7 Customer Segmentation Techniques to Understand Customers Better

Customer Segmentation

In the past, businesses viewed all of their customers to be similar and so sent the same marketing and sales pitches to the entire mass. Things have enormously changed today. With advanced technology facilitating highly-personalized connections with individual customers, bulk appeals have been discarded. 

Businesses are now customizing their communications with each customer by segmenting them based on their demographics, online behavior, future needs, and more. This can help understand customers better, engage them, build better relationships with them, reinforce their brand loyalty, and advance the bottom line.

Here are 7 customer segmentation techniques to understand your customers better.

1. Purchasing Behavior-Based Segmentation

Different customers behave differently throughout their buying journey. Segmenting customers based on this can help businesses understand-

  • The way different customers proceed towards the buying decision.
  • The intricacy and complication of the buying process.
  • The customer’s role in the buying process.
  • Significant hindrances along the buying path.
  • Those behaviors that are the most and the least predictive of a customer’s decision to buy. 

The patterns in the digital behavior of customers are analyzed to understand the above. When it comes to predictive analysis, it is done in two ways. The first one is using info about past purchases to predict future buying. The second is, using the customer’s behavior along the purchase path to predict the probability of buying. 

2. Segmentation Based On Benefits Sought

Different customers look for different primary benefits while making a purchasing decision. Analyzing customer behavior while researching a product or service online can uncover valuable details into what benefits, values, features, issues, or use cases influence their buying decision. 

When a customer emphasizes more on certain benefits over the rest, these are the primary factors that primarily drive his or her buying decision. For instance, here is the segmentation of consumers who purchase biscuits from specific brands for different purposes.

  1. Crispiness
  2. Flavor
  3. Packaging
  4. Price

Such segmentation can be done relevantly for any industry. Though two prospects may be similar with regards to their demographics and geography, their benefits and features sought may be different. So, based on this you need to tailor your messages to each one of them. This is where this segmentation helps.

3. Psychographic segmentation

Psychographics involve segmenting customers based on the customer’s qualitative or inner traits. These attributes aren’t obviously recognizable from the outside. So, these require deeper analysis of traits such as habits, lifestyle, values, opinions, hobbies, interests, activities, attitude, personality, social status, etc. 

Defining customer persona in this manner will equip businesses to customize their marketing strategies to suit customer preferences.  They can employ psychographic segmentation for brand personification. For instance, if you find that a specific group of customers keep buying the latest apparel, your sales team can keep sending them your recent arrivals. 

4. Demographic segmentation

Demographic segmentation involves segmenting your consumers based on their demographic attributes like age, family size, salary, gender, education, marital status, religion, race, occupation, living status, political party status, etc. This is done based on the info your prospects and customers provide about themselves. 

Understanding customers based on their demographic segments helps lower your marketing costs and resources. It also allows you to harness unreached potential consumers. Unlike other segmentation like behavioral, psychographic, benefits sought, etc. these are less invasive in terms of collecting consumer data. 

5. Geographic segmentation

When your consumers come from different geographic locations, segmenting them on that basis helps.  For, consumers from the same physical locations may have similar preferences. So, it is good to pair geographic segmentation along with behavioral segmentation.

Under geographic segmentation, you usually group consumers according to their country, state, city, town, district, zip code, economic status of the location, population density, regional climate, etc. Sometimes, this grouping can also be done on the basis of neighborhoods. For instance, if a firm deals with agricultural farm management, it would target consumers both in the city as well as its outskirts. 

6. Customer stage segmentation

Not all of your customers are in the same stage of their buyer’s journey. Segmenting customers based on the stage they are in will help line up your communications and personalize experiences to increase conversion at each stage. 

This also helps you identify those stages where customers aren’t moving forward. This paves way for recognizing the hindrances and areas for improvement. However, segmenting customers based on their journey stage isn’t easy. You can’t determine it based on one or two behavioral data points. You should leverage a customer’s behavioral data across all touchpoints and channels over time.

7. Customer loyalty based segmentation

A company’s most valuable assets are its most loyal customers. Retaining them is cheaper than acquiring new customers. Further, they have the highest lifetime value; and they are your best brand advocates. Segmenting customers based on their loyalty towards your brand helps you understand how you can maximize their value and gain more customers like them. 

For this segmentation, you should harness customers’ behavioral data to identify your most loyal customers, the key factors and behaviors that led to their loyalty, the right customers for loyalty and advocate programs, and the ways to keep them happy. 

You can keep them delighted with special privileges and treatments like exclusive reward programs. This will nurture and reinforce the customer relationship. This way, you’ll also gain other benefits such as providing positive feedback, testimonials, referrals, endorsements, references, participating in case studies, and spreading favorable word-of-mouth in their circle.

Wrapping up

Segmenting your customers based on different factors such as demographics, psychographics, geographics, customer behavior, customer loyalty, etc. helps your brand to understand them better. This way, you can line up your marketing communications and personalize experiences to increase conversions, improve loyalty, and heighten revenue. So, do not miss segmentation if you want to beat the competition.

About the AuthorAuthor Shivani Goyal is a content writer at NotifyVisitors, which provides Segmentation that enables you to reach a customer or prospect more precisely based on their particular needs and wants.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.