Let’s start with an interesting example. Did you know that in your personal life, you have most likely performed one or more types of customer segmentation without even realizing it? For example, you might have shared an ‘event reminder’ with your friends through a group text before informing your co-workers via email. Though they’re not your customers but you segmented them and communicated through different media.
In this article, you’ll know the different types of customer segmentation and why they are important for a business success.
Quick Introduction : What is Customer Segmentation?
By definition, the strategic process of customer segmentation involves categorizing and grouping customers based on common characteristics such as age, location, device used, industry, gender, and more.
Each group of common characteristics forms a ‘Customer Segment’. This strategic process allows for the customization of marketing, service, and sales initiatives tailored to the specific needs of these distinct groups. The outcome is the potential enhancement of customer loyalty and an increase in conversion rates.
At times, the most efficient communication strategy for businesses involves grouping customers based on shared characteristics. Just as you tailor your messages differently for various social circles, businesses enhance their communication and effectiveness by addressing different types of customer segments.
Why do we need Customer Segmentation?
Your customers possess distinct characteristics, preferences, and expectations for your business. Recognizing these individual traits, needs, and pain points is essential.
Suppose a business decides to go with the 'one size fits all' approach. This leads to critical issues like lack of personalization and inefficiency in resource allocation.
Smart Businesses think beyond this approach. The types of customer segmentation extend beyond mere categorization; it involves a comprehensive understanding of individuals within those categories.
By customer type segmentation, you can delve deeply into their characteristics, enabling the creation of tailored content that addresses the unique needs and challenges of each segment.
This strategic segmentation enhances customer service, marketing, and support initiatives of businesses.
It enables internal teams with insights to proactively address challenges specific to different groups.
Moreover, it facilitates targeted communication with customers through their preferred channels or platforms, fostering effective engagement.
Additional Benefits of Utilizing the Right Customer Segmentation Model
- Enhanced Consumer Engagement: Targeted ads and personalized marketing messages establish meaningful connections with potential consumers, fostering sustained engagement from existing ones.
- Increased Consumer Satisfaction and Loyalty: Brands that make customers feel seen, heard, and understood cultivate higher levels of satisfaction and loyalty. This personalized approach goes beyond treating customers as mere order numbers.
- Improved ROI: Customer segmentation reduces wasted time and resources on marketing efforts that don't resonate with the right audience. By comprehending your consumers' needs, you can efficiently address those needs, leading to a more cost-effective and rewarding marketing strategy.
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Exploring Different Types of Customer Segmentation
Your business can segment customers in many models. Here, you’ll get to know majorly four types of customer segmentation, as listed below.
Demographic segmentation involves categorizing customers into groups based on significant life factors. Parameters of demographic segmentation include age, gender, income, education, and marital status.
This is one of the most important types of customer segmentation where you get a foundational understanding of a customer base. This information serves as a crucial building block for businesses to better understand the type of audience that they are going to serve.
Industries such as ecommerce and fashion commonly utilize demographic segmentation to tailor their marketing strategies.
For instance, in the fashion industry, a business owner may target both men and women. By segmenting customers based on gender, the business can deliver personalized product recommendations and messages to each group.
Let’s talk about an insurance broker company Policybazaar. They regularly communicate their offers for different age groups. Take a look -
Here, Policybazaar is targeting people who are born between 1975-1995.
While below you can see that the company is trying to target elder audience to communicate its Senior Citizen Health insurance plan.
Their internal team might be using Geographic Segmentation model further as well to analyze the results and optimize campaign performances to drive results.
Seeing the use of one of the popular types of market segmentation examples, you can take inspiration and start building models for your business.
When executed effectively, this approach contributes to building a more loyal customer base, fostering long-term relationships of your business with customers.
With the use of tools like Nected, grouping of customers based on shared characteristics is effortless. It uses demographics to segment customers into micro-segments that refresh daily. This allows businesses to create targeted marketing initiatives and optimize their strategies.
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Geographic segmentation involves categorizing customers according to their location, spanning countries, states, cities, towns, etc.
This segmentation model becomes particularly relevant for businesses operating in multiple locations within the same city, state, or country, or those engaged in shipping products to diverse geographical regions.
The rationale behind segmenting customers by geography is to customize communication in a way that resonates with their specific locale. This entails adopting regional language nuances, referencing local points of connection, and tailoring messaging to align with the cultural context of the audience.
When businesses incorporate elements that reflect the experiences of customers in their particular location, it demonstrates a thoughtful approach to content creation. This, in turn, signals the customers that the message is crafted expressly for them, establishing a connection through relatable and localized communication.
With tools like Nected, you can analyze large amounts of consumer data to understand what products the customers really want, and apply strategies accordingly.
Let's take a look at an example of how you can use Nected to perform geographical segmentation. Here we take a sample set of data and we want to provide different discount rates to domestic and international customers respectively.
To create a complex rule set called the Pricing Rule, we need to access the data from the database and select the desired columns. We can use the Nected Query Builder to easily connect to any data source and drag and drop the columns we want to use in our rule set.
Next, we need to define the logic for our rule set. We want to provide different discounts to international and domestic customers based on their location. We can use the Nected Rule Editor to create a conditional statement that checks the ‘customer_location’ column in our data. Just click on the drop down list and select the desired parameter.
This rule set will assign a result and a discount value to each customer based on their location. We can test our rule set using the Nected Simulator to see how it works on sample data. We can also modify our rule set as needed using the Nected Rule Editor.
Finally, we need to deploy our rule set to our application or website. We can use the Nected API to integrate our rule set with any platform or service. We can also use the Nected Dashboard to monitor and manage our rule set performance and analytics.
Behavioral segmentation is centered around customer actions and interactions with your brand. Instances of categorizing customers based on behavior include their inclinations, frequent activities, product usage, and routines.
This segmentation model proves particularly valuable in campaigns involving PPC or YouTube ads, ensuring that your advertising budget is directed toward customer segments that align with your brand. Instead of relying on external demographic factors, behavioral segmentation groups consumers based on their habits and actions.
This is one of the most used types of customer segmentation models by marketers and businesses.
For instance, it considers factors like purchase history and the preferred social media platforms used by customers. By honing in on specific platforms, you can optimize your ad strategy and, for instance, send targeted sales emails to frequent or repeat online buyers, creating a more effective and personalized marketing approach.
Technographic segmentation is slowly becoming one of the most important types of segmentation methods. It is a strategic approach that categorizes customers based on the technology they use. This method is becoming more prominent as businesses progressively transition their operations to the online ecosystem.
Notably, this trend has spurred significant growth in sectors such as Software as a Service (SaaS) and online marketing analytics.
The basis of technographic segmentation lies in its ability to allow businesses to fine tune their targeting strategies to consumers based on the specific software or online services they use regularly. This form of segmentation goes beyond traditional demographics, offering a highly personalized approach that considers factors like mobile and desktop usage, preferred apps, and software choices.
The significance of understanding the technological preferences of individuals cannot be overstated, whether for online marketing needs or for SaaS enterprises that are heavily reliant on technology to deliver their services. As businesses continue to embrace digital transformations, the relevance and impact of technographic segmentation are poised to grow. This approach not only provides a more nuanced understanding of customer preferences but also offers a more effective way to connect with diverse consumer segments.
For example, when we look at Zomato, one of their most important messaging channels is push notifications on smartphones. This form of messaging would have been way less effective if the target customers’ primary device would have been a laptop or personal computer.
Here’s How You Can Use Nected for this type of customer Segmentation
As you now know, technographic segmentation involves categorizing customers based on the technology they use.
For example: In this dummy rule set, technographic segmentation focuses on scoring customers based on the devices (Mobile, PC), applications, and software they utilize.
Just like this, by analyzing the technological landscape of your customers, you can do segmentation & create rules that assign scores or prioritize customers based on their tech preferences. This can help businesses in tailoring marketing strategies, product offerings, and customer interactions to align with the tеchnological profiles of different segments.
Explore how Nected can help you utilize different types of segmentation methods.
Utilizing customer segmentation enhances conversion rates by better targeting and delivering more pertinent information to your audience.
It’s time to utilize different types of customer segmentation in your business to boost the revenue. Consider using a user-friendly No code tool for customer segmentation and drive maximum results.
FAQs Customer Segmentation
Q1. What is a customer segment?
When a set of common characteristics of customers are defined, it’s called customer segment.
Q2. Why do customer segmentation
By doing Customer Segmentation, you can get better results in marketing, service, and sales initiatives for your company.