How to Use Customer Segmentation to Improve the Performance of Your Marketing Campaigns
Your audience wants personalized marketing from your business.
In fact, they expect it. According to research, 71 percent of customers expect businesses to send them personalized marketing messages, and 76 percent are disappointed when they receive generic communications instead.
The challenge? If you don’t know your audience, you can’t send them personalized content. You don’t know what matters to them, so you can’t reach them on the right level.
If this dilemma sounds familiar, don’t worry. I have a solution for you, and it’s called customer segmentation. Customer segmentation helps you understand your audience so you can target your marketing campaigns with greater precision. Let me show you how it works.
What Is Customer Segmentation?
Customer segmentation means dividing customers into groups, or “segments,” based on traits they have in common such as age, buying habits, gender, and needs.
Businesses use customer segmentation models to better understand their prospects so they can target them with relevant personalized marketing campaigns including ads, emails, and social media posts.
Customer segmentation isn’t just about reaching a new audience more effectively, though. It’s also a way to reconnect with lapsed customers and encourage new purchases by sending them carefully targeted messages.
Remember, every customer is unique. They each have own buying behaviors and reasons for choosing you over your competitors. While it’s impossible to personalize your marketing to every individual, a customer segmentation strategy is the next best thing.
Why Is Customer Segmentation Important?
For one thing, it helps you improve your customer service. By understanding your customers’ needs and wants, you’re better placed to help solve their problems.
Does customer service matter? Absolutely. Research says one in five customers will abandon a brand after just one poor customer experience, so the more effort you invest in great service, the better.
Similarly, segmenting your audience helps build customer loyalty. How? Because customers are typically more loyal to brands offering personalized messaging—for 79 percent of consumers, the more personalization a company uses, the more loyal they are.
What do loyal and happy customers have in common? They’re more likely to shop with you. By personalizing the shopping experience through segmentation, you create more dedicated customers, so you increase conversions over time.
Not convinced? Well, studies show that over 60 percent of customers are likely to be repeat buyers after a personalized shopping experience, so the stats speak for themselves.
Customer Segmentation Models
You can use various customer segmentation models, depending on your business needs and marketing goals. Here’s a look at seven of the most common models.
1. Demographic Segmentation Model
Demographic segmentation means dividing people into groups based on certain demographic factors, including age, income, marital status, and occupation.
Let’s say your audience is men and women aged between 30 and 65. You want to run a TikTok campaign to promote a new product.
- 61 percent of TikTok users are women.
- 11 percent of users are over 50.
If you only run a campaign on TikTok, you miss out on a huge chunk of your target audience. Perform some demographic segmentation, and you’ll know to target Facebook, too, since 73 percent of 50- to 64-year-olds use this platform.
Want to try it?
1. Set your campaign goal.
2. Choose your variables, whether it’s age, gender, and so on.
3. Select your platforms to run personalized marketing campaigns, such as social media, email, etc.
4. Measure success using tools like Google Analytics and revise your campaigns as needed.
Pros and Cons of Demographic Segmentation
On the plus side, it’s easy to use this model, and it helps you adjust your tone to target different genders and ages.
The main downsides? You risk making false assumptions about a particular segment. You could also lose your brand voice by targeting such varied demographics.
Always use this customer segmentation model alongside other techniques. For example, it might be helpful to know a customer’s buying habits and values, or where they live.
2. Geographic Segmentation Model
With geographic segmentation, you categorize your audience based on where they work, live, and shop.
This type of customer segmentation analysis is fairly straightforward. The main disadvantage? Ironically, it’s simplicity. On its own, geographic segmentation doesn’t reveal much about your audience, but you can use it alongside other models on this list to build the fullest possible picture of your audience.
How to Segment Customers Through Geographic Segmentation
Here’s how to get started with geographical segmentation:
1. Determine your segments. You can divide people by, for example, climate, culture, language, or land area.
2. Gather data, such as website location data and sales data, to identify the size of your community.
3. Send targeted messages to customers based on these segments. As an example, you might run paid ad campaigns based on location, or if you’re launching an exclusive location-based product, email your target audience a promo code.
Case Study: McDonald’s
McDonald’s frequently uses geographic segmentation to target different audiences around the world. For example, here’s a burger found in McDonald’s India:
McDonald’s creates products to suit its diverse audience and tap into the flavors and products they may respond to based on geography.
This brings me to another advantage of geographic segmentation: exclusivity. Since the McDonald’s menu varies by location, each item feels exclusive, harder to acquire, and more valuable, which may increase conversions.
3. Psychographic Segmentation
We each have unique personalities, but we share traits or characteristics. Psychographic segmentation means forming groups based on common traits such as hobbies, lifestyle choices, personality traits, cultural beliefs, and values.
Psychographic segmentation helps you understand a customer’s psyche so you can devise highly focused, relevant campaigns. However, the main challenge is gathering (and organizing) the relevant data.
How to Use Psychographic Segmentation
Follow these steps to start using psychographic segmentation:
1. Determine your ideal customer. Who are you selling to? What do they love about your products? This stage may involve some consumer research.
2. Choose your segments, such as hobbies, values, or personality traits.
3. Identify where your audience congregates. For example, over 1.5 billion people visit Reddit every month, and 38 percent of Americans listen to podcasts every month.
4. Perform some (more) consumer research. Whether you run Instagram polls or send surveys, ask your audience what type of content they want from you.
5. Evaluate the data to decide how to properly target your groups.
Case Study: Patagonia
Patagonia, an outdoor clothing brand, knows its customers care about sustainable living. They’ve made sustainability a core part of their brand messaging:
If you ran a store like Patagonia, you could segment customers based on whether they prefer hiking or cycling and then send targeted campaigns to meet their needs while retaining this core brand message.
Conclusion: Customer Segmentation
If you’re trying to upgrade your marketing, customer segmentation is your friend. By segmenting your audience, you can learn what matters to your customers, run targeted, more effective campaigns, and ultimately convert more leads into customers over time.
Start by evaluating the customer segmentation models I’ve described and consider which combination works best for your business goals. If you need any guidance for choosing between customer segmentation types, though, check out my consulting services to discover how my team can help.
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