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Why Customer Segmentation is Key to Marketing

Why Customer Segmentation is Key to Marketing

It goes without saying that great customer service is a requirement for any business, but it is especially important for businesses. In recent years, the movement towards shopping local has gained considerable momentum and attention during the holiday season, but research indicates that more and more consumers choose to shop local businesses all year round. The 2015 Cox Consumer Pulse reports that 92% of consumers around the country visit a business at least once a week, with slightly less than half (46%) patronizing a business three or more times a week. When asked why they chose to shop locally, the 1,400 consumers who were surveyed overwhelmingly cited the high level of customer service as their number one reason.

While the Cox study shows that many businesses succeed when it comes to customer satisfaction, in 2015, simply providing strong customer support is no longer enough. To remain competitive in today’s market, businesses must continually engage with customers. In other words, they must build loyal relationships with customers to keep them coming back. The quality of service provided during the 10th transaction is as important as that provided during the 1st.

Segmenting is key to engagement

Segmenting target market groups into sub-categories will enable a business to more precisely tailor communication channels and key messages, and provide more relevant products and services. The more specifically and precisely customers are segmented, the greater the chance a business will connect with its audience and develop lasting engagement.

Segments should consist of customers who are both closely aligned with one another and clearly different from other customer segments. Every segment should be:

  • Identifiable, able to be measured and studied.
  • Accessible, able to be communicated with.
  • Substantial, large enough to warrant investment in time and resources.
  • Unique, made up of distinct needs.

One way to identify segments is through information provided via feedback surveys: how extensive is customers’ product knowledge; how do they use the product; do they share attitudes about price or quality?

By prioritizing segments, a business can better understand how to manage marketing efforts. Larger lists provide opportunities to reach larger audiences, while shorter ones can be helpful in terms of curating engagement.  Strategically assign a different value to each list: loyal customers are high value and, therefore, a top priority, but through segmentation, a business can also identify other high-value segments, for instance, consumers who make high-dollar purchases or customers who haven’t done any business in 12 plus months.

Market More Effectively

Once all segments are identified and valued, a business can set about developing unique marketing initiatives individually crafted for each type of consumer. The possibilities are endless: exclusive discounts for the most loyal customers, thanking them for their repeat business; new product and service emails for the occasional customer; holiday gifts for him and her if customers have been segmented by gender.

Whatever the approach, the point of segmenting is to drive engagement so that customers remain loyal to a local business, choosing it over the mega-retailers and bigger name service providers.  Developing unique marketing efforts for each segment, rather than blasting the same message to all segments, will personalize the experience for customers, boosting the business’s reputation as a superior customer service provider. Keep in mind, a general message that doesn’t acknowledge either directly or indirectly a customer’s previous purchases does nothing to show the customer that they are unique and valued.

Segmenting helps a business realize who its most valuable customers are and how to sell to them, ultimately providing a business with competitive leverage, especially important for business competing against bigger brands.

Download Ebook How Top Fortune 500 Companies Increased Their Performance Using Customer Feedback