When conducting your marketing efforts, the first thing you need to focus on is customer or user segmentation.
Why? Because it defines all of your future efforts and helps you determine if you are achieving a return on your investment (ROI) and indicates the success of your campaigns.
But first let’s explain what user segmentation is.
What Is User Segmentation?
Segmentation is a kind of division. You divide or categorize your users, customers, buyers, readers…etc into groups. These groups are called segments.
By understanding the different categories of your users, you can then take the next step which is to target them.
How to Use User Segmentation?
People are naturally different, even people in the same age range can act differently or have varying interests.
In other words, it won’t be fair to you or your marketing budget if you target people aged 15 to 60 at the same time.
This also applies if you try targeting males aged 18 to 25 from the Middle East and North America. Yes, their ages are close but their interests are far and wide.
Types of Segmentation
To divide your target audience, you need to understand the types of segmentation you can use.
You can segment your audience based on:
Demographics: This involves dividing users based on their language, age, and gender.
Geographic: This is where you segment customers based on location, whether it’s continent, country, city, or even a specific neighborhood.
Psychographics: The division is based on habits; this is the ‘why’ behind your users’ buying decisions.
Behavior: Here you segment customers based on their behaviors such as how they act and what they do. It’s the ‘what’ behind their decisions. This is section is also known as interests.
Lesser Known Types of User Segmentation
There are three more types of segmentation that are often forgotten or not focused on. They primarily rely on what you as a business offer and to whom.
Firmographic segmentation: This is used in B2B marketing; that’s when your target customers are other businesses.
Cultural segmentation: Understanding your customers’ culture can also help you in your targeting. It offers some insight on how customers of a certain culture make their decisions.
Occasional segmentation: This is a form of seasonal segmentation where certain words, terms, or products appear at certain times of the year versus others.
“This [occasional] segmentation focuses on specific events that are completely independent of the customer. It divides the market into categories based on the various occasions when the customer plans to buy the product, actually buys the product or uses the product,” explainsmarketing strategist Paul Shepherd.
He goes on to say that occasional segmentation can be further sub-divided into:
Regular personal occasions
Rare personal occasions
Understanding Your Users via Segmentation
By segmenting your customers into groups, whether through one or more of the above options, you can begin to create a clear picture of who you are talking to.
According to data compiled by Accenture, around 81% of consumers wish brands understood them better, knew when to approach them and when not to.
Moreover, roughly 66% of marketers “struggle to personalize content in real time,” says Adobe, which adds that 77% of marketers “believe real-time personalization is crucial.”
This means that the better you segment your customers or users, the better you can target them through ads and content.
Creating a Segmentation Strategy
Last but not least, when you’ve understood the various types of segmentation, it’s time to move on to creating your customer segmentation strategy and use it to drive better sales.
Every business, big or small, needs a customer segmentation strategy to better target their customers and increase revenues. Using this strategy, companies will then be able to better understand their customers and their needs.geo
To do that, let’s first define what customer segmentation is.
As its name suggests, customer segmentation means dividing your customers into segments or rather into groups. You define these groups based on factors relevant to your business and its audience.
These segments or groups can be created based on demographics, that is age, country, region or city, gender, level of education, or based on language, or even on interests and personal preferences.
What is a customer segmentation strategy?
This is where you use customer segmentation to form a plan that your business will use and rely on to define your target audience and customers and to generate better results and revenues.
We will take the geographical location option as an example to formulate your customer segmentation strategy.
Broadly speaking, there are 4 main ways to group your customers into segments.
Part of your customer segmentation strategy is to determine which of the following four options you want to use. You can, of course, mix them up to narrow down your target customers. But we will get into that later.
The main types of customer segmentation rely on:
By using a customer segmentation strategy, you are able to define your audience and consequently direct your marketing efforts in the right places. You are also able to understand your customers and their needs, and achieve your business objectives by fulfilling those needs.
Customer segmentation strategy 101
As mentioned, there are four main branches of customer segmentation. Why do you need them? Because when you are creating a strategy, even if your product can be bought by everyone, you cannot target everyone all at once.
So, let’s delve deeper into each of the abovementioned customer segmentation options.
Demographics is a large field but it covers a wide range of options that you can use to divide your target customers. Demographics entail information about customers’ age, gender, race, ethnicity, income, education, marital status, and employment.
According to Instapage.com, by using demographic segmentation, companies “reduce the risk of running campaigns to uninterested consumers, which quickly increases return on investment (ROI).”
Moreover, a Harvard Business study indicates that around 85% of 30,000 new product launches in the United States fail because of poor segmentation.
You may find that one or more of the items on this list is not be feasible for your business and strategy, and that’s ok. You pick the aspects that are in line with your business and use them.
HubSpot best describes psychographics as a kind of demographics. “Psychographic information might be your buyer’s habits, hobbies, spending habits and values. Demographics explain “who” your buyer is, while psychographics explain “why” they buy.”
Like demographics, psychographics involve a list of options and categories, namely: lifestyle, social class, attitude, beliefs, personality traits, activities, and interests.
“Psychographics gives marketers greater leverage in influencing conversions. For example, demographic information might tell you something about a person’s age, but psychographic information will tell you that the person is just starting a family and is in the market for baby products,” explains HubSpot.
Another aspect of your customer segmentation strategy should be geographical location. Here, you can divide your customers based on regions, countries, or narrow it down to cities or even towns depending on what your business does and its target audience.
By understanding where your target customers are, you can zero in on them, address their pain points and offer your solution. With geographical segmentation, you can understand and address your customers’ varying needs based on location, country, or city.
For example, if you want to sell a product to people living in hot countries, you can look at countries in the Gulf region where temperature exceed 40 Celsius in summer.
Another term for geographical segmentation is geomarketing or georargeting
While demographics show who your customers are, psychographics show how they buy, and geography indicates where they are, behavior is about what they do regularly.
How do your customers act? What do they do? How do they take their decisions when buying a product or service?
All of these questions and more are part of your behavioral segmentation strategy. Compile a list of interests and behaviors to decide which target audience or which target buyer persona is the best fit for your product or service.
For example, if you are selling men’s perfumes, you can target the behavior of men who regularly buy perfumes or the women who buy perfumes for their partners or husbands on days like Valentine’s Day.
A bonus to your Customer segmentation strategy
We said there are 4 main branches to segmenting your customers. But what if there’s a fifth?
This fifth option is basically combining the above 4 points. In other words, segmenting your customers based on demographics, psychographics, geography, and behavior all at the same time.
This narrows down your target customers to a great extent. It literally segments them into much smaller groups that you can easily navigate and work with.
Let’s say you have a product that is used by millions of people, these people are not all located in the same place in the same age range, or with the same interests and behaviors. By combining the 4 segmentation branches, you are able to target customers much better and in a more detailed fashion.
Customer segmentation strategy in action
Let’s say your business operates in luxury retail and you want to expand to a new market in the Middle East and North Africa (MENA) region. There are general notes that you have heard and compiled, like the need to target markets in the Gulf region.
But you have also heard that a country like Egypt has 100 million people. So, what do you do?
This is where your customer segmentation strategy comes in, clears the confusion, delivers the data, and helps you implement your expansion plans.
If you are an online business, you can target people who own a BMW or, depending on how luxurious your products are, you might prefer to target people who own a Maserati.
Almost there with your customer segmentation strategy
Now that you know how to segment your customers, there are a few steps that you need to perform as part of your customer segmentation strategy. These are:
Analyze and understand your customers
Create buyer personas
Identify market opportunities
Research other segments and opportunities
First: You need to analyze your target customers and understand them. If you are a brick-and-mortar business, don’t fret, Converted-In’s tools will help you understand your audience and what they like and dislike.
Second: You need to create buyer persona for your business’s ideal customer(s). With analysis ready, the buyer persona will already be clear in your mind. This step will help you decide who you want to attract to your business.
Third: At this stage, you want to look for opportunities based on your customers and segmentation so you can show these customers how your brand or business solves their problems. Ask questions like: ‘What are the ideal customer’s problems?’ ‘How does my brand solve them?’ And once you have your answers, go back to your persona and ask more questions like ‘Which customer segments aren’t getting enough (products)?’ ‘What other segments can I target?’
Fourth: This section is for when you discover new segments in your target market, based on your analysis and opportunities. Is the competition in this potentially new segment? What are they doing? What are they missing?
Fifth: A/B testing. You need to test the data you have uncovered and see how the target audience responds to your marketing, whether online or offline.
Have you filled all the above blanks based on your business data? Now you have a customer segmentation strategy. But it is hard work. That’s why using Converted-In’s consumer analytics tools like in-store metrics and GEO and demographics tools can bring your marketing efforts and customer segmentation strategy together.