What is segmentation?
Segmentation is the process of breaking down a market into manageable, distinct groups of customers who share similar characteristics or needs.
Customer segmentation allows businesses to target specific customer groups more effectively and create tailored products, services, and marketing campaigns that match those customers’ wants and needs.
Four main types of customer segmentation
There are 4 main types of customer segmentation:
Demographic segmentation: which divides customers based on age, gender, income level, family size, education level, occupation, and other factors.
Psychographic segmentation: which focuses on lifestyle factors such as values, interests, attitudes, and opinions.
Behavioral segmentation: which looks at how customers interact with a product or service by examining purchase history and usage patterns.
Geographic segmentation: which divides customers based on location or region.
Benefits of customer segmentation
Customer segmentation is a powerful marketing strategy. When executed correctly, it holds countless benefits for businesses:
More targeted messaging: By segmenting customers into different groups based on their interests, behaviors, demographics, or other factors, marketers can tailor their messaging and offers to better meet the needs of each group. This helps them to create more relevant content that resonates with customers and encourages them to take action.
Increased Average Order Values (AOV):
Customer segmentation also helps companies increase AOV by providing customers with personalized offers based on previous purchases and browsing behavior.
Improved customer relationships: By segmenting customers and delivering them the right content at the right time, marketers can increase engagement and build deeper customer relationships.
Smarter product development: Understanding different customer segments allows marketers to take the guesswork out of product development and start creating products and services that are more closely tailored to customers’ needs.
Greater Efficiency: Segmenting customers into different groups makes it easier for marketers to identify and send the right messages to the right people at the right time, which can save time and reduce costs.
Improved ROI: By targeting specific segments of customers with relevant messages, companies can maximize their return on investment (ROI) from their marketing efforts.
Four best practices for mastering customer segmentation
Follow these 4 pieces of advice to improve your strategy and start reaping the rewards of customer segmentation.
- Start with what you know:
Before creating any customer segments, start by unifying and analyzing existing sales, product, and customer data.This can provide helpful insights that will inform your segmentation strategies.
- Keep it simple:
It’s easy to get buried in multiple segments, so at the start, try to keep your customer segments as simple and straightforward as possible. This ensures that your messages reach the right audiences and resonate with them, while reducing the chance of error.
- Be creative:
Once you’ve identified the different customer segments, don’t be afraid to use your creativity to tailor specific messaging to each group that speaks to them on an individual level.
- Test and adjust:
As you roll out your campaigns, regularly track performance metrics to determine if certain segments are more successful than others. Then, use those insights to refine your segmentation strategies over time and improve results from future campaigns.
Segmentation with Emarsys
Emarsys helps leading brands like Nike, Babbel, and adidas Runtastic unify their sales, product, and customer data, and deliver personalized omnichannel customer experiences that drive business results.