Customer Segmentation: 5 Ways to Divide the Consumer Base
Customer segmentation enables businesses to create messages that will resonate deeply with particular audiences. Five types of customer segmentation include: geographic, B2C demographic, B2B demographic, psychographic, and behavioral.
Five Types of Customer Segmentation and Examples of Implementation
Customer segmentation is imperative when trying to send messages to a target market. Segmenting consumers enables marketing teams to stretch budgets and make the most of marketing dollars by reaching the most ideal visitors who are likely to become leads, without wasting money on impressions that will never turn into conversions.
Additionally, by reaching niche groups of people, marketers can craft messages specifically for them. This communication will enable marketers to connect with the target audience, develop relationships, and communicate messages that resonate.
There is an excess of ways to segment the market in order to reach the most ideal consumers for certain products or services. Some of these include geographic segmentation, demographic segmentation, psychographic segmentation, and behavioral segmentation.
Customer Segmentation: Geographic
Geographic segmentation is the practice of segmenting a campaign’s target audience based on where they are located. Segments can be as broad as a country or a region, or as narrow as one street of homes in a town.
Geographic segmentation is useful for both large and small businesses alike. Large businesses with international markets may choose to offer products or services specifically for audiences in particular locations. For example, Home Depot may target US northeastern states when advertising a sale on snow shovels. Presenting this ad to Floridians, for instance, would be irrelevant, unnecessary, and could even desensitize the audience to future advertisements.
Particularly for small businesses, geographic segmentation can be used to target specific customers without wasting excess advertising dollars on impressions that will not turn into leads. For example, a local pizzeria could present their ad to only people within the town they are located.
Geographic segmentation is one type of customer segmentation that is extremely easy to implement, as many companies often have their customers’ addresses from landing pages, or their credit cards.
Customer Segmentation: Demographic B2C
Demographic segmentation is segmenting the market based on certain characteristics of the audience. Characteristics often include, but are certainly not limited to: race, ethnicity, age, gender, religious, education, income, marital status, and occupation.
Also fairly easy to implement, demographic segmentation can be useful in a variety of ways. Luxury brands may choose to market to a demographic consisting of people with household income > $200,000. Colleges may use messaging in their advertising that appeals to 17-22 year olds.
Demographic segmentation is even more efficient when targeting multiple segments at once. Bridge ran an email marketing campaign where we targeted local (geographic) females (demographic: gender) aged 25-50 years old (demographic: age) with a household income of less than $100,000 (demographic: income) and an interest in furniture (behavioral). Targeting several segmentations in conjunction with one another led to over 440 sales for the local furniture retailer, driving more than $180,000 in revenue.
Combining various customer segmentation criteria has the potential to reach a very targeted niche market and drive sales while maximizing the value of every marketing dollar spent.
Customer Segmentation: Demographic B2B
Demographic segmentation can also be used in B2B markets. In this case, common demographics include: company size, industry, role, time working for the company, and more.
Agencies may choose to segment the market by industry when searching for prospective clients. An advertising agency that specializes in auto advertising may segment the market by industry. They can further segment the market by role when opting to contact marketing managers and creative directors.
Again, using multiple demographic criteria while segmenting targets a very specific list of prospective customers.
Customer Segmentation: Psychographic
Psychographic segmentation is far less concrete than both geographic and demographic customer segmentation, as the characteristics used to segment are less “tangible” than the latter two. Psychographic segmentation divides the market on principles such as lifestyle, values, social class, and personality.
This type of customer segmentation is significantly more difficult to implement than geographic or demographic segmentation. To properly segment the market based on psychographics, marketers must really take the time to get to know their current and past customers. This includes clearly defining the ideal buyer persona for the product or service and developing relationships with the customer base.
A prime example of psychographic segmentation is targeting those who are budget conscious. These people value a good deal and tend to be smart shoppers. Target ads to this segment by appealing to their intrinsic budget-savvy personality.
Discount stores, like Wal-Mart, utilize this tactic nicely. Wal-Mart uses messaging like “Unbeatable Prices” and “Best Online Specials” because it will resonate with the audience they are trying to reach.
Customer Segmentation: Behavioral
Behavioral segmentation is similar to psychographic segmentation on the basis that it is less concrete than demographic or geographic segmentation. Behavioral segmentation is the practice of dividing consumers into groups according to any of the following attributes: usage, loyalties, awareness, occasions, knowledge, liking, and purchase patterns.
Behavioral segmentation can be used in a variety of ways. When segmenting based on awareness, companies may opt to send their loyal customers one ad campaign, whereas target an additional campaign to prospective customers who have yet to build a relationship with the brand.
When segmenting based on occasions, companies can target consumers who are less price sensitive during times like graduation season and the holiday season.
Behavioral segmentation allows marketers to be more relevant and produce messaging that will resonate well with their desired target market.
Read more on behavioral segmenting here.
Each style of customer segmentation carries its own unique set of benefits, but using them in conjunction with one another will create maximum impact. Reach even more specific niche markets by combining different segmentation styles.
Customer segmentation is universally applicable. The tactic can benefit marketers in both small business start-ups and global companies across all industries.
Thus, with billions of people in the world, efficiently utilizing customer segmentation will help businesses narrow the pool and reach the people that they want to be talking to, ultimately driving conversions and revenue.
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