5 Types of Customer Segmentation and How to Use Them
5 Types of Customer Segmentation and How to Use Them
Investing in the right customer segmentation strategies is one of the most powerful ways to improve the ROI from your campaigns. Today’s consumers are consistently searching for more personalized, relevant, and unique experiences from the brands they connect with. The only way to deliver the experience your audience is looking for, is through segmentation.
Studies show that market segmentation techniques lead to 14.31% higher open rates and 101% more clicks in email marketing campaigns. What’s more, segmenting your audience allows you to dive deeper into your connections with individual users, and learn who your target audience really is.
The more you segment, the more you can develop campaigns that speak your target customer’s language, improve brand loyalty, and increase engagement.
So, how do you get started with customer segmentation?
Customer Segmentation Definition: What is Customer Segmentation?
First, let’s cover the basics. A customer segmentation strategy is essentially a promotional technique which involves separating your larger audience into smaller sub-groups. For instance, a company selling accounting software might have a number of different kinds of customers, such as:
- Freelance accountants and bookkeepers
- Consumers looking to complete their own accounts
- Agencies offering accounting services
- Businesses with their own financial department
Each of those groups can be further refined by looking at factors like the location of each customer, their purchasing power, or what kind of services they need.
With an in-depth customer segmentation analysis, you define different groups who may want to purchase your products. Analyzing each group helps you to understand what different customers need to convert, and how you can improve your chances of sales with each segment.
Types of Customer Segmentation
There are various ways to segment your audience, each with their own distinctive benefits. The methods you use to segment your consumers will depend on a number of factors, including your go-to-market strategies, and business size.
Let’s take a closer look at some of the most common types of segmentation in closer detail.
- Behavioral Segmentation
Behavioral segmentation examines the purchasing actions and behaviors of your intended audience to separate them into different groups. For instance, you might segment customers by how frequently they visit your website, click on your email campaigns, or communicate with your company.
Behavioral segmentation is often useful for offering an insight into customer loyalty and engagement levels, as people who are more “active” with your brand are often more likely to become a repeat customer. Usage-based segmentation, looking at how often a customer uses your site or software, can even help you to determine which customers you should be paying the most attention to.
Information for behavioral segmentation is usually based on a customer’s digital footprint. The use of cookies and tracking components on browsers and apps can provide in-depth insights into your audience and their interactions with your brand.
2. Psychographic Segmentation
Psychographic segmentation is a similar kind of customer segmentation to the “behavioral” option mentioned above. It involves looking at your target customer’s behaviors and beliefs on a broader scale, rather than just examining how they interact with your company.
Psychographic traits about a consumer can include everything from their habits and hobbies to the things they’re interested in, or the opinions they hold. It’s also possible to use psychographic data to segment customers according to their personality, social status, or lifestyle.
For instance, using psychographic research, a bakery could create two different marketing campaigns for an athlete who values low calories, and a mother looking for healthy ingredients for their children. Psychographic segmentation makes it easier to tailor your content to the individual tastes of each customer.
You can also use psychographic research to inform your brand personality. The more you learn about the lifestyle and values of your target audience, the more you can adapt your identity to create a brand personality your customers will relate to.
3. Demographic Segmentation
Demographic segmentation is probably the simplest form of customer segmentation because it allows you to separate your customers based on their most obvious traits, like their age, or culture. Demographic information won’t always tell you everything you need to know about your target audience, but it can help you to make broader assumptions.
For instance, if you know you’re appealing to a younger audience, you’ll be more likely to use bright colors, simple language, and attractive images in your marketing and sales assets. Alternatively, if you’re appealing to older people working in a high-octane business environment, you’ll probably avoid emojis and animations, and focus on the facts.
Some of the most common characteristics considered for demographic segmentation include age, gender, economic status, occupation, and marital status. A person’s age, their spending power, and even the size of their family can all influence their values and purchasing decisions
4. Geographic Segmentation
Geographic segmentation, like demographic customer segmentation, is a broad way to separate groups in your target audience. With geographics, you look at your customer’s physical location to determine what kind of content you should produce, and what kind of sales strategies you should use.
Geographic segmentation makes a lot of sense for companies offering specific services in certain regions. For instance, you might be able to sell your eBook downloads to people all around the world, but you can only sell and ship physical versions of your book to people in the same country as your brand. Geographical segmentation allows you to adapt your marketing strategy based on where a customer lives, or where they might interact with your brand.
Studying geography when examining your target audience is an excellent way to get an insight into the reach of your company, so you know exactly where you can sell your products or services.
5. Firmographic segmentation
One slightly different kind of advanced customer segmentation involves looking at the attributes of a firm or business. This is a common form of customer segmentation used by B2B brands.
Many businesses use firmographics to identify prospects based on scale, size, and funding opportunities. You can also break down firm opportunities based on the kind of organization, such as whether you’re dealing with a non-profit, government entity, or agency.
Firmographic segmentation is an excellent way for B2B brands to determine the various kinds of companies (large and small) they may be able to work with. A thorough firmographic segmentation will also provide insights into potential opportunities for company growth. You may find even if your target audience is big enterprises, you can still make a profit from smaller brands.
Mastering Customer Segmentation
Customer segmentation is a crucial tool in creating the best possible sales and marketing strategies for your organization. In every industry, customers are more likely to buy from, and become loyal to, companies who understand their needs and situation.
Through thorough segmentation, you can build better relationships with your target audience, and improve your chances of sales success.
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