What Exactly Is Customer Segmentation?
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What Is Customer Segmentation?

Running a business is a hit or miss kind of thing.

Many companies fail at launching new products released specifically for hitting revenue targets. Disappointments still happen in this day and age of full-on customer engagement and social media. It's actually a jarring experience, and it occurs at an alarming rate—65% – 75% of the time.

It all boils down to companies failing to understand what their customers want. Products are missing the mark because businesses continue to follow the same marketing blueprint. If you're struggling to expand your user base, it's time to stop using the old plan.

It Needs To Get Personal

Attracting new customers and keeping the existing ones happy takes some marketing gymnastics.

Productive teams know that in today's super-competitive marketplace, personalizing each experience matters. 88% of marketers have noticed vast improvements when they customize their campaigns, and 53% claim a 10% increase in business.

Personalization makes customers happy, too. In fact, 59% of consumers who received experiences tailor-made for them say so. The report claims that customization had a considerable impact on a client's purchase decisions. These stats sure do look good on paper, but where does it lead us?

The writing on the wall (plus all the data) suggests that brands need to go out there and get to know their customers better. The best way to reach marketing goals is to engage and personalize campaigns by using customer segmentation.

When scaling for expansion, customer segmentation is by far the most effective and efficient strategy. Segmentation splits customers in a market into sub-segments. This strategy divides users into groups that have similar needs and buying attributes. The goal is to find high-potential growth opportunities from your current pool of customers.

The process involves identifying users that share similar characteristics with your top clients. As you keep adding to the sub-segments, patterns will start to emerge based on needs, demographics, and other criteria.

The Divisions in Customer Segmentation:

  1. Needs
  2. Habits
  3. Interests
  4. Preferences
  5. Purchasing characteristics

How Customer Segmentation Can Help eLearning Business

One of the key benefits of using customer segmentation is that you can develop effective retention strategies. It makes sense to pull out all the stops to keep existing users happy. Let's take a look at the data:

  • Back in 2016, it cost businesses an estimated $1.6 trillion because of an inability to keep old clients.
  • It's five times more expensive to acquire new customers compared to retaining existing ones.
  • 68% of customers who leave never come back.

Customer segmentation allows you to create different strategies that focus on each market. For instance, you can identify who your most significant clients are and offer them exclusive benefits.

You're Trending, But In What Way?

The best way to get attention is to offer a superb Customer Experience that goes above and beyond. Splitting your user market into these sub-segments is key to doing this. Did you know that 81% of consumers get frustrated with businesses that have a terrible Customer Experience? 44% of unhappy users will also vent their anger on social media, which can harm your company's reputation.

Customer segmentation solves this problem by identifying individual client preferences. You can then customize each choice to fit each customer.

More Effective Advertising

It pays to know your customers better than they know themselves. Marketing campaigns focused on specific customers have 200% more conversions versus general audiences. In short, your marketing efforts can get better if you know exactly who your customers are and what they need or want.

Customer Analysis

Dividing your market into sub-segments allows you to engage in customer analysis. This strategy is all about profiling your clients by gathering all the data you collected and creating an ideal customer profile. All interactions with the consumer gather data one way or another, and information is critical.

You can use public records and social media to gather even more information on your clients to get to know them better. The data can provide a deep understanding of where each client fits in a category. You can then connect these behavioral insights with identifiable business outcomes.

Incorporating other data points, such as customer profitability analysis, can help you plan for the future.

Types Of Customer Segmentation

After collecting enough data about your clients, use the information to divide your prospects into segments. How? By using any form of customer segmentation to extract the data for processing later.

1. Segmentation By Geography

As the name suggests, geographic segmentation is all about grouping people together based on location. This type of segmentation relies on customizing the experience to fit the local culture, weather, and other factors. Parameters considered here are:

  • Country
  • State
  • Region
  • Climate
  • Market size

For instance, the automobile industry practices geographic segmentation by offering vehicles with different names and specs per area.

2. Segmentation By Behavior

Behavioral segmentation splits customers based on how they interact with your products and brand. This segmentation type offers plenty of variation. For instance, you can create a sub-segment for users who abandon their carts after adding items.

Another segment can include customers who only window shop and add items to their wishlist. Some variables considered in behavioral segmentation are usage, occasion, and thought process.

3. Segmentation By Demographics

Demographic segmentation is using demographic data to divide your prospects. Parameters considered here are:

  • Age
  • Gender
  • Education
  • Occupation
  • Income
  • Marital status
  • Ethnicity
  • What generation the candidate belongs to (e.g., gen X, gen Y, millennial)

4. Other Segmentation Types

Value-based segmentation divides clients by their economic value. Grouping customers with similar value levels into sub-segments make it easier to target them individually.

Segmentation by Customer Life Cycle is a journey-based segmentation that knows where in the buying process your customers are. For instance, you can target a customer who visited the site but did not buy anything by sending an email offering significant discounts.

Summary

Customer segmentation allows you to get to know more about your clients so you can serve them better. A generic or universal approach is ineffective in today's connected and very social market. Consumers can get pretty vocal about things, and the last thing you want is to be on the receiving end of a nasty rant. Personalized experiences are the keys to the kingdom, and market segmentation can open the giant gates for you.

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