How Customer Segmentation can help you deliver better service
When it comes to providing customer service, most businesses try to meet the needs of as many customers as possible. But what if you could tailor your service specifically to the needs of certain groups of customers? Customer segmentation can help you do just that, and in turn, deliver better service. In this blog post, we’ll discuss what customer segmentation is and how you can use it to grow your brand.
What is customer segmentation?
Customer segmentation divides your customers into targeted groups according to similarities/commonalities. The aim of this division is to maximise the value of each group to your brand. These would be factors like shared buying patterns, age, financial resources, and other characteristics.
If you understand these and the drivers behind a customer’s decision to buy, you’ll be better able to personalise your message to those targeted customers, making your marketing more effective. Customers are 75% more likely to buy as a result of targeted marketing that ‘speaks’ to them specifically.
What are the benefits of segmenting customers?
Customer segmentation holds real benefits for your brand. Here are some of the benefits:
- It creates better customer retention. As you personalise and target your marketing more effectively, your existing customers will see it as more relevant. They’ll feel validated, and are much more likely to stay with your brand and become advocates for it.
- It increases your brand’s competitiveness and income. As you retain more customers, you’ll up your income because your marketing will be more effective. Importantly, you won’t ‘bug’ customers by directing irrelevant and unsuitable material to them. Your brand’s image will be improved, which will raise your profile and increase your visibility in the marketplace.
- It will boost your brand’s identity. By directing targeted marketing at the correct segment, you’ll have a more receptive, positive audience. This will build precious goodwill and increase your brand value.
- This will build a better relationship with your existing and prospective customers. Make sure you keep your customers in the loop about new launches and any changes and opportunities they can benefit from.
- It enables you to optimise your prices by understanding your customers’ spending capacities. You can price your products competitively but in line with what your customers can afford. You won’t lose customers because they can’t afford your product, but you also won’t sell your products too cheaply. Price optimisation is crucial for any business’s survival!
- It enables you to achieve the best economies of scale, i.e., achieve your brand’s goals and objectives at the best costs.
- It helps improve the efficiency of your channels of distribution by directing the right products to the right market segments. This streamlines delivery and reduces costs.
Types of customer segmentation
The most prevalent categories of customer segmentation include the following:
- Behavioural segmentation which is based on metadata that reflects the customer’s digital footprint. This shows how the customer interacted with your brand, the actions they took and their buying habits/history. It includes the pages they’ve viewed, when they interacted with you, whether they requested a demo, which items they added to their cart, whether they completed the purchase and how long the process took. Or did they abandon their cart, and the frequency of cart abandonment.
- Demographic segmentation includes factors like customers’ jobs, gender, age, marital status, income, and neighbourhood. Do they own or rent their home? Their family size, race, education, political affiliations, and religion are all included.
- Geographic segmentation is based on customers’ location. This includes the country, time zone, real-time location, state, city, town, or village. Even the regional climate and population density are relevant.
- Psychographic segmentation looks at the characteristics and attributes of customers’ personalities, what motivates them and how they prefer to communicate. Relevant factors here include people’s values, habits, lifestyles, social status, interests, attitudes, and opinions.
Corporate clients can be categorised on visual or firmographic principles.
How to segment customers / segmentation models
A segmentation model organises your customers into groups based on what they have in common. Smaller subgroups can be targeted more accurately with relevant, personalised and therefore more effective interactions.
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Any information about your customers is grist to the customer segmentation mill, and typically includes:
- Billing, shipping, and browser info
- What services or products they bought
- How did they find you?
- What device did they use?
- How did they pay?
- The reason for their purchase
- Which channels and promotions prompted the sale?
- Intended use of the purchase – personal or business use, or as a gift?
- Job title, gender, and age.
- How much have they spent with you?
- Their lifestyle, hobbies, and interests
- Annual household income
- Children, and how many?
- Do they rent or own their home?
- Vehicle ownership
We know that customer segmentation sounds like a complex process to manage and implement effectively. If you’re not sure where to begin, Digital Customer Care Company can advise you on the right customer segmentation model for your business.