Customer segmentation is one of the most useful and practical marketing strategies your business can use to draw the right people to your product or service. But, what is customer segmentation, and what benefits can it bring?
Well, let’s start by answering the question ‘what is customer segmentation?’ Essentially, segmentation is a process where you divide your customers and potential customers into segments based on their shared characteristics and needs. This includes factors such as:
- Demographic (age, gender, family size etc.)
- Geographic (where they live and where they work)
- Psychological (social interests and lifestyle)
- Behaviour (spending habits, consumption etc.)
On a basic level, you can use all of these different factors for segmenting and marketing purposes. For example, if you were running a local campaign around a new store your business was opening in Nottingham, then you could target all of your customers that live within 20 miles of the city. Alternatively, if you were running a promotion based around children going back to school, you could target customers with families.
By dividing your customers based on the characteristics they share, you will develop a good understanding of your customer base. You can learn about their likes and dislikes, and discover their preferences for interaction. Then, using the information you’ve gathered, you can target customers with specific needs, interests, or preferences.
In addition to this, customer segmentation can also help you answer key questions about your business, such as:
- What type of customer provides your business with the most revenue?
- Which portion of your customer base has the lowest cost of acquisition?
- Which customers are easiest to retain and which become brand advocates?
Using the information you’ve gathered, you can then prioritise segments for marketing purposes. By concentrating your marketing efforts on prioritised segments, you can pitch your message more effectively and focus on customers and prospects with the highest chance of converting. Following this, you can then work out exactly how to relate to the customers in each segment in order to maximise each customer’s value to the business.
Remember, each of your customers has a different need, desire, preference, or priority. As a result, it’s not possible for you to meet the needs and desires of every prospect. Thankfully though, if you effectively utilise the data you have available, you can leverage hugely effective marketing insights. Plus, you can then develop further services, products, or solutions based on the common attributes your customers share.
If you’re looking to accurately, effectively, and quickly segment your customers, try using powerful analysis software like Apteco Orbit®. With the help of such a powerful engine, you’ll find it easy to make calculated and quantifiable marketing decisions that actively encourage the right people to buy your product or use your service. Plus, the engine also gives you the power to recognise common traits and create customer segments directly from charts and visualisations to improve engagement.
When you leverage the information provided effectively and interpret it correctly, your business will experience a number of customer segmentation benefits. With this in mind, let’s take a detailed look at seven of the main benefits of customer segmentation.
Top 7 benefits of customer segmentation
The benefits of customer segmentation are numerous, and the main benefits your business will experience will largely depend on your specific goals and business type. However, generally speaking, the main benefits of customer segmentation are:
1. Get an insight into your customers
In order to sell and market your product effectively, you need to know your customers and their needs. After all, if you understand exactly what they’re looking for, you’ll find it easier to meet their expectations and communicate effectively.
With the help of audience segmentation, you can learn much more about who your customers are, where they are, and the solutions they’re searching for. This insight is one of the main benefits of customer segmentation because, once you know all this information about your audience, you’ll find it much simpler to create a personalised connection with each audience member.
2. Improve customer engagement
Using customer behaviour data collected from social networking sites, email marketing campaigns, and user purchasing history, you can develop a much deeper understanding of your audience and their behaviour. Using this information, you can then create tailored and targeted customer engagement strategies that address their needs and actually influence their decision making.
By engaging customers with personal communications and relevant offers, you’ll be able to effectively build brand loyalty and retain your valuable customers. As time goes on, you’ll also be able to hone in on the specific aspects you want to advertise and fine-tune the messages you send out.
3. Gain a competitive advantage
But, customer segmentation benefits extend far beyond just knowing who your customers are and what they want. After all, by segmenting your customers, you’re developing and improving the intelligence of your business. Plus, by identifying segments of customers that provide greater profits and targeting these people effectively, you’re gaining a competitive advantage.
If your business can make the most of the data it has available and precisely implement effective marketing campaigns that target the right people, you’ll improve your profits and stay ahead of your competitors.
As an added bonus, repeatedly targeting your customers effectively will improve your brand identity and will also help you improve the relationship you have with both prospective customers and current clients.
4. Focus on the right people
If you understand the shared characteristics of your most successful customers, you can then improve your customer acquisition methods and ensure that you’re targeting other people who share these characteristics.
If you know who your company best serves, then you can tailor your marketing activity to ensure that you only attract good-fit leads. As an added benefit, if you do attract customers who are a good fit, then these customers should stay happy and remain with your business for longer, as long as your product or service continues to meet their needs.
5. Improve your messaging
When you segment your customers, you can also identify patterns in the way that you’ve acquired them. Plus, you can also take a detailed look at the way your different segments have engaged with your company. By analysing this data, you’ll gain a much better understanding of what messages resonate with different prospects and customers.
On top of this, some of this data can also be used by the different teams within your company. For example, the sales team can learn more about how prospects react to the sales process, while others can discover the communication methods customers prefer to receive during service delivery.
6. Improve pricing and the product
By learning more about your customers, you’ll also learn more about their social and financial status. As a result, the data you generate can also teach you more about the spending psychology of the customers you’re segmenting and can ultimately help you optimise the prices you’re charging.
Plus, the feedback you receive from the different segments will show you exactly how your product or service is being used and received. This can then help you make key strategic decisions about how you position the product. In addition, it can also help you uncover customer needs that you can solve with new products or services in the future.
7. Improve assessment of campaigns
When you segment your customers, you make all your marketing efforts more manageable. However, you’ll also experience an additional bonus. After all, segmenting your data in this way also makes it much easier for you to measure the success of all your marketing efforts and compare the effectiveness of campaigns between segments.
Once you’ve assessed the effectiveness of your campaigns and analysed their effectiveness against each other, you’ll then be able to either re-orient your marketing efforts or re-segment the targeted customers. By doing this, you’ll be able to continually improve the effectiveness of your campaigns.
In summary, customer segmentation is an important tool for many businesses. It can provide you with more information about your customers and can then help you target them effectively. By building relationships with these customers through targeted marketing, you’ll boost retention rates and make your marketing campaigns more profitable than ever.
If you’d like to learn more about how Apteco Orbit® can help you unlock the insights required to power high-performing campaigns and provide your business with all the customer segmentation benefits mentioned above, then book a demo and speak to our team today. Or, test it yourself with demo data in our free trial system.