Customers are the lifeblood of any business. Understanding their needs, wants, and pain points is crucial for delivering exceptional service and products. Technology and customer surveys can help you gather invaluable data about their customer base and segment customers into different groups based on various characteristics.
It’s a process known as customer segmentation and something we will delve deeper into below…
What is customer segmentation?
Customer segmentation is the practice of dividing your customer base into groups that share similar characteristics. Think of it as organising a wedding reception: you’d have tables for family, friends, and a separate table for food.
Different customer segmentation models can categorise customers based on geographic location, behaviour, demographics (such as age and gender), and values. Essentially, you can segment your customers based on any meaningful criteria for your business.
Customer segmentation improves customer support
Segmenting your audience gives your support team valuable insights into the customer’s profile. This helps them offer more personalised and efficient service. According to Zendesk, 90% of customers will spend more with businesses that offer personalised customer service.
Better advertising campaigns
Splitting your audience allows businesses to tailor their advertising campaigns to specific groups, increasing conversion likelihood and reducing wasteful spending. For instance, a company like Just Eat would not advertise food on LinkedIn but might run targeted ad campaigns on Instagram and TikTok at dinnertimes to entice users to sign up.
By understanding your customers’ needs and preferences, you can send them highly relevant and engaging communications rather than generic messages that they might ignore. Estate agents, for example, might send some of their customers updates on new houses on the market, whilst others will receive landlord advice and support.
Demographic segmentation is perhaps the most straightforward model, segmenting customers based on their age, race, gender, marital status, education, and income.
Brands can target different age groups through various communication channels, identify potential customers for higher education based on their educational background and segment customers based on income levels for budget-specific marketing.
Segmenting your audience based on their behaviour covers product usage, buying patterns, and shopping behaviour. Brands can personalise ads for loyal customers and create FAQ pages based on typical customer queries. The correct tracking and analytics tools are essential – ensure you understand exactly what your customer is doing and wants.
This model considers a buyer’s values, interests, attitudes, personality types, and lifestyle. Companies might showcase their social initiatives to customers who are passionate about these causes and use customer personas to represent different segments. Brands are increasingly piggybacking off of interests and values to align with their customers’ desires and score ‘brownie points’ on social media. Just look at the rise in brands adopting pride.
This model is centred around the customer’s value to the business, measured by ROI, frequency of purchases, and spending patterns. Companies can identify high-value customers for special promotions and implement a loyalty programme to encourage repeat purchases. We’ve developed a guide to building a loyalty scheme to increase sales.
As the name suggests, this model groups customers based on their location. As a result, companies can run localised advertising campaigns and tailored communications for local festivals and traditions. Global brands increasingly turn to hyperlocalised campaigns to win customer favour and position themselves as part of communities. With the right strategy, you can piggyback off core community values and cement your brand as a key player.
This model categorises customers based on their comfort level with technology. For example, the right data can help organisations decide the feasibility of launching a mobile app or tailor their products and experiences for technologically challenged customers.
This model focuses on the specific needs of the customer. Data can be used to customise delivery options for better service or implement accessibility features on a website.
This is particularly useful for B2B companies, segmenting customers based on their industry, company size, and revenue. Brands can tailor products or services for small businesses or large enterprises and evolve as their customers do over time.
Lifecycle stage segmentation
Finally, a quick word on lifestyle stage segmentation. This model segments customers based on their stage in the customer journey and can improve the onboarding processes for new customers and help develop strategies to reduce customer churn.
Customer segmentation is an indispensable tool for any business aiming to understand its customer base better. By employing these nine customer segmentation models, you can refine your marketing strategies, improve customer service, and ultimately enhance your business performance. Contact the Zudu team today to learn more and see how we can help.