Importance of Customer Segmentation
Mass marketing tactics to interact with customers may be effective to get results but mostly relies on the assumption that all customers will take interest in buying what you sell. Most of the time it leads you to the most time-consuming and inefficient strategy.
As a smart Marketer, you would decide on various Marketing Strategies most fruitful for your Business.
Like,
- New Product Awareness Campaign
- Offering Rewards based on Purchase Quantity
- Discount Coupons
- Brand Products Awareness campaigns
- Limited time offer Coupons
But would you offer these Coupons and Campaigns to all the Customers of your Business?
Think of the situation that all the Customers now possess all these coupons.
Instead of Increasing Customer Retention in your Business and Increasing Profit, loss in Business will increase, not only by losing Customers and decreasing Sales but also because investments and cost in implementing Marketing strategies would be a failure plan.
What will be the outcome of the ‘One-size-Fits-all’ Marketing strategy in Business?
As discussed, Customers possess all coupons, and offers, Say for example,
Highest Paying Customers possessing Discount Coupons will use them in your store while purchasing Products. However based on their behavior, you can say that Purchasing Costly Products at Retail Price was never an issue for them. So such Customers should be offered Brand Awareness Products coupons only. This aids you to focus and further analyze over a limited number of people rather than all.
Awareness of Costly Brand Products to Regular Customers who pay less is a waste of time, human energy, and money too.
Likewise, limited time Offer coupons should be offered to customers who have not purchased from your store since a long time ago.
The saying that “Different Customers Purchase for Different Reasons” should never be ignored when deciding Marketing strategy.
As a smart Marketing Strategist,
“Divide all Customers into Segments ”
What is Customer Segmentation?
Reaching customers and increasing Sales requires strategic planning where understanding the Customer’s needs based on their behavior is a must.
Customer Segmentation also known as Market Segmentation is the process of dividing your customers into different segments considering various Parameters that helps you to understand the behavior, the type, and the need of the customer based on the segment to which they belong.
Every Segment defines a specific type of behavior, based on their purchase the need of customers can also be identified.
Knowing the segment to which the Customer belongs, further helps Marketers to tailor and customize their marketing strategy that increases the success of the Marketing Campaign.
Which type of Information can be known if Customers are divided into Segments?
The segment defines a Specific type of Behavior of the Customer. Based on Segments to which they belong Marketers can know various aspects of Customers like
- How much do Customers Purchase?
- What do Customers Purchase?
- How frequently do Customers Purchase?
- What revenue do they generate while Purchasing?
- What age of people purchases what type of Products?
- Which brand products are purchased more by which People?
- What is the Professional background of Customers?
- To what group of age do Customers belong?
- What is the geographical location of Customers?
Knowing, the answers to all these Questions helps Marketer to decide
“Which Strategy should be implemented on Which Customers?”
Various techniques of Customer Segmentation
Customers can be divided into Segments based on various techniques like
- Demographic Segmentation:
This is the most common technique of dividing customers into segments based on their Age, Gender, Income, Education, and Marital Status. - Geographic Segmentation:
This technique involves the splitting of customers based on location. This type of Segmentation helps to know which customers live in which type of environment and thus marketers can analyze and strategize Which products based on the environment should be introduced to which customers? - Psychographic Segmentation:
An advanced form of Segmentation that divides customers based on their personalities, interests, lifestyles, attitudes, and various psychological constraints.
This type of segmentation will let Marketer know that
Why Do Customers Purchase certain Products and why not some other particular Products and Services? - Technographic Segmentation:
Using this technique, Customers are divided based on their technological needs of Customers, like Mobile Use, Desktop Use, Applications, and Software Use.
It lets Marketers know Which type of technical products to be introduced to which customers? - Behavioral Segmentation:
In this technique, Customers are Segmented based on their behavior like frequent actions, habits, products use, online shopping habits, and various such behavioral constraints of Customers.
This type of Segmentation lets Marketer Know, - What was the Customer’s action on the Website?
- What are their habits of purchasing online?
- What is the need of the Customer?
- How do they react to various products?
- Hybrid Segmentation:
Hybrid Segmentation can be defined as a combination of two or more above-mentioned segmentation techniques. Behavioral, psychographic, and even demographic techniques can most probably be combined.
Segmentation techniques can also be customized based on the Marketing team’s requirement to know various activities of customers.For example, to know details of customers altogether like, - When did the Customer last purchase?
- How frequently do customers Purchase from your Store?
- How much revenue do they generate for your business or store?
This technique of knowing all three parameters of Customers altogether is used in RFM analysis. This technique not only helps you analyze and decide
Which Marketing Strategy to be implemented for Which Customer?
But also based on segments to which Customers belong, Marketer can very easily analyze details about Customers like
Which Customers visit frequently and also pay the highest?
- Who are the Highest Paying Customers?
- Which customers have now become Non-Regular Customers of your store?
- Which Customers are new to your store?
- Which Customers Purchase moderate-cost products but visit frequently to your store?
- Which Customers purchase from Your store only?
Knowing how best this Hybrid type of segmentation technique like RFM analysis is, you can learn the Methodology of segmenting Customers based on RFM Analysis.
How does Customer Segmentation Benefit Your Business?
Marketing Segmentation or Customer Segmentation helps marketing teams to plan the most effective and highly efficient and time-saving marketing strategies and campaigns.
Below mentioned are a few of the benefits of many if you plan to divide customers into Segments before implementing your Marketing strategy.
- Highly Focused campaigns
- When customers are divided into Segments before implementation of any Strategy, then the marketing team is aware of the type of Behavior of Customers and hence can plan and implement marketing Campaigns about Specific Products/ Services. Most probably the outcome of such a Marketing campaign is also predictable. Results are optimum as the Right Segment is made aware of Right Products and Services. All in one, Achieve maximum throughput of a campaign by dealing with relevant Customers rather than all.
- Serve better to Customers
- As only the right group of people are dealing with Right Targeted Strategy because of Customer segmentation, during the time of actual Services, you are dealing with the Targeted Right audience only and with fewer efforts, the Right group of people will show the best interest. Thus, Services to Customers will also be the best one dealing with the most interested group of contenders only. Your Services can be highly focused one and thus Customers will be most Satisfied, diving your Targeted Campaigns and then best services to optimum Profit for your Business
- Sustain best in Market Competition
- When your Marketing strategies are based on Segments that define specific types of Behavior and activity of Customers, that means you are serving What Customer needs. Hence all Targeted Customers are best satisfied with your services which leads them to your store only. Thus, indirectly setting the Competitive reach for your competitors and Surviving at top-notch, Sustaining the best in a competitive market.
- Targeted Communication
- Though the product features, benefits, and usability are the same, your Marketing team based on Segments to which customers belong can decide which type of Specific Communication strategy to use while interacting with Customers. Say, for example, you are dealing with a Segment that possesses all Customers with the education in Engineering or any such relevant Technical field then as a Smart Marketer you are aware that customers of this Segment better understand products when informed with Technical information and features that suits best to their technical requirements whereas if segments possess customers of accounting field then informing customers about best cost-saving, best efficiencies and such parameters will lead you to achieve your targeted selling. Thus, Customer Segmentation helps Marketers to understand that for the same products,
“How to introduce Products to Customers based on their Professional background?”
All in one,
“Segment Customers to grow Better”
Customer Segmentation becomes imperative in providing positive, most effective, highly efficient strategies to the Sales and Marketing team, increasing sales in Business and leading to optimum profit. Hybrid Segmentation provides the best efficiency. However, each Segmentation has its importance and performance throughput based on the need for data required by the Marketing team. But in this most technologically updated growing World, retrieving data of Customers like
- When did the Customer last Purchase?
- How many times do they Purchase?
- How much do they spend on Purchasing?
And then dividing Customers into various Segments known as the RFM technique helps you to identify various types of behavior of Customers like Champion Customers, Regular Customers, Highest Paying Customers, Non-Regular Customers, New Customers, Loyal to your store only Customers, and various such characteristics and behavior of Customers that ultimately helps Marketer to lead Highest sales and dominate the Competitive Market in every aspect