Why Customer Segmentation Matters Greatly To Your Business

By leveraging customer segmentation, companies will empower employee morale, revenue streams, and business resilience. 

It is a type of market research with numerous benefits, like increasing customer empathy, which impacts brand loyalty. After segmenting customers, businesses will see the value of that time and financial investment trickle into every future decision to make more customized, attentive experiences for B2B and B2C audiences.

What Is Customer Segmentation?

Customer or marketing segmentation defines critical customer categories to better empathize and market to them. It helps people and organizations designate people into boxes for conceptualizing significant amounts of data about nuanced subjects, like customers and their behaviors. 

Segmentation manifests in a few ways, both qualitative and quantitative:

• Demographic: Looks at customer traits like age, income, education, and more.
• Value: Identifies purchasing trends with financial equivalencies like item durability or price-per-unit. This can be B2B- or B2C-oriented.
• Behavioral: Analyzes buying motivations and goals based on metrics like social media participation and their relationship to the brand and products.
• Psychographic: Observes mental or personal qualifiers, like lifestyle choices or faith alignment.
• Firmographic: Looks at business metrics like years of operation or revenue.
• Geographic: Organizes customers based on location-reliant analytics like climate or language.
• Technographic: Uses data like mobile usage and browser preferences to explain tech-based behaviors.

Companies can engage with one or any mixture of these designations depending on their priorities and resources. If the goal is to refine social media advertising targeting, geographic or demographic data might prove helpful. If a business rebrands in an attempt to have a voice and style more aligned with a target audience, behavioral demographics might reveal where their affinities lie and why.

Performing internal segmentation or hiring a third party each requires varying organizational demands. However, the more profound your access and connectivity with customers, the more valuable the data will become. How will the numbers matter to you and your operations?

Optimizing Budgets For Intent

Customer segmentation hones budgets on what matters. For example, what is the value of R&D in a product line when customers express discontent or disinterest in those items? Instead of continuing to allocate money to products because of tenure or ease of production, those funds find a better home in anything from increasing wages, investing in sustainable business improvements, or kickstarting a new product idea.

These could all impact customer satisfaction. Ultimately, it makes better use of the resources companies are constantly hyperanalyzing for more focused purposes.

Another example is targeted advertising. Organizations waste a lot of time and money on moot advertising efforts. Teams can only craft personalized ads — which are 54% more engaging to customers — if they take the time to segment and understand what their customers care to see.

Strengthen Bottom Lines

Customer segmentation is an upfront investment with constant returns and money-saving opportunities down the road — if you pull as much value as possible from the data. It distills your customer base and business priorities to reduce risk and increase resilience. Small businesses could find their way into the black sooner than anticipated, avoiding the trend of no profitability for the first few years.

Segmentation can also serve as a type of predictive analytics. The data highlights patterns depending on the sample size and the time frame the information was obtained. However, it shows how seasons impact sales or how well a referral program does within the first week versus a month. It shows how age group or geographic location relates to attendance at in-person promotional events like meet-and-greets or live music.

Profits soar, and a company solidifies its likelihood of growth. Teams can even combine segmentation with other types of market research to maximize their business strength, including:

• Surveys
• Focus groups
• Observational study
• Competitive analysis

Discover Identity Resolution

Identifying target audiences is not the same thing as segmentation. It may appear similar, but segmentation is only the first step. Then, identifying target audiences relies on seeing the patterns and trends within the data, called identity resolution. It clarifies the customer, so when you make business decisions, the image of that buyer appears to guide the company forward.

Using segmentation to identify a target audience could yield answers to previously nebulous questions, like:

• How much are my customers willing to spend on these products?
• How does my brand voice match the tone of my target audience?
• How likely am I to create repeat customers based on development or service usage behaviors?
• Am I offering enough diverse payment methods or product interactivity to keep audiences engaged?
• What kind of influencers should I contact that interact with my customers?

Businesses are realizing the value of identity resolution. Spending on this will potentially reach $10.4 billion by the end of 2023, continuing to rise as hyperconsumerism traverses online shopping.

Undergo The Customer Journey

Seeing customer segmentation unravel means going on the customer journey while sitting in the manager’s chair. Everyone has been a consumer, and it is easy to misconstrue that experience as sufficient for knowing how your customer journey unfolds.

This is not the case. What is it like visiting your storefront or website landing page for the first time? How do those first impressions impact purchasing? You cannot determine this until you see some figures that provide an accurate representation of your primary customer and their typical marketing funnel.

Whether you sell clothes or house cleaning services, it is essential to dig deeper into the segmentation — into the psychographic or behavioral. It allows business owners to consider how the customer’s spending impacts them in one day or year.

It forces managers to step back to create the most rewarding, authentic experience possible, usually with a customer journey map as a tool to visualize the major steps of the experience. If the process does not sit well with them and their customer journey, something has to change.

Customer Segmentation Is A Well-Rounded Strategy

Marketing segmentation matters significantly to your business because it can influence every decision to be more thoughtful and intentional. It forces companies large and small to step into their customers’ shoes and determine why they patronize their storefronts.

Remember, customers — especially repeat — rarely accumulate without effort.