Unlocking the Code: How Customer Segmentation Benefits Turbocharge Your Marketing

“Segmenting your customers is crucial but understanding its strategies and advantages is much more vital.”

You must have heard a proverb- “Every shoe fits None”. Well, this saying perfectly fits here.

Customer Segmentation benefits will help your business grow towards better opportunities. Segmentation is a multi-level process that gives us a better opportunity to understand our customers:

• Preferences
• Behavior
• Demographics
• Financial capacity

And much more…

It encompasses all the metrics that are necessary for building a personalized eCommerce shopping experience.

Before we bifurcate the customers into different segments, many constraints have to be considered. These considerations include factors like demographics, geographical preferences, psychological behaviors, etc.

While there are a lot of customer segmentation benefits, it critically impacts your Ads costs and other marketing expenses. And I’m sure you wouldn’t mind saving any extra penny that isn’t bringing you results.

According to a study, 77% of the returns generated come from targeted campaigns built with the help of customer segmentation.

In short, with customer segmentation, you can focus on a specific group. Thus, all your resources are invested in building a highly relevant marketing strategy.

To sum up, you get to cater to customers’ tastes & preferences while getting an idea of niche marketing

What Is Customer Segmentation?

Every customer journey is different…
And so are the marketing strategies to convince them to buy.

The customer segmentation process refers to audience segmentation and targeting.

To clarify, the whole concept is about the skillful categorization of the target audience and loyal customers.

By categorization, I mean:

Dividing customers into various segments and creating targeted marketing campaigns.

Source: KDnuggets

Customer segmentation begins with understanding the specific requirements of a customer. Then, compare them against metrics like demographics, budgets, needs, etc.

Lastly, divide your customers into categories based on the decided metrics.

Grouping customers in segments helps in mindfully organizing your marketing resources. It makes communication with the marketing team highly efficient and, helps in scaling revenue and retention.

We often talk about multiple types of customer segmentation (usually metrics-based categories).

However, there are three most crucial, yet basic forms of consumer segmentation. They are –

1. Post Hoc: It refers to categorizing customers sharing similar characteristics, interests, and demographics. Post Hoc is one of the most frequently used segmentation forms.
2. Needs-based: Every customer is different and so are their requirements. Need-based customer segmentation is done based on reasons for purchasing a product.
3. Value-based: Here value doesn’t concern the customers’ perspective. By value, I mean the returns your business makes. It can include either regularity, monetary, or loyalty values. And, categorizing customers based on the value brought is called value-based consumer segmentation.

Types of Customer Segments In Marketing

“Segmentation” is in itself a whole concept that brings a division of areas, functions & ideas. This gets segregated in the context of customers as –

• Demographic (age, gender, religion, sect, family size, family size, and more)
• Geographic (location, cultural preferences, timezone, language)
• Psychographic (social class, lifestyle)
• Behavior (spending, consumption, habits, and more)

Source: GetFeedbacks

1. Demographic

Demographic Segmentation as discussed earlier focuses on demographic data and divides customers into groups based on major circumstances which include age, gender, religion, sect, family size, family size, and more.

If you are an eCommerce store owner or in the eCommerce industry you can greatly benefit from demographic segmentation.

“10% to 15% more revenue is generated by businesses that tailor their offerings to customer segments than by those that do not.”

For instance, an eCommerce store which is an established skin care brand may segment by age for people’s unique skin care needs of their younger and older customers.

With Demographic segmentation, you can build stronger customer relationships and drive growth.

2. Geographic

Geographic Segmentation divides a market based on multiple streamlines of data including location, cultural preferences, timezone, language, and more.

By segmenting the market geographically you can understand the market better and meet the requirements of your customers in different areas.

This type of segmentation is helpful when you have products that vary in demand based on location and specific factors such as culture, climate, or language

Source: Survey Sparrow

For example, An ice cream company segments a country by how hot or cold different regions are and targets those areas for promotion that are hottest and therefore more likely to buy ice cream.

Geographic Segmentation can be more effective in marketing campaigns allowing you to allocate your resources better and increment in sales.

It can also help you tap into untapped markets in other locations allowing you to explore and grow your business

3. Psychographic

Psychographic segmentation is a savvy term that includes diving deep into your audience’s minds including personality traits, attitude, values, interests, social class, and lifestyle)

This segmentation can be useful for businesses that offer multiple services.

For instance, if you have a digital marketing agency that provides multiple services like Search engine optimization (SEO), Content Strategy Building, Content Marketing, etc.

You can gather the data and by psychographic segmentation, you can tailor your content according to your audience’s lifestyles, values, and interests this can be helpful for you to understand what your audiences like so you can provide them the best experience and grow your business.

4. Behavior

Behavior segmentation is about customer’s behavior towards your brand. This type of segmentation includes data points like your customer’s spending, consumption habits, how frequently they are shopping with your brand e.t.c

For example, if your customer’s buying habits are impulsive then you can create a limited-time promotion which can trigger their impulses allowing them to purchase more in a hurry.

This can create FOMO fear of missing out and can act as a great marketing strategy that targets your impulsive customers.

Other than the types of customer segmentation mentioned above, there is one more crucial metric that is now overly used for consumer segmentation – Sociographics or Social Media.

Source: Venngage

The social media platforms account for the huge crowd of your customer base. As said earlier, all customers have their choice of social interaction and are not subject to a single platform.

Customer Segmentation Benefits

As already discussed above, customer segmentation techniques help you to categorize your customers into various segments based on different criteria that you decide.

It eventually helps you to connect your customers better by targeting them with their demands and requirements.

Some of the customer segmentation benefits are listed below

1. More Customer Retention

A conventional marketer will always prioritize its existing customers more than new customers. Why?

About 75% of satisfied customers are more likely to remain with an organization that regularly meets their needs.

Because it is easier to connect and understand the existing customers and also because they add value to your business’s image.

A loyal customer always is your advocate among the vast crowd. Hence, retaining valued customers will make your business stand stronger for longer.

Segmenting customers based on their value will help you retain them easily with the targeted strategies and campaigns.

2. Enhances Competitiveness

The more customers are retained, the more revenue generation. And all of this will enhance your competitiveness in the market. How?

Segmenting the customers helps you in targeting a specific audience for the campaign consequently, saving you from bugging all your customers. As a result, your customers will be more inclined towards your marketing efforts.

This will eventually give your marketing campaigns a better response than expected and enhance your competitive spirit in the market as well.

3. Establishes Brand Identity

By segmenting your customers, you can make them well aware of your brand. Identifying your brand will help your customers to directly engage with your products.

This will increase your goodwill in the market & a brand value will be established among your other competitors.

4. Better Customer Relationship

Better consumer segmentation will lead to developing a better relationship with your prospective customers.

This will allow for developing a better relationship with your client base.

Communicate with your customers on their queries & requests. Regular communication will keep you updated about the upcoming changes & opportunities to be availed.

5. Leads To Price Optimization

Segmenting the customers based on their expenditure will help you in analyzing their spending limits. As a result, you can price your products in a way that fits your customers’ budgets.

On a bigger scale, financial analysis saves you from losing customers because your products are too pricey. This case can be vice-versa too, i.e., pricing too low will make your customers doubt the quality of your products and services.

Thus, it is correctly said that:

Price optimization can make or break your business forever.

Try to understand the social and financial status of your customers. This data will assist you to pace up with the price optimization accordingly.

6. Best Economies Of Scale

Customer Segmentation helps in better allocation of resources which gives you a better return on investment and eventually helps you gain economies of scale.

Economies of scale mean when you can achieve your desired goal and that too at the most efficient cost.

This can be done through consumer segmentation. Therefore, try to focus on a limited number of resources that will help to serve with resources.

7. Improves Channel Of Distribution

Customer segmentation will improve your channel of distribution. By knowing the right number of customers you can direct the right channel of distribution.

This will remove confusion among your team members about whom they have to deliver the product & at what time.

You will be able to choose a precise channel of distribution & that too at minimal cost which eventually serves the best needs of your customers.

Are Customer Segmentation And Market Segmentation Same?

Often people confuse these two terms – Customer Segmentation and Market Segmentation. But, they’re not the same.

Customer segmentation vs Market Segmentation can be a long debatable session of facts and figures. Consumer segmentation is a detailed study of data specific to customers only. While market segmentation talks about segmenting customers, it is only a small part of customer segmentation.

Market segmentation involves the market as a whole and each piece of data about the market and its participants – competitors, customers, and trends.

Market segmentation might give you an overview of your customers and target audience. However, customer segmentation paints a properly structured and detailed buyer persona. Consequently, giving you a clear idea of your ideal audience.

However, the customer segmentation and market segmentation strategies work together to prepare a wholesome marketing plan for your business to soar high like Falcons.

Segmentation Strategies For Your eCommerce Store

To maximize the customer segmentation benefits you have to incorporate the best strategies. Some of them are listed below

1. Segment Customers Based On Cart Abandonment Rate

In this category, you’ll cover those customers who frequently abandon their cart after adding 2 or 3 products.

Customers in this category fail to complete checkout due to various reasons.

“Cart abandonment can leave a major gap in conversions. For instance, a 65% cart abandonment trend leaves a 97.9% gap in conversions.”

From the above stats, it’s clear that cart abandonment has a huge impact on businesses. These cart abandoners cost your business a lot of time so you must find their pain points and provide them with effective solutions.

Some common customer pain points include High additional charges, High Shipping Charges, and a Single payment gateway.

You can tackle these pain points with solutions like sending cart abandonment emails with special discounts, Creating Urgency with one-time offers, and offering the options of multiple payment gateways.

2. Segment Based On Customer Loyalty

Identify your loyal customers who purchase from you frequently. The loyals have a lot of transactions and purchases in comparison to other customers as well they have a history of purchases, which suggests that they have been with you for a long time which eventually leads to increased purchase frequency

Keep that in mind the amount does not matter there regularity does, it helps you understand your brand value you’ve created.

After the analysis you can take certain actions to maintain their interest

For instance, you can calculate the number of orders based on the price level and provide additional discounts. You can also create a rewards program or a membership program allowing your loyal customers to enjoy special benefits.

The possibilities are not limited here, it’s up to you how to provide the best to your customers.

3. Monitor First-Time Visitors

Keep an eye on your first-time visitors, these are the customers who have just discovered your business through different communication channels and promotional advertisements.

You’ll have to keep track of and monitor these first-time visitors to know how they arrived at your website, as well as what actions they do and the products they look at.

This can help you fine-tune your suggestions and provide a better experience to your customers.

4. Customer Segments Based on Purchasing Patterns

“According to a survey by bizjournal Existing customers are 50% more likely to try your new product. “

Segmenting customers based on purchase patterns is a great strategy for eCommerce store owners.

You have to identify your customer’s purchase patterns.

For instance, how often do they purchase? Do they purchase in the holiday season? Or Do they purchase on special occasions? and then you can analyze these data and build segments focused on them.

Remember, the goal is to satisfy your existing customers and encourage them to purchase repeatedly which is much more cost effective than acquiring new customers.

5. Handle Indecisive Buyers

There must be a lot of indecisive customers in your store who are not sure about what to buy! They spend hours searching for the ideal products but rarely buy anything.

These types of customers either interact with chatbots or mostly abandon their carts.

Source: razer.com

The best way to deal with these customers is to create a separate segment for them and identify their pain points to leverage the customer segmentation benefits.

For example, maybe there are too many options for them which leads to confusion or your business lacks personalized product recommendations.

To tackle this problem you can create a personalized recommendation system that only shows the relevant and personalized products to the users.

Wrapping Up!

To sum up, customer segmentation should be done very carefully as your whole business plan depends upon your target audience only.

In this blog, we have discussed pretty much everything related to customer segmentation, why you should choose customer segmentation, segmentation strategies for your eCommerce store, and customer segmentation benefits.

How profitable is the segmentation of your consumer base? Please share your thoughts with us in the comment below.