What is customer segmentation? Targeted marketing made simple
Effective marketing is all about knowing your audience, and one of the most powerful ways to do that is with customer segmentation. When you segment your customer base into specific groups based on their characteristics and behavior, you gain a deeper understanding of their needs and preferences and can adjust your marketing efforts accordingly. In this post, we'll explore:
- What is customer segmentation?
- Benefits of customer segmentation
- Types of customer segmentation
- Getting started with segmentation
What is customer segmentation?
Customer segmentation is the process of dividing your customer base into smaller groups or segments based on similar characteristics — such as purchasing behavior, demographics, or psychographics. The purpose of customer segmentation is to help businesses create targeted marketing campaigns and strategies that resonate with specific segments of customers rather than trying to appeal to a broad, generic audience. It is worth noting that customer segmentation is different from market segmentation, which focuses on the broader market instead of a company’s existing customers.
Customer segmentation is necessary to build buyer personas, which represent the ideal customer for your product or service. By creating buyer personas, you can better respond to your customers’ motivations, pain points, and preferences — and tailor your messages to their unique needs, thereby improving your personalization and targeted marketing practices.
Benefits of customer segmentation
Customer segmentation is a powerful tool that can help businesses of all sizes improve their marketing efforts and gain customer loyalty. With customer segmentation strategies in place, businesses can earn a larger share of the market, identify their most valuable customers, and reach them through the most effective channels.
According to the 2022 Adobe Trust Report, 58% of customers will stop purchasing from a brand that doesn’t give them the personal experiences they value, which suggests that personalized messaging is becoming increasingly important for businesses to engage effectively with their target audience. By segmenting your customers, you can personalize your messaging and offers, resulting in a more positive customer experience.
The benefits of customer segmentation don’t stop there. Advantages include:
- Identifying the most profitable segments
- Increasing sales and customer loyalty
- Creating opportunities for upselling and cross-selling
- Improving customer service
Types of customer segmentation
There are three main types of customer segmentation, and each one offers distinctive insights into your customers:
- Demographic segmentation, which divides customers based on factors such as age, gender, income, and education.
- Psychographic segmentation, which divides customers based on their personality, lifestyle, values, and attitudes.
- Behavioral segmentation, which divides customers based on their past purchasing behavior, website activity, and engagement with marketing materials.
Getting started with customer segmentation
When you’re ready to get started, collect data about your customers through past marketing responses, purchase history, reviews, and surveys. This data will allow you to create meaningful customer segments and personalize each customer’s journey.
To make the process of customer segmentation more manageable, consider using a data management solution like Adobe Audience Manager. This product collects and merges information from practically any source, building intelligent audience segments that give you a complete view of your customers. With attribute-based audiences, lookalike modeling, and more, Audience Manager helps you take charge of your customer experiences and expand your reach and impact.