Customer Segmentation In Practice

Before discussing what to do with the information extracted from segmenting your customers, we reveal how your customer base can be divided.

Although we have already discussed the primary ways to segment your customers: 

  • demographic data, 
  • geographic, 
  • psychographic,
  • behavioral.

While the first two categories are pretty straightforward, let’s clarify, you might be wondering; What do we mean by psychographic and behavioral data? Psychographic data addresses a variety of personality characteristics. 

This data often relates to each of the other categories, but it provides supplemental information that could prove vital to your marketing campaign. For example, while you know that a large percentage of your customer base is married men aged 30 to 35 from Rio de Janeiro, this information doesn’t mean much until you dig deeper and discover that most of them have some relationship with sports. Action movies and craft beer. 

You may also discover other traits such as political and religious affiliations and your attitudes towards certain cultural or societal phenomena. Behavioral data focuses explicitly on the type of customer a specific person (or type of person) is. This data type tells you:

  • The time of year they shop.
  • The routines they follow when shopping
  • The preferred method of shopping
  • The ways they use what they bought

Behavioral data also takes into account a customer’s history with your brand. You can rank customers in terms of loyalty by analyzing the following questions:

  • recent purchases
  • Number of transactions within a specific period
  • Longevity
  • References

Once you’ve collected as much data about your customers as possible, you’re ready to find out how to use that information to improve your company’s performance.

Determine Segment Sizes

The first thing to do with your customer data is to look at the general makeup of each category. For example, by analyzing geographic data, you might find that 65% of your customers live in the suburbs, while 25% live in urban areas and 10% in rural areas.  This data indicates that the product or service resonates best with people in suburban areas. Of course, the previous example scratches the surface when analyzing customer segmentation data.

Once you get a basic overview of your customer base from multiple angles, you can zoom in on each to better understand your customers’ exact type of people. When analyzing this data, take note of both trends and anomalies that arise in specific segments.

Trends can tell you what is going well or expected regarding your marketing campaigns, telling you where you can “stay on course.” Anomalies, on the other hand, can prove even more valuable. On the one hand, you may find that your product is not as far away as you thought it would be within a specific segment. 

On the other hand, you might be surprised to find that people in an unexpected segment notably support your services.  In either case, noticing these anomalies can spur you to act to change your plan of attack or capitalize on a newly discovered market.

Estimate The Value Of Segments

While you’ve determined the overall makeup of each segment, you’ll gain much more leverage in determining the value of each of those segments. To get started, estimate the percentage of revenue generated and purchases made by each subsection within a specific segment.  This data may or may not be correlated with the subsection size being analyzed.

For example, even if individuals in an urban setting only represent 25% of your customer base, they can generate 40% of your overall revenue. This indicates that individual customers in urban areas buy more in a single instance or visit their businesses more often than those in suburban areas. In this case, even though most of your customers reside in the suburbs, your best customers live in urban areas.

By comparing the size of the segment to the revenue they generate, you can find out which type of customers are most likely to remain loyal to your brand – and which kind of customer you should focus your marketing efforts on in the future.

Content Customization

One of the main benefits of segmenting customers is that you will be able to provide them with personalized and relevant content that will almost certainly grab their attention.

In today’s marketing world, developing a content marketing strategy is essential.  According to HubSpot, a personalized call-to-action can result in 42% more engagement than a generic CTA. The goal of segmenting customers and learning as much as you can about them is to provide a service that makes them feel at home when they engage with your brand.  When your customers feel you exist solely to meet their needs, they will almost certainly continue to trust your services indefinitely.

Also Read: What Types Of Marketing Are There?

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