Your ‘one-sale-fits-all approach’ to sales and marketing leaves profit on the table and unsold inventory.
NB: This is an article from Revenue Management Labs
Instead of thinking about your customers as 1 entity or 1 large group, break them into a few well-defined segments with ‘like’ needs. For a concrete segmentation example (that’s close to home), think of all the people you interact with. Chances are, 95% of these people can be categorized with 1 of 3 labels: Family / Friend / Colleague. Each group fulfills an important aspect in your daily life with different needs, expectations, demands, and roles.
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Transport this thinking and use a segmented approach with your customers. Make it easier to attract, retain and build revenue relationships by calling out specific needs, pain points, and common/linked expectations of your business and product/service.
When you break customers into clearly segmented groups and communicate the most relevant and appealing offers specifically, you’re going to notice an immediate improvement in your bottom line!
Here are four common ways to segment customers: Behavioural, Psychographic, Demographic and Geographic,
Behavioural Segmentation (The How)
Behavioral segmentation divides customers into different categories based on similar behavioral patterns. Unlike demographic and geographic segmentation, behavioral segmentation provides deeper insight into spending history, like how much customers spend and how frequently.
Behavioral segmentation removes obstacles in optimizing a buying experience to tailor a customer journey. Behavioral segmentation helps businesses focus their sales and marketing efforts on specific group types in hopes of high levels of engagement. These behavioral insights are driven using transactional data, like how long they’ve been customers, which group types most utilize customer services, order timelines, or even how widely customers buy across your business portfolio.
This avoids dedicating resources to the wrong target audiences. The best part, behavioral data is also easy to obtain and is tracked by website/analytics tools.
The downside with behavioral data is that you can’t understand the motivations (the why) behind customer behavior. Also, human behavior and online trends are always changing, so it’s difficult to pinpoint whether an activity is standard or sporadic.
Psychographic Segmentation (The Why)
Psychographic segmentation breaks down customers into groups based on shared beliefs, values, lifestyles, and motivations. Understanding your customers’ psychological characteristics is the final piece of the puzzle when building holistic customer segments.
Psychographic segmentation is often confused with behavioral segmentation, but there’s a distinct difference. Rather than track customers’ financial history, psychographic segmentation draws out customers’ underlying motivation behind the behavior. When businesses have a clear picture of your psychographic segmentation they’re empowered to speak the customer’s love language and showcase offerings on a personal level.
Unfortunately, psychographic data is the hardest to obtain. The only way to get psychographic data is by surveying your customers. There’s also the risk that because data is qualitative, it can be easily misunderstood.
Why Market Segmentation Matters
When properly utilized, market segmentation saves time and money for every business, every time. By knowing the specific needs and desires of your customers, businesses can utilize effective campaigns to reach the maximum profit customer base. Target engagement improves customers’ overall buying experience while delivering a favorable return on investment.
A more targeted sales & marketing approach may also reveal previously hidden niche markets. This can lead to the development of new offerings and high-conversion, high-quality leads.
