Article

Asena Atilla Saunders
Asena Atilla Saunders 3 August 2017

All You Need to Know About Segmentation and Targeting

Customer Segmentation and Targeting is one of the best ways to use Big Data wisely. Segmentation enables you to personalise your approach to meet every customer group`s needs. Building the right segmentation groups will enable you to determine the most valuable customers and create campaigns that suit them: a win-win situation for both you and your customers!

Big Data is not a buzzword anymore. Now every organisation has a vast amount and various types of customers who are in demand of tailor made services and products. So how do you provide each individual a personalised service? This might sound far from possible but what you consider as a disadvantage is actually an advantage when you know how to utilise this amount of information in your hands.

Customer Segmentation and Targeting is one of the best ways to use Big Data wisely. Segmentation enables you to personalise your approach to meet every customer group`s needs. Building the right segmentation groups will enable you to determine the most valuable customers and create campaigns that suit them: a win-win situation for both you and your customers! Let’s see how you can achieve the right segmentation and targeting strategy for your customer base:

Step 1: How to Segment Your Customers

Every business has different metrics and KPI’s therefore you need to make sure which segments are most suitable for your industry and for your brand.

The most common 5 variables that you can segment your audience are;

1. Demographics

These include personal attributes such as age, gender, ethnicity, religion, marital status, education, occupation, social class, income etc.

As socio-demographics is the most important segmentation, it is not enough to be a successful indicator alone, even if you combine more than one attribute. For example; if you are a 5 star hotel chain, only the income segmentation would not give you the right results as your customers also need to be segmented with their lifestyles or life stages.

2. Behavioural

This is the process of segmenting your customers based on how they perform while interacting with your application such as; how they behave, response and engage as well as their usage rate, readiness stage and loyalty. Measuring behaviours might sound challenging however you can easily segment your audience based on; past clicks, views, frequency of usage, value of past purchases, time spent and particular actions performed by specific user groups to name a few.

3. Geographic

In this segmentation you group your customers by geographical indicators such as region, nation, urban/rural, climate, population density and neighbourhood.

4. Lifestyle

This segmentation refers to hobbies, entertainment, extracurricular and other unprofessional activities. The key point is trying to find the niches and avoid assumptions such as offering only football related products to male customers.

5. Channel Preferences

Determining which channels to reach your customers enables you to save time and money on your campaigns in addition to approach your customers relevantly.

You can generate other segments according to your own specific market. The key is your segments must contain similar consumers and distinctive elements that respond differently from each other in order to achieve effective results.

Step 2: Targeting

When you successfully segment your customers, the next step for personalised campaigns is targeting. Targeting enables you to build related campaigns to the individuals of those segments according to their behaviours, likes and attributes.

There are several key points to take into consideration while you are targeting your customers in order to determine the most effective segments such as; Profitability, Size and Potential Growth of your segments.

Step 3: Retargeting

An effective segmentation and targeting strategy must be nourished with retargeting since your previous campaigns provide you with the best insights about your segments’ behaviours and responses. Retargeting enables you to identify which campaigns were successful on which segments and re-select your customers for a new marketing activity according to this information.

An accurate retargeting strategy allows you to make the best of your marketing campaigns to the customers with a high repeat purchase rate.

Segmentation and Targeting: Do they Really Work?

We have been talking about how an effective segmentation and targeting strategy can leverage your marketing activities but let’s admit it; you want to see real numbers.

We have tested a push notification campaign with one of our e-commerce customers. At first they segmented their consumers who have checked a shoe brand before on their channels. After this segmentation, they sent a push notification campaign for promoting shoes to 2 segments (total of 700 K users). The results were as follows:

In addition to the results above, the Revenue Rate of Segment #2/ Segment #1 was 57%.

As seen clearly from this campaign, with the right segmentation and targeting, the conversion rates are 10 times more and push notification open rate is higher together with a more lucrative result.

Segmentation, targeting and retargeting is an ongoing process, which allows you to optimise your marketing strategy as you gain insights from every campaign and improve your approach to customers. The right segmentation and targeting strategy will enable you to;

  • Improve your marketing strategy by focusing on the most profitable segment
  • Gain deeper customer insight
  • Improve customer satisfaction and engagement
  • Strengthen your brand image and customer loyalty

Original Article

Andrés Redondo Mercader
Andrés Redondo Mercader

Great article Asena, I'd just add that in the Lifestyle variable the social networks may provide invaluable information to identify the interests, favourite brands, products and communities loved by the customers and prospects. Social Network Profiling solutions like Xeerpa may help marketers capture this data under user consent and use it for improved segmentations and targeting.

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