If you’re like most businesses, you probably sell more than one product or offer more than one service. If there are significant differences in the products or services you offer, then there will likely be significant differences in the interest of your customers. In order to market effectively, you need to target and promote your products or services to your customers based on their interest. In this article, we’re going to outline customer segmentation best practices.
What is customer segmentation?
Simply put, customer segmentation is the practice of dividing broad markets of people into smaller subsets or target groups. This dividing is done using demographics, spending habits, and general interests. This makes it easier for marketers to effectively target groups of people based on their interest in certain products or services.
Step 1: Focus on effectiveness over efficiency.
The main objective of customer segmentation is to both recognize the differences between your groups of customers and craft tailored marketing messages to each one. That being said, if you’re targeting every group with the same message, then what’s the point? You’d be better off not putting any effort into segmenting your audience if you’re going to do that.
Of course, it can be much more efficient to send all of your customers the same marketing messages, but it will be much less effective.
Effective campaigns come from an understanding of segment values, motivations, and engagement. When focusing on effectiveness over efficiency, conversion rates are increased.
Step 2: Keep the correct metrics in mind.
It’s easy to get caught up in tracking all the metrics, but that’s not the best practice. In fact, tracking too many metrics can be unnecessarily overwhelming. So figure out which metrics are absolutely necessary to track and stick with those.
This comes down to efficiency. It’s easier to keep track of a handful of useful metrics than it is to monitor every metric available. This will help you maintain a high level of attention to what really matters.
The best way to determine which metrics or key performance indicators (KPIs) to pay attention to, is first determining what your goals are. For example, if you want to make more sales this year than you did last year, then you’d want to track your year-over-year growth.
Step 3: Be specific.
This might be obvious but, make sure your segments are easily distinguishable. While overlapping is unavoidable, you don’t want too much overlapping between segments nor do you want segments that are too broad.
A good rule of thumb is to have each segment defined by no more than three terms categories or descriptors.
Step 4: Get familiar with all available customer segmentation models.
There are a number of great segmentation models, so try to become familiar with each one. For example, a company could choose to follow a behavioral model, a demographic model, or a needs-based model depending on their objective.
Each model has its pros and cons, as well as its ideal uses, which is what makes it so important to have a general understanding of each one. The goal is to have maximum effectiveness when it comes to deciding on a segmentation model.
Step 5: Avoid segmentation bias.
The biggest problem that businesses face during the segmentation process is bias. Bias tends to happen when questions are phrased or posed in a way that solicits a certain response from customers. For example, if you submit a survey to your customers or run a poll, your questions can be leading.
This bias effectively alters the data that is received and recorded. As a result, this leads to inaccuracies that can prove to be detrimental to the segmentation-conversion process.
How can you avoid segmentation bias? If you’re planning on using survey or polls to help you better segment your audience, avoid leading questions that don’t allow for genuine responses. You may also want to allow the customers to provide written answers just in case they don’t see an answer that is applicable to them in the provided choices.
Step 6: Be open to optimization.
Because segmentation is an ongoing process, there’s a good chance that the initial customer segmentation will contain flaws or areas that can be improved. That’s why it’s a good idea to always be open to optimization.
This can be done by making small changes and monitoring over time. This is called A/B testing or split testing. The goal is to continue to make changes in order to better understand your audience.
Customer segmentation is an incredibly important part of the conversion process. Without it, it can be hard to know which customer group to target and which should be avoided for a particular campaign or product.
We hope you find our breakdown of customer segmentation best practices useful and that you can implement what you learned into your marketing strategy. Did we leave anything out when it comes to customer segmentation? Tell us in the comments below!