Modern businesses can’t rely on generic marketing strategies to sell and earn consistent profits. Customer segmentation is the key to audience engagement and profitability, irrespective of whether you own a startup or a global enterprise. 

Figure out different groups within your segment of the market and try to understand their unique needs and preferences. It will help you create a personalized marketing plan for effective communication.

Our comprehensive blog on customer segmentation will allow you to make actionable strategies to enhance your personalized marketing efforts.

Jeffrey Oravbiere

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What is Customer Segmentation?

Customer segmentation helps you divide target customers into sub-groups based on characteristics like demographics, behaviors, or psychology. Segmentation allows businesses to tailor their messages and make special offerings to each segmented customer segment. It adds relevance and impact to your communication efforts.

Target market segmentation directly connects a business to its audience, boosting the conversion of leads into paying customers. With a precise target customer segment, you can implement laser-focused strategies on the most promising consumers.

Power of Customer Segmentation

Customer segmentation marketing helps you achieve the following benefits:

1. By differentiating each segment of the market, you can implement personalized marketing to address specific groups with tailored messages.
2. It also results in improved customer retention as it gets easier to satisfy customers and build better relationships with each target consumer segment.
3. Customer segmentation promises a higher return on investment (ROI) as it allows you to retarget marketing efforts on specific market segments in marketing. That’s how you get better results with the perfect utilization of available resources.
4. It gives you a competitive advantage over rivals as you identify and address unmet needs to precisely target market and market segmentation.

Key Bases of Customer Segmentation

Understanding your customers inside-out is the key to successful segmentation. However, many businesses get confused while dividing their audiences. Below are the primary bases for segmenting markets.

1. Demographic Segmentation

This commonly used base for segmentation allows division of audience based on age, gender, education, income, or occupation. With demographic segmentation, you understand customers’ basic needs and where they are in life.

For Example, if you own a men’s shirt company, a segmentation between youngsters, retirees, and teenagers, will help you create different collections and retarget ads for each group.

2. Geographic Segmentation

With this, you get the location of your ideal customer to target specific audience groups in multiple regions or countries. Different locations of consumers also influence their needs, preferences, or buying behaviors.

For example, a pizza delivery service can utilize geographic segmentation to implement localized promotions in the city or neighborhood.

3. Behavioral Segmentation

Behavioral segmentation in marketing is done based on the audience’s purchasing behaviors or loyalty to a product. This segmentation helps you understand the psychology of your customers, every time they make a purchase. With the right marketing, you can influence those behaviors.

To understand it better, imagine you own an online bookstore. With behavioral market segmentation, it will be easy for you to identify frequent shoppers and you can offer them exclusive deals or reward points.

4. Psychographic Segmentation

Psychographic segmentation is done after studying the personality, interests, values, and lifestyle of each customer. This psychological base segmentation is powerful enough to find out the core reasons behind people’s purchase decisions.

For example, a hiking company can take advantage of psychographic segmentation and plan out the most adventurous experiences for those who seek adrenaline over comfort.

5. RFM Analysis (Recency, Frequency, Monetary)

RFM analysis helps you study customers for segmentation based on three points:

• Their recent purchase 
• How frequently do they purchase
• How much money they usually spend

RFM analysis is useful for all types of businesses as it filters out your most valuable clients. You can personalize marketing efforts for this special segment for unprecedented profits. For example, an e-commerce company can conduct RFM analysis to focus on loyal customers, who haven’t shopped recently.