How to Create Customer Segmentation -

Gaining insight into your customers is vital for success. This insight empowers you to craft messages and offers that truly connect with your audience, as opposed to relying on guesswork about their preferences and requirements.

Table of Contents

In this guide to customer segmentation, we’ll explore the concept of customer segmentation, talk about its importance, delve into diverse types and strategies that can be employed to create results-driven customer segments.

What is Customer Segmentation?

Customer segmentation entails categorising current and prospective customers according to common attributes. By dividing customers into distinct categories, you can gain deeper insights into their requirements, preferences, and purchasing behaviours. This enables you to effectively engage with your customers. The outcome of these targeted campaigns and initiatives is an enhancement of customer loyalty and interactions.

Importance of Customer Segmentation

Utilising customer segmentation provides a deeper understanding of your customers, refines your marketing and sales strategies, prioritises investment in specific customer groups, and enhances your overall marketing approaches. Here are the key reasons to consider implementing customer segmentation for your business:

Strengthened customer relationships and brand loyalty

Customer segmentation allows you to tailor your marketing messages and communication channels precisely to each customer’s preferences. It uncovers insights into customers’ interests, spending behaviours, budgets, and more. By engaging with customers based on these insights, you convey care and foster increased purchases. Consistent engagement is also a sure way to nurture loyalty, encouraging repeat purchases from customers.

Improved customer experience and sales

Through customer segmentation, you can ascertain when and why customers require certain products or services, enabling more personalised deliveries. For instance, refining marketing messages results in higher purchases as customers receive relevant ads or promotions. Responding effectively to changing seasons and needs leads to improved professional services, customer support, and product offerings.

These actions drive increased sales by addressing specific needs, making your business more sought after. Directing marketing efforts at targeted customer groups is great way to save resources, thereby boosting revenues.

Types of Customer Segmentation

There exist various forms of customer segmentation that your business can employ, each with its own set of variables that require consideration during the segmentation process.

Demographic Segmentation

Demographic segmentation involves grouping customers based on shared characteristics such as gender, age, marital status, educational background, occupation, household income, and location.

Gender: It’s important to have an inclusive segment with a variety of categorisation options to ensure all genders are considered in order to create a comfortable environment for customers.
Age: This segmentation helps identify customers’ probable budgets and their favoured products.
Marital status: You can divide this into categories like “married,” “in a relationship,” and “single.”
Occupation: Segmenting customers based on their occupations provides insights into their income, spending patterns, interests, and availability.

Geographic Segmentation

Geographic segmentation involves categorising your customers based on their location, language, and transportation preferences. Location can encompass a neighbourhood, city, country, or region. Additionally, consider their preferred mode of transportation.

Preferred language: Understanding your customers’ preferred languages enables more effective communication. For instance, if your business operates in the United States, you might use English and Spanish to cater to different language preferences.
Location: Being aware of your customers’ locations and how to reach them is crucial for tailoring your marketing strategy. Your approach to residents of Los Angeles should differ from that for customers in Alabama.
Transportation: Knowing how customers commute can also enhance your marketing and sales efforts. For instance, if customers predominantly use trains or buses for transportation, you can employ out-of-home advertising on trains, billboards, and subway stations

Psychographic Segmentation

This type of segmentation is centred around the inherent attributes of the customer. Elements of psychographic segmentation can include:

Interests: These encompass customers’ preferences for activities, hobbies, sports, pets, and more. By identifying these interests, you can tailor your advertisements to align with their areas of passion or collaborate with relevant organisations. For instance, if a customer enjoys spending time with seniors, you could initiate a cross-promotional campaign with a seniors’ home.
Values: Customer values can be obtained from surveys or individual interviews. Subsequently, you can focus on refining your product or service to address their specific needs based on these values.
Personality traits: Another segmentation approach involves categorising customers according to their personality traits. This enables you to market to them in a way that resonates and garners a more responsive reaction.

Behavioural Segmentation

Behavioural segmentation involves analysing customer buying history, their response to marketing campaigns, and their patterns of product or feature usage to group them accordingly.

Website interaction: To ascertain this, it’s necessary to monitor your customers’ activities on your website, including the pages or elements they engage with most during their visits.
E-commerce behaviour: This pertains to observing their actions when they navigate your online store. This could be based on the items they’ve purchased or those they’ve browsed but haven’t yet bought—such as items left in their abandoned carts.
Purchase frequency: The value of a customer to your business increases with the frequency of their purchases. Hence, you should assess their value and consider offering exclusive incentives to those who make consistent or recurring purchases.
Recent engagement: Understanding a customer’s most recent interactions with your business can guide your subsequent actions. You might choose to reward positive interactions with promotions, while addressing negative experiences, like returns or negative reviews, through improved customer service efforts.

Technographic Segmentation

This type of segmentation involves segmenting customers with respect to the technological tools they frequently use for daily interactions. Elements of technographic segmentation can include:

Device category: You can categorise customers according to the specific type of device they use for interacting with your website, such as smartphones, tablets, or computers. Understanding this will help you tailor your approach. For instance, if a major number of your customers access your site on their phones, it’s important to consider developing a mobile app and ensuring your website is mobile-responsive.
Browser preference: Customers employ various browser options, including Google Chrome, Mozilla Firefox, and Safari. By identifying the browser apps used by customers to interact with your website, you can refine your website design to natively fit the layouts of the browsers. You will need to test your content to ensure it displays correctly across these different browsers.
Initial source: Customers can come across your business through social media, search engines, or even referrals from other customers or websites. Knowing how they initially discover your brand enables you to optimise the conversion journey.

How to Segment Customers

The best way to effectively segment your customers is by understanding the basic principles of customer segmentation and approaching them methodically. This can establish your business for successful conversions and sales. Here are the essential tactics necessary for a productive customer segmentation process:

Define Your Objectives and Variables for Customer Segmentation

To ensure that you gather the necessary data for delivering optimal customer experiences, you must initially identify the kind of customer segmentation that aligns with your business objectives. For instance, if you intend to introduce a new product or feature, or broaden your market reach, you can consider employing psychographic, needs-based, or technographic segmentation.

Afterwards, assess each segmentation approach to pinpoint the specific aspects that require your focus. Although this might seem trivial, it can significantly impact the content of your messages to different customer segments and influence the outcomes of your marketing endeavours.

Establish Individual Customer Segmentation Initiatives

After gaining a comprehensive understanding of the required customer segmentation categories, proceed to establish your initiatives. A straightforward method involves arranging the segments and commencing with the most sizable one. Once the sequence is established, proceed with initiating the projects.

Define a purpose: For every customer segmentation project, it’s crucial to establish a clear goal. You can employ the SMART (Specific, Measurable, Attainable, Relevant, Time-bound) framework to outline your objective and address inquiries related to aspects such as segment demand, project duration, anticipated completion time, deadlines, and methods for evaluating success.
Establish the project’s extent: To prevent any potential overlaps or ambiguity in the future, clearly outline the scope of each project from the beginning. Establish objectives for components like data sources, resources, and budget.
Outline the project outcomes: The concluding step in project initiation involves outlining the projected achievements. These can include segment profiles, well-defined segment scopes, process outlines, and workflow wireframes.

Gather and Arrange Customer Information

Acquiring data like job roles and product purchases from straightforward transactions is simple. However, obtaining details such as age and marital status may require intentional effort from your end. Fortunately, there are various methods to collect data from customers, some direct and others indirect, derived from data analysis.

Questionnaires: Utilise surveys, including post-purchase surveys, in-store surveys, and product satisfaction surveys, to extract candid information from customers by posing specific questions. These surveys can equip you with insights into customer thoughts and behaviours necessary for refining your products or services. Make sure to clarify the purpose of the questions and ask only those directly linked to the survey’s goal, using terms and language that resonate with each customer. Additionally, allow them to provide open-ended responses when provided answers might not fully capture their feedback.
Analytics tools: Employ omnichannel analytics tools to comb through various social platforms. These tools will uncover customer conversations about your company and identify the platforms where these discussions transpire.
Social listening: Social media platforms are rich sources of customer data. This is why it important for you to curate data on customer feedback, mentions, or discussions related to your brand. You can proceed to conducting an analysis of the obtained social media data to extract valuable insights that can guide customer-oriented business endeavours.

Categorise Your Customers into Groups

Once you’ve collected the necessary customer information, begin constructing your segments. To achieve optimal outcomes, approach this pivotal phase with key principles in mind.

Ensure Segments are Accessible: Align each customer segment with the appropriate marketing and sales channels. For instance, to engage Gen Z customers, your marketing strategy should focus on platforms like TikTok, Instagram, or Twitter, rather than Facebook.
Incorporate Loyal Customers: Don’t overlook your existing customers in your pursuit of new ones. Concentrate on enhancing interactions with them to boost their frequency of purchases.
Prioritise User-Friendly Segments: Ensure that your team members find it easy to work with customer segments. Make use of clear language that resonates with them, and organise the sections in a structured and navigable manner.

Engage Your Customer Segments Effectively

The work doesn’t end at categorising your customers into segments; leveraging these segments is crucial. This involves devising strategies for each segment and ensuring your interactions with them are tailored to their needs.

For optimal results, it’s imperative to develop distinct strategies for each segment. With your customer segment, you can use the insights to identify the kind of content, products, or features that will resonate most with them. Generate targeted content that encourages their engagement and formulate a plan to deliver it to them. Additionally, determine the optimal timing for content distribution.

Furthermore, customise your emails and design more meaningful landing pages. These measures will convey to your customers that you comprehend their needs, value their patronage, and are dedicated to resolving their concerns promptly.

Conduct Routine Customer Segmentation Evaluations

Given the ever-evolving nature of business, it’s essential to periodically assess your customer segmentation strategy. This process verifies the continued relevance and effectiveness of your segments in achieving your objectives.

Conclusion

By understanding the diverse facets of customer segmentation, from demographics to behaviour, businesses gain a can navigate the complexity of the market. Customer segmentation fosters a bridge between brands and their audiences.