What is segmentation and how does it help find your best customers
Jun 2, 2023

What is segmentation and how does it help find your best customers

Segmentation is a marketing term that may sound complex, but it’s actually quite simple. In its simplest definition, segmentation helps you break down your customers into smaller groups in order to target each group effectively. Sounds strangely familiar?

It should. I bet you have heard about segmentation before and you’re thinking “I already know everything I need to about customer segmentation” I bet you are wrong

You can always learn something new. So have a read and see how a CDP can do wonders for your segmentation efforts.

Understanding your customers

Understanding your customers is crucial to the success of any brand. What you need to do here is:

  • Understand the customer journey – how they make decisions and what makes them decide.
  • Understand how customers like to buy – what are their pain points in the process? How can you make it easier for them?
  • Understand where your customers hang out – what do they read, watch and listen to? What sites do they browse regularly (social media or otherwise)

Segmenting your customers

Once you’ve collected data about your customers, you’ll want to create segments. Segments allow you to organize your customers by common characteristics, which makes it easier for you to communicate with them more effectively.

Segmentation can be done on many dimensions: demographics, psychographics, behavior, and geography are some of the most common.

A demographic segmentation could look at age, gender, or marital status. A psychographic segmentation might focus a bit deeper on personality traits and lifestyle habits such as hobbies and interests. Geographic segmentation groups contacts based on where they live or work (such as country or city). A behavioral segmentation could include purchase history, job title, or industry — whatever fits your business best!

It’s important to keep in mind that audiences are unique and often have multiple characteristics in common with different audience segments depending on how narrowly they’re defined. You may want to compare customers across several different dimensions simultaneously when narrowing down segments for marketing campaigns (for example all males between the ages of 40 and 49 who purchased at least one bicycle product within the last 12 months).

Why segmentation is important?

Segmentation can help you achieve the following:

  • Increase sales. By understanding your customers, you are in a better position to offer them the products and services they want.
  • Improve customer service. Again, by understanding your different types of customers, you will be able to develop better relationships with them, for example by tailoring your support services to their needs.
  • Communicate more effectively. You can craft campaigns that clearly address each segment’s wants and needs, which will make them more effective overall – rather than using a scattergun approach that may only connect with fragments of each market segment.
  • Customer-focused marketing. Segmentation is all about learning more about who your customers are and what they want from you. Customers appreciate this kind of personalized engagement and it helps build trust between you and your audience; it also helps to create long term value through loyalty and repeat business.
  • Increase the value of your business – If you use segmentation well across every part of the organization (not just as a marketing process), then it can help improve growth across every function within the company

How to increase your sales by segmenting your customers

Now that you know how to segment your customers, it’s time to explain why all that effort was worth it. Let’s start by saying that even if you only have a few hundred customers, there’s no way one marketing approach is going to work for everyone. So instead of wasting time, resources, and money on ineffective campaigns, focus all your efforts on your best customers and watch the results roll in!

  • Targeted marketing. When you know who your best customers are, you can contact them directly through emails or phone calls (good old “dialing for dollars” still works!) or personalized messages on social media. You can offer them special discounts and deals just for being part of the exclusive club. And when they respond positively (which they will), they’ll likely share their good fortune with their friends and family, which means more business for you!
  • Change your product. If none of the above points work to attract new customers or retain existing ones, maybe it’s time to consider making some changes to what you’re selling so that it better meets their needs. Of course this isn’t always an option (if you run a restaurant with a set menu, there are limits on what changes can be made), but in many cases there is room for improvement—and getting customer feedback can help identify those areas in need of attention

Segmentation helps you understand and connect with your customers

The primary purpose of customer segmentation is to understand your customers better. This helps you create the most relevant content to increase engagement, which will lead to more efficient marketing and happier customers.

Segmentation allows you to target your marketing efforts, so you can make sure your content is always relevant to each customer. It also helps you find your best customers by understanding what makes them buy from you (and not a competitor). This will help deepen brand loyalty and help you build relationships with these key buyers.

Finally, segmenting the data helps clarify trends in the buying habits of your customers. This will help you understand the needs of your customers better and allow you to plan for future changes that may impact their spending behavior.

How a CDP can help improve your segmentation

Talking about data, one way of having data that is useful for segmentation is through a Customer Data Platform.

It simply comes down to having the ability to use speed and flexibility to use your data in a meaningful way.
Let’s say you want to test one segment against another one and see which ones drive the best results. A CDP can do all that for you within one framework that allows for automatic data flow. This means you will have real-time insights into which segment is better for a particular campaign.

You can use this knowledge to gain an understanding of which customers are converting fastest. Or which ones are converting more reliably. You can even look to impact things like revenue, loyalty, and customer lifetime value.

With a CDP you can draw on all your information to create segments with better precision. Instead of relying on siloed data. You will have access to a full overview of your customers, and understand them on a deeper level. We call this a unified view, and it allows you to create segmentation that actually is based on valuable metrics and factors.

The CDP means you no longer have to hunt through multiple software providers, documents, and processes. It’s all done in one place. Ready for you to take action and create better results.

If you want to know more about how to leverage your data to make your segmentation better, book a demo with a Custimy expert and learn more today.