“Knowing who your customers are is great but knowing how they behave is even better.” – Jon Miller.
Think about the people around you — your family, friends, colleagues, coaches, and more. Chances are you don’t communicate in the same way with each of them.
You talk with your siblings differently from your colleagues and most likely have a range of methods and expectations when interacting with them.
The same approach works with your customers because they too can be divided into diverse groups of people. Each of these customer segments has different opinions, life experiences, backgrounds, unique traits, needs, pain points, and expectations of your business.
According to a Statista survey, 90% of the consumers in the United States appreciate personalization to some degree.
This means that the cornerstone to building and maintaining successful relationships with customer groups is mastering their preferred communication styles and unique needs. This is also the key to successfully and effectively meeting (and, probably, surpassing) their expectations.
On the whole, working with customer segments can radically help you take your business to the next level. This comprehensive guide will help you explore what customer segments are, and how you can implement them in impactful ways.
What Are Customer Segments?
Customer segments are groups of users classified by similarities and traits that they share such as interests, behavior, demographics, income, geography, etc. These segments are directly related to customer personas that you use to customize your marketing efforts.
Furthermore, segmentation makes it easier for businesses to organize and manage the customer base and effectively target the needs of specific groups. It helps boost customer’s trust and loyalty in your brand, and ultimately, drives conversions. Hence, finding the right customer segments should be a core part of your growth marketing strategy.
This way you get to cater to your audience’s subsets by dividing them into groups and helping you market to specific groups appropriately and effectively.
Why Segment Your Customers?
There are several reasons why customer segmentation is critical to a business. Here are some of the ways it can help your business:
- Get in-depth insights about your customers, which helps you customize your content to their distinctive needs and challenges.
- Design targeted ads and campaigns to resonate with specific segments and convert them.
- Customize the content and boost customer loyalty
- Know your valuable customers on a deeper level
- Understand and prepare for the challenges different segments of customers may encounter and enhance customer support and customer service efforts
- Communicate with different groups via preferred platforms
Identify and leverage potential opportunities for products and services resourcefully, for example, upsell and cross-sell to buyers who are more likely to respond.
4 Types Of Customer Segments
Your customers may have a wedding, a birthday, a special occasion or event coming up, so to reach out to those customers, you’ll need to tweak your communication approach and suggest purchases that interest them.
Understanding customer segmentation starts with the knowledge about the different ways you can categorize your market. There are four primary types of customer segments, as illustrated below.
Demographic segmentation is one of the most common forms of segmentation. It clusters a market by factors such as education, age, income, race, family size, gender, nationality, marital status, religion, occupation, and ethnicity. These elements help you to narrow down your clusters of customers.
The questions such as what products or services customers buy, how they use those products, and how much they wish to spend on the products are related to demographic factors.
As the name suggests, geographic segmentation is a type of segmentation that is when you target buyer groups based on their geographical boundaries. Customers have different needs, interests, and preferences according to their geographic region – country, city, state, or town.
Geographic Segmentation lets you divide your customers by location, which helps determine where to advertise and sell. Also, it enables you to understand the locals’ expectations, culture, and climate of those areas.
Location-specific targeting also allows you to recognize how a market operates in a particular area so that you can relate to the marketing campaigns’ audience as genuinely and naturally as possible.
Behavioral segmentation sorts the market by customers’ decision making and behavioral patterns such as consumption, purchase, usage, and lifestyle. For instance, younger customers may be more inclined towards purchasing a bottled body wash, whereas older buyer groups may prefer soap bars.
Customer segmentation based on buying behavior, allows you to build a more targeted customer approach and focus on what they are more likely to buy. And with 9 in 10 marketers claiming behavioral segmentation as the most effective for businesses, it is imperative for brands to deploy it strategically.
Furthermore, a customer’s past purchase behavior patterns can be indicative of their future buying decisions. It’s also imperative to consider the reasons why a customer goes for a particular product or a service and how those reasons can alter in the upcoming years as their needs and preferences change.
Psychographic customer segmentation considers the psychological attributes of users. It classifies the markets based on consumers’ personality traits, lifestyles, values, interests, and opinions.
For example, if we take the fitness industry, they’ll use psychographic aspects of consumers to analyze and sort their target market to people who are particular about health and wellness.
While psychographics is somewhat similar to demographic segmentation, it centers on the psychological aspects of a consumer. However, it’s the hardest to gauge and extract the psychological data as the customers never readily reveal their preferences.
A psychology-based evaluation helps you appeal to a unique customer base, which plays an upper hand than a product or service’s quality and price of the brand.
How To Craft A Solid Customer Segmentation Strategy?
Now that you know about customer segmentation, why it matters, and the four types of ways to segment your customers. Before you put this knowledge into practice, it is essential to create an effective customer strategy.
When it comes to sort your customers into groups, work through the following segmentation strategy to learn better about your audience, and leverage new opportunities.
Outline Your Customer Segmentation Objectives
It’s crucial to start with determining the customer segmentation strategy’s goals you aim to derive from it and why you want to segment customers. Determine the outcomes that you want to achieve so you can devise the rest of the strategy around those goals, which can help you accomplish them.
Remember, when you develop your customer segmentation goals, there is no one size fits all approach. Your goals will be unique to your targeted audience and business.
For example, your strategy-related defined goals will be distinctive to you and depend on your business’s nature, size, industry, and the type of customers you cater to. Additionally, your goals should be pertinent to cross-team (e.g., sales, marketing, service, etc.) or some specific department.
That way, you can use company specifics traits and needs that can help you determine your customer segmentation goals, prioritize the right segments, and use them as a launching pad.
While demographic segmentation is focused on B2C, B2B marketers tend to classify by organization or company attributes as a whole, also known as firmographic segmentation.
Appropriately Segment Your customers
Once you gain a clear perception of the goals you intend to achieve from your segmentation strategy, decide the approach you’ll take to segment your customers. You can refer to various customer segmentation types and models to define how you’ll do this.
Again, there’s no definite rule or method on how to segment your customers — it entirely depends on the nature of your business, types of customers, and the objectives you want to accomplish.
For example, if you aim to target the audience and boost conversions in a particular region, say West Coast, you can segment the customers geographically.
Target Customer Segments
Now that you have segmented your customers plan on how you’ll target and reach them within your organization. For that, you need to ensure that all departments (e.g., sales, marketing, service, etc.) are aligned on and understand how you segment your customers.
That way, the department’s team members will plan around a similar approach and, ultimately, target the potential and existing customers effectively.
For example, if we refer back to our West Coast example about targeted ads for that region’s customers:
- You can tailor the marketing approach and customize the content to educate, entice, and cater to your West Coast audience’s needs to increase brand awareness and generate leads.
- Through sales and audience analysis, you can identify shared traits of the most valuable customers in that region, i.e., West Coast — as well as the effective ways to reach out to and resonate with them — to drive conversions.
- You can leverage your customer segments to see the challenges encountered by West Coast customers and work on minimizing their concerns.
Evaluate Your Customer Segments
Finally, it is imperative to analyze your customer segmentation efforts to see if you were able to achieve the desired outcomes. That can help you make the required adjustments to the process and strategy if needed.
Furthermore, check with the relevant departments such as sales, marketing, and service, get their opinions on necessary modifications with respect to the segmentation approach. Also, experiment with new techniques and the right BI tools to cluster your customers to decide what works best for you.
Gather your customer’s feedback to segment them into suitable groups effectively. For instance, you can conduct surveys to enhance your behavioral segmentation by inquiring your customers about their product and feature use tendencies/habits.
Naturally, it allows you to organize your customer base more accurately. Additionally, it will help you review the way you segment your customers when you rebrand, update your offerings, or revise the buyer personas. These changes call for restructuring the customer segments.
4 Examples Of Powerful Customer Segments
To scale efficiently and effectively, the brand’s efforts to target the potential customers and reach out to a specific customer subset are critical to acquiring and retaining customers. That’s where customer segmentation comes into play.
There are numerous examples of renowned brands and the variables they consider when targeting different customer segments.
Let’s look at some of the brand’s examples of how they advertise their offerings to customers based on different factors.
Location-Based Segmentation – Nike
While geographic segmentation allows you to target an entire country, some brands prefer to go even more specific focus on cities. Try
One of the brands that came up with such segmenting was Nike’s “Nothing Beats A Londoner” video that did a great job. It addresses football enthusiasts in London with local football stars, key landmarks, and London’s overall life.
The campaign worked pretty well and shot to the top trending chart of YouTube within hours. It also got coverage by national newspapers and was even tweeted by Sadiq Khan, London mayor, while racking up many views along the way.
Psychographic Based Segmentation – Comcast
Comcast, the streaming service giant, created an audacious offer to entice Gen Z: a significant discount to high school students on an appealing plan that consisted of free access to HBO and Amazon Music.
Interestingly, their campaign performed very well as it was perfectly aligned with Gen Z’s interests and lifestyle.
To quote Cheri Davies, a senior executive of acquisition marketing, “Our new gated student offer has taken off.” He added, “an enormous spike in traffic to our site and a significant lift in conversions.”
Gender-Based Segmentation – ONLY
ONLY is one of the brands that mainly caters to women. It focuses and directs all its marketing, products, and imagery for women. Moreover, they target every women-specific demographic and deem that a woman’s age and body have nothing to do with looking stylish.
Income-Based Segmentation – Mercedes
Mercedes, a luxury automobile brand, clusters its customers based on income demographic segmentation. They understand their customer base, who will be up for premium pricing, and target both ranges’ customers quite strategically.
Naturally, high-end automobile brands focus on individuals with high incomes. However, the brands have diversified to target nontraditional segments, too such as, young female customers.
Mercedes-Benz utilized a converged media tactic to acquire the attention of a younger target audience. One of the key influencers in their approach was their collaboration with Casey Niestat, who presented a cool, to some degree, adventurous, authentic image for the brand.
Niestat created many videos for Mercedes-Benz and resonated with the millennials.
There are valuable insights to be gained about your customer’s behavior patterns from appropriate marketing efforts. This includes information on customer demographics and psychographics, which makes it easier to segment them. This is something your business can’t afford to overlook.
An effective customer segmentation strategy coupled with the right platform like Mailmunch lets you automate your marketing campaign in the most impactful way. It also streamlines the segmentation process for you and effectively clusters your customers while generating leads.
Furthermore, Mailmunch enables you to personalize emails to build an engaged customer base. Their robust segmentation tools are all you need to kick off a powerful segmentation strategy.
Let us know how you plan to segment your customers or what the customer segmentation approach works best for you. Please share your views and opinions with us in the comments section below.
Will Cannon is the founder and CEO of UpLead, a B2B sales intelligence platform, and Signaturely, an electronic signature software. Will is an avid SaaS enthusiast who loves creating new B2B opportunities. When he’s not busy optimizing his platform, you can find him enjoying spare time with his kid(s).