The Importance of Customer Segmentation


You may aware that you need to identify different types of customers and prospects – yet unsure of the best way to identify these “customer segments” or efficiently target them.

Customers expect personalized conversations based on their unique needs in today’s business environment – not some canned email that you send to everyone who has a pulse and a dollar.

Segement your dataA solid segmentation strategy is key for differentiating you from your competition. Why? Segmentation helps you better communicate the benefits of your products and services to prospects and ultimately provide better service once they become customers.

At its core, segmentation is all about grouping your database records based on some characteristic like demographic information (e.g. age range) or behavior (e.g. subscribe to newsletter). Further, the ability to segment customers comes down to how well do you know your customers and how they behave.

Customers can be segmented in almost an infinite number of ways. How to best segment your customers is dependent on your business goals. However, there are four common segmentation approaches you can start with:

  • Demographic: This is one of the most basic forms of segmentation. It involves grouping individuals according to demographic characteristics like gender, sex or marital status.
  • Behavioral: Behavioral segmentation groups people on the basis of their actions. For example, you might group individuals that purchased 5 or more products into a single segment.
  • Psychographic: Using psychographic segmentation involves grouping the target market based on personality characteristics and/or lifestyle.
  • Benefit: This form of segmentation involves grouping individuals on the basis of the benefits they are seeking in your product of service. For example, if trying to build memberships for a gym, you might group individuals into groups for those seeking to lose weight and for those wanting to gain muscle.

You can use one or more of these approaches to group your target market.

Segments are Identified, Now What

Once you have developed your segmentation strategy, you are not done. You must then begin to understand the needs of each group starting in four key areas:

  1. Product: Do your products and services meet the needs and desires of the segment?
  2. Place: Are your products and services easily obtainable by the segment?
  3. Promotion: Do your marketing efforts use the messages and right forms of media to appropriately target the segment?
  4. Price: Does the segment perceive your products as being competitively priced?

It is important to fully leverage tools like your customer relationship management system to capture the information that is necessary for customer segmentation and targeting.

The more refined the segmentation, the better results you’ll achieve. But don’t let “getting it perfect” stand in the way of incremental improvement. Start today, even it the categories are as broad as “customer” and ‘prospect”, to realize increased conversions and more relevant communications.



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