Here's how to segment your customers and place them in the right audience
Customer segmentation is an effective way to ensure that your products, services and marketing materials meet your customers' expectations.
There are many ways to segment your customers. Knowing which type of customer segmentation to use helps refine your message and target customers more accurately.
In this blog, we'll give you our definition of customer segmentation, cover seven types of market segmentation, show you how to use them effectively and let you see that you can reach the right target groups even with cold acquisition.
Customer segmentation is the process of classifying your customers based on shared characteristics. It allows you to target each group with messages specifically tailored to their interests, needs and preferences.
When segmenting an audience, you can use the following parameters:
- Demographic data - age, gender and occupation
- Location - local infrastructure, retailers and climate patterns
- Economic and social factors - income and stage of life
- Behavioral preferences - interests, hobbies and work
- Technology preferences - the platforms and devices a customer uses
For example, imagine a company that sells athletic shoes. They analyze their customer data and discover that they have two main groups of customers:
Gen Z, young people who need athletic shoes for exercise and people who discover around age 45 that they enjoy hiking and want supportive outdoor shoes.
Instead of creating broad marketing campaigns, it is better for the company to tailor the message to each group based on their common characteristics.
You can expand segmentation further and form subgroups. For example, you could split the second group into young families and individual hikers, and then tailor campaigns separately to each subgroup (for example, target the family group with ads for children's hiking boots).
Why is market segmentation so important?
Segmentation allows marketing and sales teams to target groups of customers who are interested in the same products. It also helps companies understand their ideal customers and generate marketing messages that resonate.
Here are a few benefits of segmentation:
Increase marketing and sales performance:
Segmentation identifies the most relevant customer groups. It allows you to customize your messages, product offers and sales strategies to fit that audience and increase the likelihood of converting potential customers.
Increase in customer engagement: Personalized messages make much more of an impact on your customers. This means they are more likely to open your emails, respond to your social media posts or follow your calls to action (CTAs).
Get a competitive advantage: Market segmentation helps you discover niche or underserved segments so you know which new products to create and which new markets to enter.
Product development improvement: Segmentation helps you determine customer pain points and the needs and preferences of different customer segments. You can improve existing products by understanding your customers' unique needs and preferences.
In short, by segmenting your customers, you can personalize your interactions. A tailored approach like this impresses customers and helps you stand out in a competitive marketplace.
7 Key Models for Customer Segmentation (with Examples)
There are several ways to segment your customers. Below we explain seven key methods for market segmentation.
You can use a combination of these segmentation techniques for different purposes.
For example, you can use one form of segmentation for your general email marketing and another for a specific product launch or email campaign.
Demographic segmentation divides a target market into smaller groups based on factors such as age, gender, income, religion, marital status, stage of life and occupation.
For example, a shoe company may discover that young runners between the ages of 18 and 25 are interested in trendy designs and new technologies, while older runners value cushioning and support more. Female runners may prefer shoes with a narrower fit or specific colors.
By segmenting the market based on demographics, the company can tailor creative content marketing to the needs and preferences of each group.
Behavioral Segmentation in the automotive industry takes into account how often customers use their vehicles, their brand loyalty, buying habits and how their behavior varies on different occasions. Customers who drive frequently are approached with messages about durability and comfort, while sporadic users are more interested in affordability. Understanding these behavior patterns enables companies to develop targeted marketing campaigns and offer products and services that meet the specific needs of each segment.
Geographic segmentation distributes customers based on location, climate, proximity to key locations and population density. It allows companies to target their marketing to specific areas, taking into account local needs and cultural differences.
For example, a company selling ski equipment can target customers in ski-popular regions with customized offers. Similarly, marketing for mountain bikes can be concentrated in mountainous areas for maximum effectiveness. Population density determines where marketing efforts will be most effective.
Seasonal segmentation, such as summer season discounts for a ski business, helps generate revenue during the off-season. This approach is especially useful for businesses with physical stores, where location plays a crucial role in attracting customers.
Psychographic segmentation divides customers based on lifestyle, values, attitudes and interests. For example, an outdoor adventure store may target active customers for hiking and camping products.
Values and attitudes come into play; customers who make environmentally conscious choices can be addressed with an emphasis on sustainable products.
Personality traits, such as thrill seekers or nature lovers, and interests such as water sports, also influence purchasing decisions.
Psychographic segmentation helps create customized ads that resonate with customer values and increases the likelihood of attention.
In-depth analysis of psychographic data helps understand customers at a deeper level. Detailed personas lead to more effective communication and increased customer engagement.
Technographic segmentation Analyzes how technology affects customer behavior, essential for Tech companies but useful in all industries.
Factors such as device usage and online behavior reveal potential customers open to new technologies.
A company selling smart home automation can use technographic segmentation to find customers who use their devices heavily. This data helps create targeted ads and improves the customer experience on digital platforms.
Firmographic segmentation focuses on industry, company size, location and revenue. For B2B companies, this is crucial because customer needs vary by company.
Example with a CRM software company:
- Industry: Different industries have different requirements and regulations. A CRM provider can develop specific functions for industries such as healthcare and offer them to hospitals and clinics.
- Company size: Large and small businesses have varying needs and budgets. Customizable pricing plans and support options can be provided, along with features such as interdepartmental collaboration for large businesses.
- Location: Cultural practices and local regulations play a role. Companies should target specific regions and countries, taking into account language preferences in international marketing.
- Financial factors: Recurring revenue and financial considerations help allocate budgets. Premium services can be offered to high-turnover companies, such as 24/7 telephone support.
Firm-wide segmentation helps B2B companies prioritize email marketing and product development, which increases conversions.
Transactional segmentation divides customers into groups based on their value to a company. This helps target customers with higher lifetime value, a crucial measure of sales performance.
- Purchase frequency: Separate regular buyers from occasional customers. Companies can offer exclusive discounts, recommendations or loyalty programs to encourage repeat purchases.
- Average order value: In addition to frequency, value per purchase is essential. Customers who make large purchases annually are more valuable than frequent small purchases.
- Acquisition history: Analyze buying habits to understand specific preferences. Group customers with similar preferences for targeted marketing.
Transactional segmentation is crucial for customer retention and helps account managers prioritize key accounts.
Final thoughts
Customer segmentation is powerful for refining marketing strategies and increasing sales. To use it effectively, it is advisable to utilize various models. Through continuous research, you will better understand your target audiences, optimize marketing efforts and allow your business to flourish. Proper segmentation also allows you to reach the right target groups through various sales channels, including cold acquisition! Keep exploring and invest in strategies that produce the best results.
