segmentation to growing businesses.
As much as your customers share similar characteristics, they are not a homogenous group that you can just lump together. A point of divergence arrives at a certain point, and it is in this area that their differences start showing.
It’ll be impossible to cater to every customer need, especially on an individual level. If you’re a small to medium-sized business, what you can focus on instead is finding ways to divide your customers into more manageable groups and from there, pinpoint their preferences so you could serve them better.
To do this, marketers employ customer segmentation strategies. What these strategies do is that it helps marketers gain a deeper understanding of their customer groups’ characteristics.
We talked about segmentation as part of the STP Marketing Model as a way of identifying and dividing customers based on their shared characteristics. However, customer segmentation as a whole process on its own runs quite deeper (but still doable). Basically, it’s the process of dividing your customers based on their shared characteristics and turning them into manageable groups.
Customer Segmentation: Why Is It Important?
STP model is important in determining the best type of ad content to release for a certain group. Customer segmentation is equally concerned with evaluating who your prime audience is. Knowing who you’re catering to—their preferences, the desires, expectations, buying behaviours, their triggers, values and beliefs—can expedite the whole sales process for your brand.
Essentially, customer segmentation delves into real data coming in from real pockets of people. Information-driven strategies and campaigns are a lot more effective because it comes from your customers. It pinpoints what your customers hold valuable. What it does is it shifts through the clutter to illustrate your ideal audience better so you could effectively maximise your marketing budget and allocate your resources better.
Segmentation also aids in the creation and communication of marketing messages. It primarily wants to divide the groups so they could talk to them more effectively, using words or targeting value-lidden emotions that resonate with specific groups.
In essence, customer segmentation also segments customers based on their profitability. Once segmented, you can easily see the potentials within each group, and also address the needs of those more reluctant or the “least profitable”.
While demographic data’s important (and the commonly used base), it’s only one part of customer segment marketing; insight must also coalesce from other character bases like geographical, psychographic, and behavioural data.
Ways of Dividing or Segmenting Customers
When dividing customers, you need to think about key differentiators that will separate one from the other. To get you started, here are the four bases of segmentation:
Geographical segmentation refers to the act of dividing your customers based on units such as countries, nations, states, cities, regions, climatic zones, and even their neighbourhoods.
Demographical segmentation means dividing your customers based on measurable variables such as a person’s sex, age, gender, income bracket, educational attainment, marital status, nationality, etc.
Psychographic segmentation relates to lifestyle (how one lives his or her life), personality (personality traits such as intro- or extroversion), and an individual’s attitude and response to certain products.
Behavioral segmentation delves a little deeper about an individual’s perspective and knowledge about the product. It includes insight on perceived benefits, user status, usage rate, readiness to purchase and use product, attitude and especially, loyalty status.
The Process of Customer Segmentation
Another topic that’s closely related to customer segmentation is personalisation. A personalised customer experience is a process of tailor-fitting a certain product or service based on customers’ preferences. Almost 88% of marketers attest to the significant improvements that their business received by employing personalisation. What many marketers don’t understand is that no matter how much they think they know their customers they wouldn’t meet significant returns and make that revenue if they wouldn’t focus on personalisation.
Before we get to that point, however, marketers must remember to polish their customer segmentation processes first.
First, decide on what data you need to collect and how to collect it. You can’t go around any marketing initiatives without capturing and utilising the data you got from your customers and their actions. That’s just grappling in the dark. For a more informed and well-thought out strategies, you need to be data-driven. You should know how to handle both qualitative and quantitative data so you could draw out a more data-driven strategy for your initiatives.
We’ve covered the bases you can explore (demographic, geographic, psychographic, and behavoural), so start determining and filling those portions up before you do anything else. Additionally, this part covers what channels you must explore in order to get the data. You can employ face-to-face interviews, focus groups, data review from industry trends, etc. In digital, in can include data from social media listening, as well as an observation of simple user-actions on your or your competitors’ social media assets.
Next, think about your data analysis methods. The Balance Small Business has an articulate article about data analysis in market research that you could check out here. In this portion, you will need a statistical know-how, as well as knowledge about some of the common data analysis tools available in the market.
The next step is communicating the data to other learned experts within your organisation. Since you don’t work in isolation, you need a way to communicate your data to those who will get your plans closer to implementation. This will include a lot of sit-downs with relevant business units within your organisation or business to get feedback. Additionally, it’s a chance to refine the “edges” of your strategy before you get to actual implementation.
And finally, you must implement your data-driven, customer-backed strategies. Once you have the collected, analysed, and communicated the data to your team, it’s time to synthesise and implement them. It’s time to act on it.