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What is Customer Segmentation?

customer segmentation

Business Tips

What is Customer Segmentation?

Customer segmentation has virtually unlimited potential as a tool that can find firms toward more effective ways to market products and develop new ones.  Today overspecialization is one of the effective ways you can truly attract the customers and retain your existing customers. In fact, 59% of consumers who have experienced it, say that professionalization has a great impact on their purchase decisions. 

Customer Segmentation based on the needs, interest, habits, and preferences of your customers is the key to providing exceptional customer experience.

Below we discuss how customer Segmentation can benefit your brand.

Develop Effective Retention Strategies:

Customer Segmentation can help you develop more focused strategies to retain customers.  For example, you may want to identify your top-paying customers and create exclusive offers for them.  Or you may even want to re-engage people who haven’t purchased in a while. The possibilities are endless.

Better Ad Targeting:

Marketing messages sent to customer segments have seen 200% greater conversion than those sent to the general audience. If you create the well-defined customer’s segment based on common attributes, you can get better marketing results.  If you create a customer segment based on social channels they frequent, you can engage with them at the right place or time.

customer segmentation

Google analytic, Tomato, or spandex can help you create customer segments effectively.

Here some types of customer segmentation all marketers should know of.

Demographic Segmentation:

63% of marketers are agreeing that audience segmentation’s valuable to providing a great customer experience. And one of the most common types of customer segmentation is to segment customer through the demographic segment.

customer segmentation

You can consider parameters such as age, generation, gender, occupation, education, income, material status or ethnicity to create customer segments.

NIVEA Sun: Grow their portfolio to 40 different product variations to meet the needs of their customers. They used demographic Segmentation to segregate their customers and analyzed their behaviour to create a profitable range of products. NIVEA Sun was able to provide more value to their customers.

Geographic Segmentation:

Geographic segmentation involves country, states, region, climate or market size. Climate or tailor your messages to various graphics segments keeping graphics the local culture and weather.

customer segmentation

For example, Porsche of product mixes based on the geographic region they cater to, They offer a higher percentage of convertibles in their product mix to consumers from the video greater value to consumers and encourage them to buy.

Behavioural Segmentation:

Behavioral segmentation involves segmenting customer based on the way they interact with your brand.  Perhaps you can create a segment for consumers who have to add the product to their cart but didn’t complete the checkout. 

  • Some common variables that decide the behaviour of a specific occasion such as Wedding, Christmas, or Halloween.
  • Usage: segmentation based on the frequency of their purchases.
  • Thought process: segmentation based on the driving force behind their purchases decision.

Life cycle or customer journey based segmentation:

Apart from understanding buyer preferences and interest, you also need to know which stage of the buying process they are in.  This type of customer segmentation is called Life cycle or customer journey based segmentation.

You can create various segments such as customers who have visited your online store but haven’t made a purchase. Or customer who have bought only once in the last 12 months or haven’t in the last 12 month. These all strategies provide you with the powerful approach to target them with more useful recommendations.

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Business Paragon Editorial Staff

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