Marketing is all about precision, especially when it comes to defining the right type of customer to target. Wild guesses don’t have room in the industry-wasted fund and energies make businesses lose a lot of dollars, and deals, and create an undefined path towards reaching your return on investment (ROI).
No one can sell to the whole world, but smart companies know who they can sell to. To be effective marketers who give customers the best value and experience, you should be able to break down your target audiences into segments where you think you can sell your products and services. You also need to find people who would want to be brand ambassadors and loyal customers.
Every business’ success depends on you, as a marketer, on how good you are at meeting your customers’ desires and needs. Knowing who your customers are, what they want, what they can afford, and where they live will enable you to assess if you’re actually meeting their needs and desires.
Your company can achieve improved ROI, better ads and content engagement, and more efficient campaigns when you’re able to target your efforts to the right people in the right way. The best way to do this is through Customer Segmentation.
What is customer segmentation?
Customer segmentation refers to the process where you divide or classify your customers into segments based on common characteristics, like behaviors and demographics, so you can market to them more efficiently.
This approach is utilized by both Business-to-Business (B2B) and Business-to-Consumer (B2C) marketing. B2B customer segments are typically based on demographics, needs, lifestyles, and values. B2C marketers, on the other hand, divide their customers according to payment, industry, location, or the particular products a company purchased recently.
Generally, customer segmentation is divided into 6 types:
Think of demographics as a picture of individual customers based on their personal traits and lifestyle. This segmentation classifies the customer market according to age, gender, occupation, marital status, ethnicity, family size, and religion.
Customers from different locations have different needs, so knowing “where” they are is important especially when geography matters to your business. This type of segmentation groups the customers in terms of locality, city, state, country, landscape (rural or urban location), population density, climate, and regional diet/ food preferences.
This type of segmentation focus on the customers’ actions, habits, and unspoken cues. To better understand their behaviors, you can classify them according to the history, frequency, and time spent in interactions, their preferred time of the day, and product or feature use.
Psychographic segmentation delves more into the personality’s subjective area, making it harder to apply compared to other segmentation data. Nevertheless, it’s still very valuable. In this type of segmentation, customer markets are divided into beliefs, values, personal traits, interests, opinions, and attitudes.
Educating your customers can take place in more than one way, and one way to reach them is to know what technology they prefer to use. This segmentation classifies the customer market on the basis of software and hardware, apps, device preferences, browser data, mobile usage, and connection speed.
Firmographic Segmentation (specific to B2B companies)
Firmographics are like demographics for businesses. Segmenting your customers using this category gives you some very basic but extremely valuable information about the company, what they do, and what its goals are so you can personalize your customers’ B2B experience. Some characteristics you can segment your customers are industry, revenue, organization structure, number of employees, and growth.
Customer segmentation, as a rule, is used to inform a brand’s positioning and messaging, and to improve the way a business sells. Function-wise, these customer segmentation groups mentioned above can be used as the basis for discussions in building marketing personas. For marketing personas to be effective, they must be closely aligned with customer segments.
For businesses: Identify New Target Audiences through Customer Segmentation
Your entire marketing strategy’s tone, including how you develop and label your products/services and the marketing channels you use to promote them, depends on your target market.
When you’re in a business, you serve a particular segment of the population. When businessmen are asked who their target market is, some may say “ everyone. However, that’s not always the case.
Your main goal as a marketer is to narrow your focus while widening your reach. This is easier to achieve when you’re able to identify and understand a smaller and relevant niche that’s easy to dominate. Hence, the importance of customer segmentation comes in.
When it comes to B2B lead generation, finding new leads, and prospects, customer segmentation plays an important role in identifying the kind of people you see as your ideal customers. It’s also crucial in establishing whether the market is enough for your products or services. The goal of segmentation is to be able to send out tailored and pertinent marketing messages to each grouping and get good and qualified leads from them.
The trick is quite simple: Draw in your mind a clear picture of the company or the individual that characterizes the type you’re targeting. Taking two very different prospect types, you’ll see that they have very unique wants, needs, opinions, and values. You’ll also notice that they’ll respond differently depending on what marketing method you use.
Defining target audiences, especially new ones, isn’t an easy job for any business. Here are some steps on how businesses can identify new target customers through customer segmentation.
1. Surveying your current customer base
Although underrated, surveys provide valuable data you can use in defining and reaching your target audience. That is, as long as you ask the right questions and keep your questionnaire short. Your customers are busy people so make your survey worth their time.
The average market research survey, according to a SurveyMonkey study, has approximately 13 questions, while all other surveys have 4 to 14 questions.
Be more succinct while asking more probing inquiries. Fill-in-the-blank questions are more preferred since they encourage the respondents to give more insights, compared to true or false/scale style questions.
Here are some questions you can ask:
- What [your niche]-related issue[s] are you most frustrated with?
- Which price range do you prefer for [product] with [list of features]?
- Which social media platforms do you use the most?
- Do you have any urgent inquiries about [niche]?
You can use the responses to these questions to build buyer personas and create emails, landing pages, and other marketing assets.
2. Interacting with your audience
A good content marketing strategy doesn’t only focus on driving website traffic, it also opens up topics for discussion. Interacting with your audience doesn’t always mean that you’re going to answer every question. You can give connect and let your audience know you’re listening.
Paying attention to your audience’s questions, criticisms, anecdotes, and comments can give you a view of what they need, want, and think.
3. Turning frustrations into motivations
After surveying your audience and engaging with them in conversations, be alert for pain points and objections. Find out what issues your audiences and followers are facing. By listing them down, you can refer to them as your business changes.
4. Knowing who isn’t your target audience
As much as you are getting good at identifying your target audience, you should also know who to weed out. This skill is useful especially when you’re advertising via social or search.
Excluding potential customers who don’t align with your target audience’s description saves your time and attention.
5. Keeping tabs on your competitors
Copying your competitors can lead to a disaster, while keeping tabs on your closest ones may give you an edge especially when you’re aiming to refine your target audience.
Find out what they are NOT doing on their landing pages, home pages, product descriptions, and squeeze pages so you can give your target audience something they might be looking for.
Benefits of Customer Segmentation in a Business
Here’s how customer segmentation can tangibly impact your business’ operating results:
It enables fine-tuning of marketing messages
Segmenting your marketing efforts to specific customer groups allows you to focus more on specific messages you want to send. By this, you’re able to fine-tune your marketing message according to what your customer is looking for, therefore increasing their chances to convert.
It improves your whole product.
Having a clear picture of who wants to purchase your products and what they need them for will help your company stand out as the best solution provider for their needs. This results in increased customer satisfaction and a more impressive performance against competitors.
The advantages beyond your core product offering since any insights into your best customers will allow your organization to offer better customer support, professional services, lead generation services, and any other offerings that make up their whole product experience.
Establishes brand identity
Dividing your customers helps them become aware of your brand. This enables your customers to engage with your products directly, thus increasing your market goodwill. You’ll also be able to establish a strong brand value among your competitors.
Increase customer retention rates
One ideal part of a successful business is customer retention. Customers who switch to other brands cause businesses to lose a huge amount of their earnings approximately $136 billion a year.
By segmenting your target audience, you know what marketing tactics work to successfully convey your message and place your product in the market based on age groups, and their preferred marketing channels.
Segmenting your customers based on their manner of expenditure will assist you in analyzing their spending limits. This way, you can price your products according to your customers’ budgets.
Choose the best communication channel for a specific segment
By grouping your customers into specific segments, you can easily choose which communication channels best fit their preferences, locations, availability of resources, and methods or gadgets they are most comfortable with.
Using Customer Segments
The common characteristics of customer segments can assist companies in how they market their products to these individual segments and what products/services it promotes to them.
Customer segmentation can be practiced by businesses of all shapes and forms. It starts with gathering data and ends with using this data efficiently to drive business results. This gathered information can be used to optimize various business areas, specifically: Marketing, Product Development, and Customer Experience. Take a look at these scenarios:
Segment-based Marketing examples:
- Customize email campaigns to various segments, such as nurture sequences for reluctant buyers and upsell sequences for frequent ones.
- Create multiple versions of sales pages based on generational or age group segments including their behaviors and values, such as Millenials, Gen-X, or Gen-Z.
Segment-based Product Development examples:
- Modify current products based on consistent client feedback
- Offer fresh products to maintain the interest of loyal customer segments.
Segment-based Customer Experience examples:
- Streamline the checkout process by clarifying the product value on the checkout page.
- Create support documentation that is simpler and clearer, and give customer support staff the tools they need to troubleshoot issues fast.
Segment your customers, nurture them, and grow your business
There’s no denying that we live in a world of personalization and customer segmentation. Whenever we shop on our favorite online shops, we expect to find product recommendations that best fit our tastes. Or when we log in to our favorite video or music streaming service providers, we anticipate seeing the shows, movies, or song suggestions we love.
This is pretty much normal and expected. Customer behaviors are always changing, and part of it is to stop being faceless members of a bigger crowd. They now want to feel understood and valued as individuals.
For businesses, generating leads, especially new ones, can be tedious. Customer segmentation provides massive help in gaining new target audiences by enabling detailed market research and easier product placement through the identification of common characteristics.
While target audiences refer to those people who are most likely to purchase your products/services, customer segmentation is all about understanding these customers and reaching them successfully.
Customer behavior is always evolving, and customer segmentation helps businesses create marketing strategies that can catch up to the rapid changes in the industry.