As any business grows, so will its customer base and the need for well-rounded customer segmentation.
Getting more buyers drawn to your unique and excellent product/service makes it harder to modify marketing strategies for all of them — especially if you’re running a modern easy-to-shop E-Commerce business.
That’s when customer segmentation comes into play.
Mesmerizing customer segmentation is a critical part of any business’s marketing effort that wants to bring in more new customers, keep all happy, retent old customers, and overall be successful.
Are you having problem with categorizing customers?
Let’s get into it by first going over the definition.
What Is Customer Segmentation?
Customer segmentation refers to dividing customers into specific groups of customers who share commonalities and preferences. Usually, members are similar in a unique way, like age, gender, personality traits, hobbies, ideology, or even spending habits.
The goal here is to have dedicated groups so relatable, and custom-made tactics can be implemented to maximize profit.
After segmentation, communicating and interacting with certain groups become more accessible as they open up — on the paper at least — to your personlized message.
How To Segment Customers?
There are some direct and other indirect approaches to obtain essential information that help with market segmentation.
When customers sign up to your website and enter their information to carry on, you — with no apparent intention, of course — are receiving some details about them, like location, name, etc.
Other useful information pops up when customers move through the purchase phase, such as other products they put on their wishlist or previously bought.
Other information, however, requires a more go-out-there approach, some of which is as follows:
- Interviews
- Surveys
- Research
- Focus Groups
Types of Customer Segmentation
Below I’ve spread out some of the more basic and traditional yet frequently-used customer segmentation methods generally accepted across different businesses, except one RFM segmentation method.
RFM Analysis
RFM is the abbreviation for Recency, Frequency, and Monetary value. Basically, the RFM model showcases customer behavior.
Frequency and monetary value impact customer lifetime value, while recency indicates customer retention.
RFM analysis helps personalize customer-message through identifying their behavior.
It identifies the number of transactions carried out by the user and gathers robust scientifically-approved numbers that help businesses as E-Commerce grow.
Geographic Customer Segmentation
One of the more used and typical market segmentation techniques is, without any doubt, categorizing customers based on where they live — like which city or country they are located in or even time zone.
Businesses, small and large, don’t hesitate to utilize this method simply because it’s overly straightforward, error-free (for most parts), and too good of a market-research opportunity to pass up.
Demographic Customer Segmentation
If the target audience is sorted out based on a specific characteristic, customers are segmented through the demographic method. In this method, elements such as age, gender, ethnicity, marital/financial status, religion, family size, or even education are considered by the marketing experts.
Demographic segmentation is dubbed the easiest buyer-classification trick since it brings a lot to the table and branches out multiple helpful avenues for E-Commerce and other businesses to take advantage of.
For example, you can list particular crowds that bring in above or below certain monthly income that you set. Or how old they are.
The demographic customer segmentation method becomes even more practical when dealing with a wide variety of customers. Facebook is one of the prime examples of social media platforms that target specific groups for its ad campaigns through demographic segmentation.
Behavioral Customer Segmentation
The behavioral system rose to existence when patterns of mutual behaviors began to show themselves. For example, older customers tend to buy out of necessity rather than spending on impulses. Or, younger female buyers are more accustomed to purchasing beauty and cosmetic products when passing through the ages 18-22.
These patterns help eCommerce and other sectors to advertise their products/services according to the predicted behaviors of their audience. If they want to reach a young audience, they’d probably focus their marketing strategies around university campuses and schools. On the other hand, if they’re going to target middle-aged white-collars, they will probably work around public transportation systems and office buildings.
Firmographic Customer Segmentation
Firmographic segmentation expands on the philosophy of probing into organizations as a whole body, whereas the demographic method individualizes.
If you opt for firmographic customer segmentation, you are more invested in quantitative aspects of the work. For example, they are looking into staff size, how strong they are, the size of different companies busy in that sector, and in general, hard facts.
Psychographic Customer Segmentation
When deeper personal and psychological research into the customer base is conducted to verify specific types of people, psychological customer segmentation is used.
Psychological segmentation of customers describes taking lifestyles into consideration.
More often, large-audience companies commonly choose this method for their segmentation studies, such as pharmaceutical companies and data experts or the retail industry like vide-console/computer manufacturers.
How Customer Segmentation Affects Company Retention Marketing?
Retention marketing isn’t a piece of cake when the customer spectrum widens —sometimes even expanding vehemently and out of control, especially in E-Commerce businesses.
The reason is that with such expansions, not all customers fit into one giant neat tier, and it becomes next-to-impossible to keep all of them continuously satisfied and happy.
Customers make their decisions based on their cultural background, personal style, marital status, income, and preferences. As the customer base enlarges, more segmentation becomes vital to offset the adverse aftereffect of having such a vast user base.
Customer segmentation collides with retention marketing by creating an “unsatisfied customer” category so business owners can mend them and make them happy again.
Another helpful segmentation entitles deserted customers who left the brand and no longer want to be a part of it due to lack of attention.
Overall, customer segmentation benefits retention marketing as it makes it more evident why customers are unhappy, leaving, or are not repeating purchases.
Customer segmentation resolves business (customer-base) growth issues and sets a clear path for managers to successfully tend to each group’s criteria. It divides customers into easy-to-access groups with common mindsets.
Is identifying and classifying your customers challenging for you?
We suggest you Markograph. Markograph customer data analysis platform helps you analyze customer behavior and design a campaign for each segment by categorizing customers using the RFM method. Click here to get acquainted with the market
If your E-Commerce business is too on the verge of massive expansion and you’re sensing a gigantic bomb of new-arriving customers about to explode, the time has come to incorporate market segmentation tactics to defuse the situation.