Whether you work for an up-and-coming startup or an established corporation, you have to ask yourself if you know who your customers are, what market segment you're targeting. No matter how successful a company is, if you don’t understand how to market to the people within the right demographic segmentation who buy your product, you’re losing sales.
What Is Customer Segmentation?
Customer segmentation is the practice of dividing a company’s customer base into similar groups for marketing research purposes. Types of market segmentation include age, gender, interests, spending habits (behavioral segmentation), income, and more.
Marketing segmentation is a way to discover your customers’ unmet needs. By conducting market research to target groups whose needs are not currently being met by your competitors, you can fill the void with new products or services that the customer base is looking for, creating effective niche marketing for your potential customer.. If a business can customize its marketing for a specific target customer, they not only gain once missing opportunities to draw in more shoppers but they also realize an increase in sales and are able to successfully fulfill consumer needs.
A Basic Customer Segmentation Process
Customer segmentation depends on creating different groups of individuals that are looking for things that have yet to be offered. By finding these niches, a business can create a marketing campaign promoting tailored offerings to these different market segments.
To do this, you need to find the customer segments by doing the following:
- Identifying the target market through data and analytics tools
- Understanding the target market's customer needs and interests
- Defining subgroups within larger groups, for example, age, gender, income, and location
- Discovering the needs of the subgroups
- Naming the customer market segments
- Creating marketing strategies to promote products that suit the needs and interests of the different segments
- Going back and revisiting the target audience’s behavior on a regular basis to determine is marketing strategies are working and adapt marketing to changes in the targeted segments
Market Segmentation Benefits
If market segmentation is done properly, the positive impact for a business comes on many fronts. Not only does it help with the allocation of marketing resources but also pointing product development in a more beneficial direction. It can lay the path for maximum value for all customers through targeted marketing and pricing.
Using market segmentation also offers up-sell opportunities if you can discover buying trends within a group. Perhaps a certain customer segment is known to bundle items, allowing you to work on a marketing strategy that takes that into account. It can also wean out problematic groups of customers such as those with high product return rates. If you have a demographic of customers who are constantly buying then returning, that isn’t helpful for you as a seller.
Market segments can also be tagged according to the types of products sold, allowing you to assess the success of your product line. If there are a lot of cheap shirts sold and no one comes back to buy them again, consider the feasibility of that particular line of sales.
A top segment that is often missed is the idle customer- we're talking customer loyalty. It costs. It costs more to get a new customer on board than it does to bring existing customers back so finding those who have already bought something but are now idle is an easy sell. They offer growth in sales with more profitability since less capital is required to get them to purchase.
So, watch out for negative segments and jump on the chances that are offered in the positive segments. Specific market segmentation examples include:
- Customer lifetime value (LTV), profit potential with a long term customer
- Lifecycle patterns of groups
- Purchasing patterns
- Multichannel usage
- Customer psychographic segmentation to look at personalities, values, lifestyles
- Geographic segmentation – focus on geographic regions such as a town, county, region or country.
Prioritizing the positive segments and those who are potential sales needs to be highlighted in marketing campaigns while moving away from the more problematic segments.
Audience/Market Segmentation Software
A lot of CRM systems for ecommerce will have some market segmentation features built-in, but here are some other tools that specialize in market segmentation:
1. Adobe Audience Manager – Using data pulled from the marketing stack and from sources both internal and external
2. Apex Loyalty – A loyalty app that targets customers, staff and channel partners
3. Segment – Activating customer data with one API
4. SightMill – Making it simple to gather information on customer satisfaction and employee engagement through Net Promoter Score
5. Aimtell – a way to acquire, engage, and keep customers and leads even when they are no longer on the website.
6. Disciple – Branded apps to drive engagement
7. Remesh – Offers the ability to talk to a live audience then analyze answers for a better understanding of the audience.
8. Perka – Now under the umbrella of Clover provides loyalty marketing answers for businesses
9. Fixel – Focuses on determining the customers that matter through ranking website visitor's engagement.
10. Justuno – Captures, personalized messaging, and visitor analytics letting you convert visitors into customers.
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