What is Customer Segmentation?
customer segmentation is the brand has specific data on these customers: it knows who they are, what they have bought, how much they spend, their recurrence, etc. The objective of customer segmentation is to optimize the performance of a business by taking specific actions aimed at known customer segments with identifiable vital features.
As we pointed out above yesterday, market segmentation differs from customer segmentation in one fundamental aspect: while market segmentation tries to group a vast and anonymous target market into small segments, customer segmentation focuses on classifying the customers that a business already has.
Strategic Customer Segmentation
Having clarified the definition of customer segmentation, we will delve into the types of customer segmentation that exist. We find 2 types of customer segmentation: strategic segmentation and tactical segmentation.
When defining or modifying our business strategy, strategic customer segmentation allows us to group our customers by relevant audiences. In general, this type of segmentation will enable us to make strategic decisions that affect the following parameters:
Profitability objectives per client: How to optimize the clients’ performance we already have by reducing high-impact variables such as the churn rate or the Churn Rate.
Definition of the business format: depending on which customer segment we primarily target, our business will present one format or another.
Offer optimization: if we know what our priority customer segment is and what it values, we can make substantial changes to our product offering to respond to the needs of that segment. It is an important strategic decision.
Launch of new products or services: the strategic knowledge of our clients will allow us to predict whether the launch of specific products or new services integrated into our current offer will be profitable for us.
Tactical Customer Segmentation
On the other hand, we have tactical customer segmentation. This type of segmentation is more focused on improving the economic performance of specific customer segments.
The goal of any tactical targeting is to improve sales by taking different actions. Here it is not a question of defining the characteristics of a broad segment of clients but rather of segmenting clients based on a definite need or problem, which of course, we propose to solve with our tactical action or campaign.
We can distinguish between 5 types of campaigns based on tactical segmentations:
Retention campaigns: how to retain the most profitable customers and new customers, not to abandon us, and how to gain recurrence. Everything that has to do with loyalty would be within this type of campaign.
Recovery campaigns: focused on the recovery of customers who have left us.
Cross-selling campaigns: Through which we suggest to customers who have bought certain products to purchase other complementary products.
Upselling campaigns: with which we seek to either increase the average ticket or increase the frequency of purchase.
Recruitment campaigns: To attract new customers. And so far the customer segmentation and the main types there are. We hope this post has been helpful for you to better segment your customers in the future.
Summary and Procedure for Customer Segmentation
Successful customer segmentation requires several steps. Generally, the customer segmentation process consists of five stages:
Define the target group: First, you need to determine which customers are relevant to the company. This is related to the objective of customer segmentation: It should carry out to launch new products, highlight specific characteristics of existing products or adjust the marketing mix.
Define the characteristics: According to what features the segments should form.
Identify Sets: In this step, customer segments identifies through surveys, discussions, or other survey methods.
Describe the customer segments: The customers of the different parts describe according to their characteristics. This results in the development of the people who best represent the respective customer segments.
Use customer segments: Once the customer segments are defined, the final step is to adapt the marketing mix to the company’s needs. The more personalized the contact with each customer, the more likely it is to affect the company’s turnover positively.
What Types of Customer Segmentation are there?
There are multiple ways to classify users to optimize business processes. Historically, brands have applied these 4 types of customer segmentation:
It is the one that does according to the places where the different clients are.
Also, here variables such as climate, seasonality, and size of the place are taken into account, influencing users’ preferences.
Aspects such as age groups, family size, culture, profession, educational level, and family income consider here.
In this segmentation, user behavior assesses, analyzing usage patterns, price sensitivity, and topics of interest.
The behavioral analysis must consider aspects that demonstrate how the person interacts with the Internet and social and digital platforms
It consists of segmenting current consumers and even potential ones, considering details associated with individuality and lifestyle.
So, psychographic segmentation involves assessing dreams, wishes, goals, motivations, and daily life dilemmas. In addition to those mentioned above, we can make segmentations according to the objective of the process.
In this way, we come across classifications for strategic purposes, aimed at optimizing the offer and increasing personalization, among other things, and with tactical segmentation, which seeks specific sales and financial benefits, such as subscribing to loyalty programs and Cross-Selling. and Up-Selling.
To close this section, we must mention classification systems that go according to the characteristics of the relationship with users, for example, loyal customers. And dissatisfied consumers.
As its name reflects, it is a process that consists of categorizing clients into different groups, which respond to their characteristics and particularities.
Of course, each segment comprises users who are similar in different criteria and aspects. Which makes them feel motivated and comfortable with the same stimuli and strategies.
In this way, brands manage to strategically adapt business processes to each of these groups to make them more effective and profitable.
Also Read: 8 Strategies to Reduce Your Start-Up Costs
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