No customer wants to feel like a brand just doesn’t get them. Customer segmentation analysis allows brands to better understand and categorize their customer base according to factors like demographics and interests.
Better understanding your customers can help you appeal to each group more effectively through your product or service offerings and messaging. Here’s how to get started!
Effective customer segmentation analysis starts with quality customer data. Some data points that may be relevant for customer segmentation include:
These various factors can give you some insight into who your customers are and how you can effectively appeal to them. For example, you may learn from some of your customers’ online activity that they’re invested in a particular social cause or share a certain hobby or interest. This type of information can help you form more meaningful connections with both prospective and current customers alike.
Once you’ve collected your data, find patterns and divide customers into groups based on shared qualities. For example, you might find that your customer base includes a substantial faction of females in their 20s and 30s with children. Knowing this can lead you to appeal to the needs and priorities of young moms and engage this demographic even more.
You can categorize customers in an infinite number of ways, so look for the patterns that naturally emerge and consider what factors matter most for your products and messaging. For example, geographic location may be more or less irrelevant for some companies while, for others, it’s a key factor to consider. Know what matters most to your company.
It’s also important to note that people are complex, and they often won’t fit neatly into one category without overlapping with other categories, too. For this reason, it can be helpful to create data visualizations that divide your customer base along different spectrums such as age, income, and so forth. These can either be presented as complex venn diagrams or simply as separate charts.
Remember those moms in their 20s and 30s? Picturing these customers as a group can feel a bit abstract, but what if you boil the group down to one customer persona named “Young Mom Mandy”? Now you can create a real image of this mom that embodies much of the data you see across customers in this category.
Customer personas work because it’s easier to picture a specific person when you’re working on product design or marketing than to think more abstractly about data trends. Create customer personas for all the main categories you’ve identified across your customer base. Depending on your business, it might make sense to create anywhere from 2-20 customer personas.
The Pareto Principle suggests that 80 percent of a company's revenue is generated by 20 percent of its customers. One of the key benefits of customer segmentation analysis is that you can identify which groups of customers make up that 20 percent.
As you evaluate your segmentation data, consider which groups collectively offer the highest lifetime customer value. In other words, which customers does your company most heavily rely on for its success?
A musical instrument retailer, for example, may find that the majority of their customers are beginner musicians, but their most valuable customers are experienced musicians who purchase high-end equipment. This retailer shouldn’t abandon their novice customers, but they should focus more heavily on marketing to experienced musicians to capitalize on this lucrative customer segment.
Put your customer segmentation efforts to good use by personalizing your marketing messaging for each group. Research shows that personalization can have a powerful effect on your customers and target audience. In fact, a recent survey found that a third of marketers are now spending a majority of their digital marketing funds on personalization efforts.
You can implement personalization in a number of ways. For example, for direct mail, you can employ variable data printing to customize the images and text you include on each mailer based on your customer data. The result is a more targeted appeal to each segment and individual customer.
Customer segmentation analysis involves gathering and interpreting a vast amount of data. Many companies benefit from partnering with an expert to confidently undertake this process. Baesman is a partner you can trust to help you personalize your marketing efforts through data-driven decisions.
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