Customer Segmentation: How to Effectively Segment Users

Customer Segmentation: How to Effectively Segment Users

Segmentation is defining a market based on demographic and lifestyle variables. This helps organisations better target their marketing efforts towards the market segments most likely to respond positively.

There’s no question that when you’re launching a new product or service, you need to be smart about how you market it. In today’s digital landscape, there are more options than ever when choosing what kind of message you want to send to your target market. That’s why segmenting your target audience and creating personalised messaging for each group are so important. 

To do this right, you must understand what motivates and influences a particular customer. This post will look at several ways to segment your user base into distinct groups.

It’s the secret sauce that drives the success of any marketing campaign. But how does one effectively segment users?

In this guide, we’ll take you through segmenting customers based on their behaviour patterns and then use that knowledge to craft targeted marketing campaigns and offer the right content to the right people at the right time.

What Is Customer Segmentation?

Customer Segmentation Performance Matrix
Source: Intercom

Customer segmentation is identifying subgroups of customers based on their needs, behaviours, attitudes, and values. It is used to create customised products and services that meet the needs of different groups of consumers.

Today, most companies use customer segmentation to identify specific needs in different market segments and to target them with relevant messaging. For example, a clothing retailer might target males ages 18 to 25 with different messages than females or teens with different messages than adults. However, before using customer segmentation, you must first decide what needs to be segmented.

Who Are Your Customers?

Once you know who your current customers are and what they want, it’s time to think about what you might need to do differently. For example, if you sell shoes, you may want to consider teenagers’ needs. You might target women interested in makeup or fashion if you sell cosmetics.

You may also need to consider where your customers are. For example, your customers may have similar needs and may live nearby. If so, you may want to target them with different messages or marketing methods.

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Consider Your Current Customers

One of the best ways to understand the needs and motivations of your current customers is to ask yourself these questions:

  • Where do my customers spend most of their time?
  • What are they interested in?
  • Where do my customers get their information?
  • Are there any gaps in my current product or service offerings?

After you’ve defined your customers and their needs, you can identify the products or services that match them. This is called the “desired outcome”, and it will give you a framework to determine the type of customer segmentation you’ll need.

For example, if your customers are men ages 18 to 25 looking to start a new job, you might focus on job hunting and employment. This may be the “desired outcome” for your market and may lead you to a particular message and a product optimised for this group.

If your customers are women ages 30 to 45, you might use the same message to attract and retain more female employees. The desired outcome is different in this case, but the message and offer are the same.

Your customers don’t all have the same interests. Some may be more concerned with job hunting, while others may be more interested in family issues or starting a new business. So, it’s essential to ask yourself, “How does the way I communicate and the product I provide fit into these interests?”

Identify Your Needs

After you’ve identified your customers, you can focus on identifying their needs. It’s important to know whether you’re serving your customers well or whether you should create a new segment or target a new market.

You can learn about the needs of your customers by asking yourself the following questions:

  • What do my customers want?
  • What are their problems?
  • How can I help them solve their problems?
  • What would make my customers happy?
  • Do your customers have a common interest or a unique need?

Once you have identified your customers’ needs, it’s time to consider how you can help them meet them. Once you have done this, you’ll be ready to create customer segments.

Who Are Your Potential Customers?

There are three steps to identifying potential customers:

  1. You must define your target market.
  2. It would help if you analysed the characteristics of this market.
  3. You need to determine if these potential customers meet your desired outcome.

Define Your Target Market

To define your target market, you must first identify the size of your potential customer base. You can do this by identifying the number of people you are trying to reach or the demographic you want to reach.

For example, if you sell shoes, you might be trying to reach a specific age group, gender, income, or geographic area. The more specific you can be, the better since a small market segment may require different messaging than a large one.

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Next, you should think about what your customers are looking for. You might need to identify a specific need that you can fill. Or, you may find that you have a more significant number of customers that want to meet a specific need. Either way, you’ll want to know what you want to say to them.

Analyse Your Potential Customers

Once you know your customers’ needs, it’s time to find out if there are enough of them to warrant creating a segment. You can do this by analysing your potential customers’ demographics.

To create a segment, you need to know the age, gender, and other factors that make up your potential customer base. For example, if you sell shoes to men ages 18 to 25, you would target that segment. You’d likely target a different age group and demographic if you sell women’s jeans.

Once you have identified your target market, you can determine if your customers share similar traits and needs. Identifying your target audience is the first step in creating a successful ad campaign. You want to ensure that your advertisements are relevant to the people seeing them.

How is Segmentation Used

How To Use Customer Segmentation

Customers are divided into segments based on their behaviour and buying. Different segments have different preferences in terms of product or service features.

Customer Segmentation is a marketing practice that focuses on creating unique customer experiences by identifying and targeting customer segments with similar needs and most receptive to your products and services.

In other words, customer segmentation is a way to identify the people most likely to want what you sell and tailor your offerings to their specific needs.

Segmenting customers is a step in the marketing process that can help you understand your target audience, improve your ability to engage with them, and develop more effective strategies for promoting your products and services.

You can use customer segmentation to identify the following:

  • A specific demographic that is most receptive to your offerings
  • The best channels through which to reach customers
  • People who share a common trait, such as gender, lifestyle, or purchasing patterns
  • Customers with specific motivations or goals

Why is Customer Segmentation Important?

You can create loyalty and build your brand if you know how to target your customers with products and services they want and need.

Segmentation helps you discover the differences between customers and create experiences that resonate with them, whether for a mobile app or a website.

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Customer Segmentation is an essential part of any modern business strategy because it can help you:

  • Provide a personal touch
  • Develop a customised approach
  • Improve the value of your offering
  • Develop a targeted marketing campaign
  • Better understand your customers and their interests.

Benefits of Customer Segmentation

In recent years, companies have focused on customer segmentation to identify target audiences that might fit their products and services. Segmentation is used to understand how the customer behaves and to gain insight into the characteristics and needs of each group.

The most common approach is to create segments based on demographics or income levels. However, this approach can fail to consider customer behaviour, interests, or needs. A segmentation analysis based on purchasing behaviour and lifestyle preferences can be more effective.

As mentioned, customer segmentation is a way to identify specific groups of customers that will benefit from your business. For example, you can target customers who tend to buy more than the average person or those who buy only after the holidays.

Another option is to segment customers based on their lifestyle or demographic. People in the same geographic area or living in similar households often have similar interests, needs, and behaviours. So, if you sell to pet owners, you can create a pet-focused segment.

Segmentation allows you to focus your marketing messages and product or service features on the groups of people most likely to purchase your product or service. A good segmentation plan helps you identify who will respond to your marketing messages.

By learning what motivates and influences each group, you can tailor your message to address the needs of that particular segment.

How Can I Use Customer Segmentation to Improve Marketing?

Here are some ways that customer segmentation can help improve marketing.

  1. Increase brand loyalty. Customers who purchase from you repeatedly over some time are likely to be more loyal. This means they’re more likely to recommend your business to friends and family, leading to more sales and greater profits.
  2. Reach new customers. If your customer base comprises customers who purchased from you last year but didn’t make another purchase, you’re missing out on opportunities to generate new sales. By focusing on specific customer segments, you’ll be able to reach customers who are more likely to purchase from you in the future.
  3. Identify the most profitable customers. Customer segmentation allows you to determine the most profitable customers and target them for your business.
  4. Learn more about your customers. With segmentation, you can learn more about your customers, including the characteristics of their households, jobs, and lifestyles. By knowing your customers better, you can market to them more effectively.
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Types of Customer Segmentation

Marketsegmentation Blogimage
Source: Remesh

Segmentation can be done at any customer life cycle stage, but it’s especially effective when targeting new prospects. Understanding what differentiates these new prospects from the rest of your existing customer base can help you identify why they’re most interested in buying from you.

The three basic types of segmentation are:

  1. Demographic
  2. Psychographic
  3. Behavioural

Let’s explore each one.

Demographic Segmentation

Most companies first segment based on demographics. This is a straightforward approach to segmenting your target audience.

Demographics are the things you can measure, like age, gender, occupation, or income. Companies often use this information to create groups of customers who share the same values or needs.

For example, an auto insurance company may segment based on the following:

  • Age
  • Gender
  • Location
  • Marital status
  • Family size
  • Interest in certain sports, hobbies, or activities
  • Education level
  • Income

Psychographic Segmentation

Psychographic segmentation is much more focused on the buyer’s mindset. Instead of grouping customers based on their specific demographics, it focuses on how buyers think and feel. This is often used to determine where buyers are on a spectrum of a particular need.

For example, a home improvement store may group customers into one of three segments based on their motivation for purchasing their next big project.

The most important motivations are:

  • Money
  • Pride
  • Adventure
  • Love

These motivations are similar to the ones you’d use to describe a typical customer. For instance, a contractor might describe a customer with money as one who “likes a bargain,” while a customer looking to build a dream home might be described as a “homebody.”

Behavioural Segmentation

Unlike demographic and psychographic segments, behavioural segmentation is based on the specific actions of individual customers.

Behavioural segmentation is sometimes referred to as micro-segmentation. Behavioural segmentation looks at how people act and behave, so it can help you determine whether the customer is ready to buy or what product features would be most appealing.

A retailer, for example, may segment based on the following:

  • Product search behaviour
  • Click-through rate
  • Conversion rate
  • Referral rate
  • Sales volume
  • Loyalty

It’s important to note that many customers may not fit perfectly into these categories. For instance, a customer who purchased a single item is unlikely to be loyal.

Segmenting your audience can help you better understand your customers, which is essential to crafting the right message for them and targeting your marketing efforts appropriately.

How to Market to Customers

What Is Customer Experience

Customer segmentation is the process of identifying unique groups of customers based on specific characteristics that affect how they buy or behave. Segmenting customers allows you to send different messages or offers to different types of customers. By understanding the buying habits of each group, marketers can find ways to encourage them to buy more, which is critical for maximising the value of their marketing budget.

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There are different types of customer segments, but the most commonly used types include the following:

  1. Age: Most companies segment their customers into age groups. For example, a company might categorise customers by age: 18–24, 25–34, 35–44, etc. This approach is most familiar to younger customers and older customers.
  2. Gender: Companies often use gender as a way to segment their customers. Some companies segment their customers based on gender: men, women, or both. This allows companies to tailor their marketing strategies to the different preferences of each group.
  3. Interest: Some companies segment their customers based on interest. For example, a company might group customers by interest: tech-savvy, fashion-forward, or sports-minded. This strategy is helpful because it helps a company tailor their marketing efforts to the needs of each segment.
  4. Loyalty: Loyalty segmentation lets companies identify customers who are repeat buyers or buyers who purchase often. This is especially helpful for businesses with products or services that must be ordered regularly or have limited quantities.

Customers who had bought before and purchased regularly are referred to as loyal customers. These customers are valuable because they represent a high-value target for retailers or service providers. In addition, these customers are more likely to purchase from a particular brand or retailer.

These customers are valuable because they represent a high-value target for retailers or service providers. In addition, these customers are more likely to purchase from a particular brand or retailer.

Conclusion

You might think that if you’re trying to sell a product, you should segment your audience by gender, age, interests, etc. After all, that’s what you’d do in a physical store. But that’s not necessarily what makes sense online.

This is because you can segment your audience in many different ways online. And each segmentation method has its pros and cons.

For example, if you’re selling a product, you may not care whether someone is male or female. But, if you’re selling an ebook, you might want to segment based on gender. This is because women tend to buy more books than men.

I think the best way to segment your audience effectively is to base it on their interests. For example, if you’re selling a product that helps people learn how to build a website, you may want to segment it by the types of websites people own.

You can market your product to those people based on their specific needs. Learn more about customer segmentation in my free guide by subscribing below!

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