Marketing segmentation strategy: A guide for modern marketers
Understanding your customers has never been more important. Savvy marketers know the importance of segmentation and agree with these statistics:
Segmentation helped in better understanding the customer’s challenges and intentions. 82% of companies using personas have developed an improved value proposition.
77% of marketing ROI comes from segmented, targeted, and triggered campaigns.
Businesses can enhance their marketing efforts by focusing on distinct customer needs and preferences, boosting customer satisfaction, and improving return on investment (ROI).
This article looks into the key principles and effective market segmentation strategies for better understanding and meeting the diverse needs of your customers, ultimately driving your business success in a competitive landscape.
What is marketing segmentation?
Marketing segmentation enables businesses to divide their broad customer base into smaller, distinct, and more manageable segments based on shared characteristics.
It is a foundational strategy that empowers businesses to better understand and engage with their diverse customer base.
Why is segmentation in marketing important?
Market segmentation is crucial for businesses because it helps tailor their strategies to different groups of customers. Here's why it matters in simple terms:
Price: Different segments of customers have varying price sensitivities. By understanding these differences, marketers can set prices that match what each group is willing to pay. This ensures they don’t overprice and scare away budget-conscious customers or underprice and miss out on revenue from those willing to pay more.
Product: Not everyone wants the same thing. Segmentation allows marketers to identify unique needs and preferences within their market. With this insight, they can develop products or customize existing ones to better meet the diverse demands of different customer segments, which leads to higher satisfaction and loyalty.
Promotion: Different segments respond differently to marketing messages. By segmenting the market, marketers can create targeted promotions that resonate with each group’s interests, values, and behaviors. This increases the effectiveness of marketing efforts, resulting in higher engagement and conversion rates.
Place: Segmentation helps marketers identify where their target customers are located and how they prefer to shop. Whether online, in-store, or through specific distribution channels, marketers can ensure their products are available where customers are most likely to buy them, maximizing convenience and accessibility.
Benefits of marketing segmentation to businesses
Segmentation in marketing enables businesses to develop targeted marketing strategies and customized offerings that resonate more deeply with each segment's specific needs and preferences.
Here’s how marketing segmentation benefits businesses:
Understanding each segment's unique preferences and pain points allows businesses to develop products and services that better meet customer expectations, enhancing satisfaction and loyalty.
Concentrating marketing resources on segments likely to respond positively maximizes efficiency and return on investment (ROI).
Building an omnichannel marketing strategy by knowing the preferred communication channels and behaviors of different segments, to deliver a cohesive and seamless experience across channels.
Identifying new market opportunities within existing or new segments supports sustainable business growth and expansion.
Types of marketing segmentation
Customer segments often overlap because individuals often share characteristics or behaviors that fit into more than one segment. Effective marketing segmentation strategies recognize these overlaps by creating flexible definitions that reflect consumer behavior and preferences.
Here are several common types of segmentation:
Demographic segmentation: Age, gender, income, education, occupation, religion, etc.
Geographic segmentation: Region, city, climate, etc.
Psychographic segmentation: Lifestyle, interests, attitudes, and values of consumers, hobbies, personalities, purchase interests, etc.
Behavioral segmentation: Usage patterns, brand loyalty, benefits sought, spending habits, browsing history, purchase history, product feedback, etc.
Firmographic segmentation: Company size, status, number of employees, revenue, etc.
Best practices for effective market segmentation
When it comes to segmenting your market, keep these four simple principles in mind to develop effective marketing strategies:
Measurable: Make sure you can easily measure and quantify the characteristics of each segment to have clear data and analysis criteria. For example, a company may segment its market based on age, gender, lifestyle, and purchase frequency to effectively measure and analyze each segment's preferences and buying patterns.
Accessible: Understand where and how each segment can be reached and engaged to tailor outreach strategies to connect with targets effectively through various channels, such as email newsletters, LinkedIn, WhatsApp, Facebook, etc.
Substantial: Prioritize segments that are sufficiently large and potentially impact your business to concentrate resources, maximize ROI, and deliver exceptional service tailored to clients' expectations.
Actionable: Use segmentation to gain actionable insights for customizing marketing strategies and offerings. This includes creating targeted promotions, recommending relevant products, and enhancing customer satisfaction by aligning offerings with specific segment needs.
Common errors in marketing segmentation
Effective marketing segmentation is crucial for businesses to tailor their strategies and messages to different customer groups. However, errors in segmentation can undermine the effectiveness of segmentation efforts.
Over-segmentation: While detailed segmentation can be beneficial, over-segmentation can lead to overly fragmented marketing efforts and inefficient resource allocation. This occurs when businesses divide the market into too many small, niche segments.
Under segmentation: On the other hand, under-segmentation happens when businesses fail to create meaningful and distinct segments. This results in generic marketing messages that fail to resonate with any specific audience, reducing the impact of marketing campaigns.
Incomplete data utilization: Relying solely on demographic factors or incomplete data for segmentation can lead to flawed segmentation decisions. This approach may overlook important behavioral or psychographic insights, resulting in ineffective targeting and missed opportunities to connect with customers.
Lack of integration: Effectively segmenting the market but failing to integrate segmentation data and insights leads to ineffective marketing strategies, inconsistent messaging, and customer experiences.
Segmentation in marketing use cases
1. Re-engaging users with predictive segmentation based on behavior
Businesses can track and analyze user behavior to forecast future actions and preferences. Based on these predictions, targeted re-engagement campaigns, such as broadcasting personalized promotions on previously viewed items or sending abandoned cart reminders, to effectively re-engage users and encourage them to complete their purchases.
For instance, CANVAS takes into account factors such as product interest, purchase location, and customer reactions to promotions to re-engage with their offline buyers with personalized WhatsApp broadcasts. They crafted a special offer for 12,000 VIP members via WhatsApp, and those who showcased the message in-store received a complimentary mask. Remarkably, this targeted broadcast achieved a 75% read rate, outperforming their regular emails by 2.5 times.
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2. Send product recommendations to loyal customers based on their preferences
Segmentation enables businesses to identify loyal customers who consistently purchase specific products or show preferences for certain categories. Using this segmentation, personalized product recommendations can be sent through WhatsApp campaigns, website suggestions, or mobile app notifications.
For example, Le Dessert uses SleekFlow‘s social CRM system to label and segment customer happiness levels to offer personalized recommendations and send targeted campaigns to various customer segments.
How do you get started with marketing segmentation tools in social CRM?
Social Customer Relationship Management (CRM) systems have become increasingly vital as businesses aim to deepen customer engagement across social media platforms. It integrates traditional CRM principles with social media interaction. SleekFlow’s social CRM system enables businesses to make customer engagement a two-way street, i.e., more interactive. Customers are more willing to reply to a personalized message directed to their phone.
1. Unify customer interactions across multiple messaging channels, such as WhatsApp, Instagram, Facebook, WeChat, etc., into a centralized platform to create omnichannel marketing strategies and streamline communication across platforms.
2. Integrate third-party platforms such as Salesforce, HubSpot CRM, Shopify, Facebook click to WhatsApp ads, and more with social CRM system to automatically sync customer interactions and data. SleekFlow allows businesses to automatically sync contact details and custom information, such as membership, order history, etc., to create dynamic segmentation.
3. Implement automated workflows to segment and label customers based on their behavior changes and interactions to create dynamic contact lists. Customize customer journeys for each segment to automate personalized messages aimed at customer retention and encouraging repeat purchases.
Read more: 10 essential chat flows you should build with SleekFlow’s Flow Builder
4. Provide hyper-personalized customer service with a comprehensive view of customer details alongside the chatbox.
5. Leverage the segmentation data to broadcast personalized marketing messages to specific customer segments. Tailor your messages based on segment characteristics such as preferences, behaviors, and purchase history.
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