Customer segmentation involves the practice of categorizing customers into distinct groups or segments based on common characteristics such as age, gender, interests, or purchasing behaviour. It is also known as consumer segmentation or target market segmentation. By segmenting customers, businesses can better understand their customer base and tailor their strategies to meet their specific needs.
Customer segmentation is a type of customer analytics that involves utilizing customer data to derive valuable insights and make informed decisions. It is also referred to as customer data analytics or consumer analytics. Through customer analytics, organizations can harness the power of data to understand their customers better and enhance their overall business performance.
Guide to customer segmentation strategy
Basically, segmenting customers involves three stages, collecting data, identifying patterns, and segmenting customers. Hence, a step-by-step walkthrough of customer segmentation strategy is important:
Assess what success appears to be
When implementing customer segmentation, it is crucial to establish clear goals and objectives. Defining the purpose of customer segmentation allows businesses to identify specific challenges they aim to address and determine the desired outcomes they want to achieve. By setting measurable goals and using relevant metrics, businesses can track progress and evaluate the success of their segmentation efforts.
Having a specific goal in mind helps focus the segmentation project and ensures alignment among key stakeholders across various business units. It provides a clear direction for decision-making and resource allocation, ultimately maximizing the effectiveness of customer segmentation.
Set up a scope
Establishing rigid parameters for market segmentation is essential- evaluate the number of segments you want to develop and from where you plan to collect your data.
Begin collecting customer data from external and internal sources to develop every segment.
Mark the variables used for segmentation
These variables are characteristics you select to segment customers. It may include geographical, behavioral, and demographic traits.
Authenticate the variables with primary stakeholders
Before proceeding with segmentation, cross-check with your stakeholders to determine if the variables chosen are acceptable to get desired results.
Develop customer segmentation
You can begin the process now!
Go for internal adoption
After creating customer segments, ensuring that all business units within your organization effectively utilize them for strategic decision-making is essential. To achieve this, developing a comprehensive plan for educating employees and stakeholders about the customer segments is essential. This plan may include sharing the segments with relevant team managers such as Marketing, Sales, Product, and Finance.
Start targeting your segments
It’s time to activate your customer segmentation strategy and implement it. Begin by developing personalized marketing campaigns that specifically target each customer segment. Craft messages and content that resonate with each segment’s unique characteristics and needs.
Re-assess your customer segments
Consumer segmentation is an ongoing and iterative process that requires regular feedback and review from your teams. Continuously gather feedback from your various teams to assess your segmentation efforts’ effectiveness and identify improvement areas. This feedback loop will help you understand what is working well and what needs adjustment.
Once these steps are followed, proper customer segmentation can be executed as per your requirements to meet your marketing needs.