Unleash the Marketing Power of Customer Segmentation
Whether you’re selling the latest in luxury footwear or a fancy gadget that makes peeling bananas easier, we’ve all got a target audience that we want our marketing to reach. But is that audience really all the same? The answer is almost certainly no. Recognising this fact is one of the most fundamental principles of marketing.
Ahmad and his friends love luxury trainers but absolutely hate using Facebook. Kim loves Facebook, but she wouldn’t be caught dead with her friends using the LRT. Chloe hates both Facebook and the LRT, but she’s a diehard lover of reality TV and wouldn’t miss a talent show if her house was on fire.
The terrifying life decisions of Chloe aside, how do we ensure our marketing helps fit the broader idea of our target audience while crafting marketing content that appeals to each of these types of people? That’s where customer segmentation comes in.
What is customer segmentation?
Customer segmentation is the process whereby we break down our larger target audience into smaller groups according to certain types. It’s a way of creating more identifiable targets with more focussed preferences that can inform your marketing efforts.
We’ve already established that not all customers are the same, so customer segmentation seeks to identify particular demographics or identifiable features which groups of customers might share. If you know Chloe and her representative demographic love reality talent shows, you know to craft a television advert that resonates with that audience during that specific timeslot. So how do we break down customer segments into manageable bite-sized chunks?
Demographics offer a divider
Demographics are one of the key elements of customer segmentation. Broadly speaking if we know certain aspects such as age and location of our audience, we have access to more focussed insight onto how to strategically target our marketing. Demographics cover a wide range of factors:
- Socio-economic group
- Spending patterns
All of these make for valuable customer segmentation to inform our marketing efforts. If we know Ahmad is 25, male, located in Kuala Lumpur and has a hard-working middle-class lifestyle, we understand that him and his cohort of like-minded customers are perhaps most easily reached by a marketing campaign that targets social media during their commute.
Ahmad is just an example, remember customer segmentation isn’t about targeting specific individuals, it’s about identifying sub-groups within your target audience. And it’s not just direct to consumers businesses where that kind of informed decision making is key.
Business segmentation is a B2B essential
Demographics aren’t just limited to B2C markets, you need to be equally informed with customer segmentation in a B2B environment. If you’re selling a range of office printers that begin at an off-the-shelf bargain basement model right up to the latest in super-efficient high capacity inkjet printing, you need to understand which customers are most likely to fit the target profile for your product. B2B demographics take in things like:
- Number of employees
- Total business value
- Industry sector
- Location of head office
- Number of offices
- Stage of business development
Customer segmentation requires rudimentary psychology
The basics of customer segmentation go beyond objective understanding found in identifiable demographics. There’s also an element of psychology involved in building a deeper understanding of your customer segments. Here we’re talking about the weird and wonderful world of psychographics. Now this might sound like a new film from the makers of the Matrix, but it’s actually about using personality and values to build a wider customer understanding.
Psychographic segments might traditionally be seen as a slightly more nebulous concept than the more objective demographics, but with digital technologies and the truly staggering amount of targeted customer data marketers have access to today, that’s almost certainly no longer true. We’re talking here about things like:
- Personal interests
- Lifestyle choices
- Social class
- Values and attitudes
If it all seems a little creepy, you’re probably right. But again, remember we’re looking for aggregated data around customer segments, not a detailed investigation into why Ahmad decided to call his pet fish ‘Goliath’.
B2B segmentation also has an element of psychology
Surely a B2B marketer has no reason to get involved in this maddening maze of predictive mind-games? Sadly you’re wrong. Understanding elements of business psychology and buyer habits is also important in B2B markets. You’re looking to help identify factors such as:
- Company culture
- Branding decisions
- Company traditions
- Public perception
- Buyer habits
These kind of influencers can still provide valuable strategic insight into your marketing efforts. One customer segment might include companies that are proud of their sustainable credentials – in which case informed marketing around the high-efficiency of your printers would be valuable. Other organisations might have reputations for deliver-at-all-costs projects, in which case the market-leading print speed of your products would be key.
How do we inform our customer segmentation?
Of course it’s easy enough to say ‘segment your customers’, but it might be a little harder in practice. There are a variety of ways you can inform this customer segmentation, from the on-hands experience of your front of house staff to the detailed data analytics available through digital sources today.
Online platforms such as Facebook in particular allow a level of focussed demographic and psychographic marketing that is almost terrifying in its targeting potential. That doesn’t mean you should overlook the traditional methods of market research, from face-to-face customer surveys through to established market insight platforms.
The various elements of demographic and psychographic segmentation provided a powerful distinguisher to help understand your customer segments. Once that first step has been completed, it’s up to you to work out how best to utilise that understanding to make the most of your marketing efforts.