Companies looking to expand their business will have little success focusing on a broad range of potential customers.
The key to growth is not identifying a subset’s characteristics or prospects. These customers and prospects are more likely to purchase and stay loyal. This is where customer segmentation comes in.
All of us want to get to know and understand our customers. We would love to be able to wave magic wands at customers and make them purchase products or services that are tailored to their needs. Unfortunately, life and business are more complicated.
We need systems to analyze and acquire data to understand our customers better. We also need the right approach to using this data. And we must be able to compromise.
We already have these systems in place with marketing automation. We can get the information we need and store large quantities of customer data. We have the right approach, too. We want to use these data to understand customers better and offer a beneficial service.
The final element, the compromise, can be problematic. Customer segmentation is a compromise. We want to get to know our customers individually, but this is impossible. Instead, we break down our customers into more convenient groups and try to address their needs as directly as possible.
How much compromise should we make? How do we find the perfect balance to provide seamless customer support and services?
This article will explain how you can increase your customer segmentation. First, let’s clarify what customer segmentation is and why it matters.
Customer Segmentation: What is it and why?
Customer segmentation, also known as market segmentation, divides customers and prospects into distinct groups. A variety of variables and features can be used to determine the division, but most often:
Customers need. What do customers want? What product or combination of products can they use to satisfy their needs?
The buying characteristics What are their buying habits? What are their responses to messages? What are marketing channels most appealing to them?
What age are they? Which stage of their lives are they at? What impact do their experiences have on their buying decisions?
There are three types of segmentation.
Customers are classified based on publicly available information, such as their demographics and industry.
Segmentation based on needs, based upon market research findings
Expanding-stage companies can use value-based segmentation to identify and focus on prospects
A business should concentrate on value-based segmentation during its growth stage. Why? Why? Because without understanding your most valuable customer, executing a marketing strategy for expansion is like shooting an arrow 150 feet away blindfolded. You’re unlikely to hit the bullseye. You will likely miss the target entirely.
Understanding the segments of your best customers will give you the sharp focus that you need to allocate capital and human resources in a way that generates the most significant marketing ROI.