Marketing plays a massive role in the success of a business or organization. However, before you can go about creating a marketing strategy, there are several things that you need to take care of first. One of those things is market or customer segmentation.
What is customer segmentation?
If you’re new to the concept of “market/customer segmentation,” don’t worry — it’s pretty simple to understand. As the name suggests, it’s essentially categorizing your clients or consumers into “segments” based on shared traits or characteristics. This process helps businesses and organizations determine exactly what type of messaging and medium would influence a customer to make a purchase or sign up for a service.
Companies can gather unique insights using customer segmentation and save money, time, and other resources to boot.
Types of customer segmentation
In market segmentation and research, there are five popular forms that it may take, depending on its application: psychographic, demographic, firmographic, geographic, and behavioral.
Under psychographic segmentation, customers are categorized according to their psychological characteristics. In other words, their lifestyles, personalities, as well as attitudes towards life events.
On the other hand, demographic segmentation involves recording and grouping customers according to their age, sex, occupation, educational background, civil status, as well as income. This is the simplest type of segmentation a business can do.
Meanwhile, the trickiest types of segmentation are behavioral and geographic segmentation. These segmentation types require a lot more research and consistency given that behaviors can very quickly change at a drop of a hat and wants and needs aren’t necessarily the same throughout a single geographic area.
The last type of market segmentation is what experts call firmographic segmentation. Whereas other market segmentation methods record data from customers, firmographic segmentation gathers data from other businesses, c companies, corporations, firms, non-profits, and governmental agencies. This data is used to target and segment potential prospects in that area.
Benefits customer segmentation
The main goal of market segmentation is to help organizations create solid profiles of customers who are most likely to purchase a product or service from them. Besides that, there are other reasons why you need customer segmentation and research in your company:
1. To create better products and services
By getting to know your consumers and audiences more intimately, you can find out their needs and wants more accurately. The goal of every business should always be to provide their clients with services that can help them solve everyday needs. Once you gather this data from your customers, you can develop new features, products, and services that are more aligned with this information.
Improving your services won’t just ensure your clients stay loyal to your brand or business, it will also increase their confidence in your products and services. It may also invite more people to your company.
2. To increase marketing results
With the data you gather from customer segmentation, you can more accurately market your products and services to your customers. This not only saves you money but also helps increase your marketing results and efficacy. After all, it wouldn’t be any use to advertise your services to a group of people who have no interest in what you create.
3. To get better leads
Since customer segmentation and research can help improve marketing efficacy, it also provides companies with higher-quality prospects. People from certain segments are also more likely to invite other people within their segment to use the products that they are using. This can trigger a domino effect that may help your sales increase significantly.
4. To improve investment returns
Depending on the application, marketing can use up a lot of money. This is why you want to make sure that your strategies are executed without a hitch. Otherwise, you’re basically flushing money down the toilet.
Customer segmentation ensures better marketing and high-quality leads, which also adds up to a better return on investments. With the gathered data from customer segmentation efforts, you can effectively allocate resources to where it will be most profitable.
When it comes to marketing, even the tiniest detail can be pivotal for a business. Customer segmentation can help target niche markets that you may have overlooked in the past. This opens you up to more opportunities for new products, services, features, and even companies.
6. To determine if you’re doing enough
Are your marketing campaigns doing enough to increase your reach and sales? Customer segmentation can help you determine just how far you’ve traveled on the road toward your goals. Furthermore, it can help you keep track of your investments, providing you with data that can help you identify which are profitable and which are sinking ships.
7. To drive brand awareness
Customers are more impartial to brands that actually pay attention to their needs, frustrations, and emotions. This is why getting to know your customers including their quirks and behaviors is important. It will retain in them that your brand is more than just a business — it’s a partner working hard to provide them with high-quality services.
The bottom line
The key to marketing success is to target your campaigns, collaterals, and other promotional efforts to the right people. Customer segmentation and research allow companies to improve their marketing strategy and understand their consumers’ needs better. By doing so, businesses can increase brand awareness as well as profitability