No matter how these years and technology change marketing practices, you will always need properly segmented customers as a professional. Since day one, targeting the right audience after a successful customer segmentation has been a crucial cornerstone of any marketing strategy. Segmentation shortly helps marketers reach specific groups of people with similar interests, needs, and pain points. After reading this article, you will have all the critical facts about customer segmentation in addition to five of the most effective segmentation strategies to use while creating your marketing strategy in 2021.
Customer Segmentation 101
Four main segmentation strategies create the foundation of the customer segmentation concept:
Demographic Segmentation: Dividing customers according to certain traits such as age, gender, occupation, nationality, religion etc.
Geographic Segmentation: Segmenting customers based on the locations they live, work, shop etc.
Psychographic Segmentation: Grouping customers based on their psychological traits such as beliefs, attitudes, interests, preferences etc.
Behavioural Segmentation: Segmenting customers based on the actions they take when interacting with a particular company.
Although the foundation of customer segmentation stays the same, the building blocks that embody themselves are constantly evolving. The methods have become more modern and adequate to meet the demands of the digital era. Companies change their segmentation strategies to use and interpret their aggregated customer data and analytics. Therefore, among these four fundamental segmentation strategies, behavioural segmentation methods are the ones that give the companies what they are looking for in 2021.
Here is in-depth information about five of the most effective behavioural segmentation types that you should consider to enhance your marketing strategy in this digital era.
1. Purchasing Behavior
Segmenting customers through their purchasing behaviours is a common and probably the most widely used behavioural segmentation method. By grouping customers according to their purchase habits and transaction histories, companies can predict the most likely behaviours to lead a purchase. This method usually subcategories the behaviours of the customers into four categories:
Complex: In this behavioural pattern, the customer is highly involved in their decision-making process since it is quite complex and essential. The purchase process generally lasts long, and it includes a lot of product research. The products that are compared usually have significant vital differences.
Variety-Seeking: The variety-seeking consumer behaviour emerges from the low risked decision processes in daily life. The consequences of the purchase decision are not very impactful on the end user’s daily routine. That leaves some room for variety-seeking and different purchase behaviours through a repetitive purchasing process.
Dissonance-Reducing: The scenario here is similar to the complex customer behaviour. The decision is still important, but the compared products do not have significant differences between their features. The products or companies are generally very similar, so customers typically prefer the one with the lowest price.
Habitual: This behavioural pattern generally results from personalised preferences or brand loyalty. The compared products are generally similar in features, and the decisions are not complex or require high involvement.
2. Spending Habits
Segmenting your audience by spending their money can give you many monetary tips to develop your business. The segments of this method can be represented as:
- Shopping modality: Buy online vs in-store.
- Coupon usage: Always use coupons vs rarely use coupons.
- Payment method: Whether they use a credit card vs don’t have a credit card.
- Highly promotional: Prefer full-price or sale.
By understanding how your customers prefer to spend their money, getting the answers of where they spend and when they spend can boost a marketer’s strategy in and out. It optimises the existing resources and capital a brand currently has while keeping customer awareness and engagement on top.
3. Status of Shoppers
The status of the shoppers is another way to segment your market in behavioural patterns. There are several categories to subgroup your audience. The most common examples are:
- Potential shoppers
- First-time shoppers
- Regular shoppers
The strategy you will develop as a marketer for each user group needs to have critical characteristics according to the different needs and tendencies of the group participants. For example, you want non-shoppers to know you, notice you. Therefore, your strategy towards that group’s participants should be proactive and initiative. On the other hand, the appropriate approach towards the ex-shoppers should be more case-specific. The process may require various research and analyses since you need to figure out what makes them leave you, why they need another alternative and the strategy that made your competitor move forward. When you deal with the segment of first-time shoppers, the required strategy should be to make them stick with you. You want them to come back, so you create opportunities they never want to miss. The segments you will begin using this method can range from returning visitors, leads, lapsed customers, repeat customers, VIP customers etc.
4. Stage of Customer Journey
A customer’s brand journey is generally summarised as follows.
Awareness: In this phase, shoppers are segmented through their earlier interactions with a brand. The newly discovered brand and its actions may vary a lot. However, by interpreting the initial activities of the customers and segmenting the audience aligned with this information, brands may easily decide which customers are worth the relationship with, which are not.
Engagement: This phase includes the customers who want to learn more and more about the brand, its services, and its values. Segmenting customers according to their engagement levels and how they react according to those levels help brands which strategies, products or campaigns are worth keeping, bring conversion, and make customers stick to them.
Evaluation/Consideration: After a successful engagement process, here comes the throttle neck of every purchasing activity. In this phase, customers are carefully considering their purchase decisions. So breaking down this phase can significantly help brands figure out which paths lead to a successful purchase.
Purchase/Conversion: By segmenting shoppers according to how they purchase products or services, brands can measure all of their sales channels’ efficacy.
Post Purchase: Even if the purchase is successfully made, your brand is not entirely done. Tracking the post-purchase behaviours of the customers may help you create post-purchase behaviour-based segments and develop strategies according to those groups. After-sale loyalty efforts can be optimised efficiently by using this segmentation method.
During this journey, marketers can collect a vast amount of data. Each of these phases has specific characteristics in terms of traffic, efficacy on operation, cost-consumption etc. Interpreting these data helps marketers to create consumer-specific and journey-specific marketing strategies and increase conversion in every stage. Furthermore, identifying the phases that need more progress and creating new conversion perspectives becomes more manageable with this method. For instance, according to the exact phrase that the consumers are in, a brand can manage the budget it allocates to the advertisements and differentiate the messages and notifications it will rationally send to its customers.
5. Customer Loyalty
Loyalty-based segmentation divides customers according to their loyalty levels. It is essential to identify loyal customers because they generate the most significant part of your revenue. In addition to generating repeat revenue for your business, improving average order value benefits loyal customers.
To reach a more significant point while approaching them – and make the other segments more like them – this method can mix with different technical approaches such as customer journey and user status. Integrating aggregated customer data coming from other segmentation methods could be helpful while interpreting the loyalty of the customers. Dividing your customer base into groups of loyalty levels can be added up to as an additional step to your marketing strategy to bring a significant improvement to overall conversion rates.
After identifying your audiences loyalty borderlines and their specific needs, consider these follow to enhance their progress to the next better level:
- What made their loyalty increase, when -at which customer stage- did it happen?
- Which way to choose by impressing the most loyal ones?
- our brand are compelling, which are not during nurturing loyalty?
Marketing executives always need to be awake and widen their perspectives to the customers’ journey, from the top on down. No matter how strong the way is, balancing all valuable points in any strategy is crucial. In segmentation, the rules are the same. These methods are generally used in a mixed and supportive manner to make more effective strategies. Correct segmentation and the actions taken towards is a holistic destination to reach during marketing a product, a brand or a campaign.
How Segmentify Supports
There is an excellent way to segment online shoppers efficiently. Segmentify is the most intelligent way with its personalised engine to help you segment your audience and reach your customers in real-time. Segmentify analyses the customers and segments them automatically with AI-based algorithms and determines how to get the most out of each customer segment.
Segmentify’s Behavioural Targeting solution calculates the most important metrics for each segment to harness the power of segmentation to the full extent with advanced metrics like:
- customer lifetime value (LTV),
- customer risk rate, activity ratio
- probability for the next order