Unless your business offers something for absolutely everyone in the world, knowing exactly who you are targeting with your products is extremely important.
Trying to sell to the widest possible market and using the one-size-fits-all approach can get your business in trouble…and these stats prove just that:
You need to accept that you can’t please everyone. You should instead try to engage the customers who can provide the most value to your business. This is where customer segmentation comes into the picture.
See, your target customers have unique needs, wants, traits, and pain points – and customer segmentation can help you ensure that you deliver the right message to the right kind of customers.
In this blog, we will walk you through what customer segmentation is, why it’s important, and how it works. Are you ready? Let’s roll!
What is Customer Segmentation? (Definition)
Customer segmentation is the process of dividing your customers into targeted groups based on characteristics they have in common. It ultimately allows you to create tailored sales and marketing strategies.
Customer segments can be wide – for example, those who have purchased your e-book, and those who have not. They can also be narrow and focused – for example, customers who have kids and customers who don’t.
So, is customer segmentation different than market segmentation?
Yes, it is. Market segmentation is more general and broader than customer segmentation. It looks at all of the marketplaces, whereas, customer segmentation only focuses on part of the market.
Now that you know what customer segmentation is, let’s head over to the next section of the blog post: why customer segmentation is important.
Reasons Why Customer Segmentation is Important
Customer segmentation is a smart way to understand who your customers are and what they are looking for. If done right, customer segmentation can bring many benefits to your business, such as:
1. Better Marketing
By breaking down a large customer base into smaller, more manageable chunks, it becomes easier to target the right audience and create successful campaigns using the right channel.
2. Higher ROI and CRO
Targeted campaigns always bring much better ROI than generic campaigns, as those customers have already shown interest in your product or service.
3. Identifying New Market Opportunities
When you are grouping the customers into clusters, you might discover a new market segment, which could give you new insights into your marketing strategies.
4. Better Brand Strategies
Once you have nailed down what motivates your customers, such as the price or practical needs, you can brand your products accordingly.
5. Better Distribution Strategies
Knowing where your customers like to shop from and when removes the guesswork out of the equation and helps you sell your products at the right places.
6. Customer Retention
Through segmentation, you can identify customers with the highest potential value, along with the ones that need some extra nudge – and create strategies accordingly.
Customer segmentation has so many benefits, and you know that by now. In the next section, we will take a look at the four important types of customer segmentation.
Four Types of Customer Segmentation You Should Know About
1. Demographic Segmentation
This is one of the most widely used customer segmentation! Demographic segmentation covers age, gender, occupation, industry, household income, marital status, education level, etc.
For example, luxury brands may choose to target the customer segment that earns more than $30,000 per month. Universities and academies may target their marketing campaigns to children aged 16 to 23.
2. Geographic Segmentation
In geographic segmentation, customers are divided according to their location. The segment could be as wide as a country or a state, or as narrow as specific areas in a town.
For example, if you sell winter clothes and equipment, marketing it to people who live in hot regions would be pointless. You’ll need to target people who live in cold regions!
3. Psychographic Segmentation
Psychographic segmentation is the process of grouping customers based on internal characteristics – such as lifestyle, interests, personality, beliefs, values, attitudes, social class, and more.
For example, a company that creates plant-based foods will target people who follow a specific diet, such as vegans or vegetarians. That’s psychographic segmentation in a nutshell!
4. Behavioral Segmentation
Behavioral segmentation is all about categorizing customers based on the actions, behaviors, and patterns they display while interacting with your company or making a purchase decision.
For instance, you can group customers according to the number of pages they visited, the time they spent on your website, the shopping cart value, exit intent, inactivity, and more.
On the surface, customer segmentation might involve three stages: collect data, identify patterns, and segment the customers. However, it’s a little deeper than that. Read on.
How to Perform Customer Segmentation – Step By Step Process
Step 1: Know Your Goal
What is it that you hope to achieve using customer segmentation? What problems are you attempting to resolve? What’s your desired outcome? Answer these questions as precisely as you can, and if possible, use metrics to set measurable goals.
Step 2: Set The Scope
It’s super important that you set strict parameters for customer segmentation, such as the number of segments you are planning to create, the sources you want to pull data from, and more.
Step 3: Collect The Data
This is pretty self-explanatory – collect customer data from all the internal and external sources that you decided to use in the previous step.
Step 4: Establish The Variables
Segmentation variables are basically the characteristics that you will use to segment your customers, such as geographic, behavioral patterns, demographic traits, social media consumption, and more.
Step 5: Consult Key Stakeholders
Before you actually start working on the customer segments, it’s better to check in with the key stakeholders to ensure that everyone is on the same page.
Step 6: Create Customer Segmentations
Here comes the step we have all been waiting for! It’s finally time to put everything together and start building your customer segments.
Step 7: Promote Internally
Now that you have created your customer segments, it’s time to make sure that every department in your organization adheres to them when making strategic decisions. For that, you need to develop plans for educating the employees and stakeholders and share these segments with the teams.
Step 8: Develop Marketing Campaigns
It’s time to put your customer segmentation into play! Start working on personalized marketing campaigns, targeted sales outreach, and so on.
Step 9: Reevaluate Customer Segments
Always remember that customer segmentation is an ongoing process. Keep evaluating what’s working and what isn’t, and make the necessary adjustments.
Let’s be honest. It is not easy to gather, record, and present all the customer data. There will be times when you keep running into one challenge after the next while recording the data.
One of the major challenges you’d face is creating, organizing, and sharing all the customer research documents. So, you need to hedge this thing off before it becomes a problem.
…and that’s where Bit.ai comes in!
Bit.ai Will Assist You With Customer Segmentation Research
Bit.ai is a robust, new-age, and smart document collaboration platform that allows you to create, manage, organize and share documents – under one single roof. Bit will make recording and organizing all your customer research data super easy – you can take our word for it!
Want to know other reasons why you should use Bit.ai while conducting your customer research? Read on!
1. Collaborate With Your Team in Real Time
While collecting and recording your customer research data, you need inputs and insights from your entire team so that you don’t end up misinterpreting anything.
Bit.ai helps you do that effortlessly! On Bit, you and your team can collaborate on documents in real-time. That means you don’t have to communicate back and forth with your team through emails and messages.
2. Organize Everything Efficiently Using Workspaces
While conducting customer research, there is a lot of information that you need to gather from different users – and storing all this information can be a pain.
Bit is here to take that pain away. On Bit.ai, you can create smart workspaces and keep all your research data organized in folders and subfolders.
3. Create Smart & Interactive Documents
What if you could add all your important customer research information in one single document? We’re talking about the excel sheets, surveys, charts, etc. Won’t that make your research documents so much more powerful? The best part is – your team won’t have to jump from one platform to another to get information.
Well, Bit helps you do just that! You can embed surveys/polls, charts, cloud files, presentations, and any rich media you can think of in your Bit doc. This nifty platform supports over 100 integrations!
4. Share Your Documents in Multiple Ways
Research findings are crucial documents, and you need to make sure that the right people have access to them at the right time. This is why Bit supports features like document tracking, password protection, file access restrictions, etc. that help keep your important information safe.
Once you are done creating your user research documents, you can easily export them as PDFs, Word files, Markdown, and much more. You can also share them via a link or through Bit’s guest access feature!
There’s nothing like Bit out there when it comes to creating and organizing documents. With a free account for up to 5 members, there’s no reason why you should not give this amazing platform a try.
You do not always have to use the standard attributes of age, gender, income level, etc while categorizing your customers. You can segment your customers based on the characteristics that work for your organization.
No matter which character you choose, segmentation will allow you to target your ideal customers, and help you save the costs of targeting customers outside of the ‘ideal customer bracket.
Lastly, always be open to reevaluating your segmentations – after all, people change! By the way, if you have any questions or suggestions, tweet us @bit_docs, and we would be happy to help you.
Bit.ai is the essential next-gen workplace and document collaboration platform. that helps teams share knowledge by connecting any type of digital content. With this intuitive, cloud-based solution, anyone can work visually and collaborate in real-time while creating internal notes, team projects, knowledge bases, client-facing content, and more.
The smartest online Google Docs and Word alternative, Bit.ai is used in over 100 countries by professionals everywhere, from IT teams creating internal documentation and knowledge bases, to sales and marketing teams sharing client materials and client portals.