In today’s business world, it can be hard to find the right customers and audiences. Customer segmentation is a big help in getting to this point. It is the process of putting people into groups based on certain things they all have in common.
The goal of putting customers into groups is to get the most value out of each group for the company by figuring out the best way to deal with each group personally.
Why businesses need to divide customers into groups
Business-to-Business (B2B) marketing involves dividing customers into groups based on different factors, such as but not limited to:
- Industry
- Size of the company (number of employees, number of offices and branch offices, etc.)
- Purchases of Goods
- Turnover Location
When it comes to Business-to-Consumer (B2C) marketing, companies often divide their customers based on things like:
- Gender Age Relationship status (married, single, divorced, retired, etc.)
- Places (rural, city, and suburbs)
- Segmentation lets you target your marketing to specific clients and learn more about your whole audience at the same time. Here are a few ways that segmenting your clients could help your business.
- Marketing messages should be tailored to the person receiving them: People are different in different ways. What brings one group together might not make any sense to another. In addition to making your marketing more effective, addressing the specific pain points of each customer can teach you a lot about how to improve your products or services in the future.
- Find the Most Effective Ways to Communicate: Some people are more likely to respond to emails, while others are more likely to respond to social media posts or ads. Knowing how to talk to different kinds of customers can save you both time and money.
- Get more customers to come back: This is what happens when a customized strategy is used. The more you show that you care about your customers by understanding their concerns and using the right language, the more likely they are to come back and become loyal customers.
- There are also the following products and services: When you know what kind of customer you’re dealing with, you can sell more to them because you already know what they’re likely to like.
- Find out which customers are the best fit: It will give you a list of the people who have spent the most money as individuals. But what’s much more important is that you’ll fully understand what ties them together. You will be able to find more people who are like you.
How to Put Customers in Groups
There are many different ways to look at data about customers. Spreadsheet editors like Microsoft Excel or Google Docs can be used to manually do the most basic customer segmentation. In this case, the first thing you should focus on is getting your data ready:
- Export the information you have about your clients: You can do this with the administration panel of an eCommerce platform like Shopify, WooCommerce, PrestaShop, or something similar. It is the most common way to export this kind of data because it works with almost any program and is easy to use.
- Open (or import) the file in the text editor you use most often.
- Make the changes to the data that are needed. Look at the data you exported and decide which data fields you will use in your app. If you want the section to be more focused, you can get rid of the rest of it.
- Let’s start by putting them into groups. Colums can have filters added to them. To start sorting your clients, choose a trait that you will use to divide them. For example, if you want to group clients by where they live, you can choose one or more locations (like towns in a county) and filter out the rest to reach your goal.
- Congratulations! You have finished making the first part of your story.
- Copy the customers who have been filtered to a spreadsheet that has been made just for this section.
- Repeat the process for the rest of the customers, and you’ll have a group of customers who are separated by where they live.
- You can, of course, add other characteristics and divide customers into groups based on their location, age, and gender at the same time. But this will take a lot more work than before.
Also, it’s important to keep in mind that the portions should be big enough. If you have a small group of people to target with different marketing activities, you don’t have to go after each person in a segment. It’s just not going to happen.
On the other hand, customer segmentation software is easy to find and can be used for many different things. They speed up the process and make it easier for you.
Automatic Grouping of Customers
If you want to group your customers in a more complex way, you might want to use automated tools. Here are some reasons why an automated solution is better than a segmentation process that is done by hand.
- It will save you time: Even the simplest kind of segmentation based on a single trait could take hours. When you have to do a lot of segmentation, using automated methods could save you weeks of work and stress.
- No need to get data ready for analysis: It works well with your eCommerce platform and sends out information in a standard format.
- It combines information from different sources into a single dataset: As a very simple example, it can gather information about a person’s age, where they live, what they buy, and how they act and put it all into a single, complete database. Even though it is possible to do this by hand in theory, it would take a very long time.
- The most recent information is added to segments: Once you connect an automated solution to your eCommerce platform, it will be able to automatically export updated client data and do regular segmentation.
- You don’t have to know everything there is to know about segmenting. If a tool is powered by AI or machine learning, it will be able to search your data on its own for insights. This means you don’t have to ask for more information in order to get answers.
The long-term value of a customer
Customer Lifetime Value (CLV or CLTV) is the most important part of your marketing strategy when you are planning it. You can divide customers into groups based on any factor, but the most important thing to think about when planning your marketing strategy (CLTV or LTV) is how you want to reach them. This lets you put customers into groups based on how much value they bring to your business.
The longer people use your products or services, the more money they will spend on them. So, it’s important to not only look at how much money they’ve spent, but also try to guess how much they’ll spend in the future.
Putting customers into groups and machine learning
Even though automating customer segmentation is better than doing it by hand, combining it with artificial intelligence could do a lot more. Since computers can process information much faster than our brains, why not give them more difficult tasks?
The process of segmentation could be made much better by using artificial intelligence. Because segmentation is so useful, you don’t even have to know what you’re doing it for before you start. Algorithms can sort through a lot of data and find important connections between them. Then, the lessons learned from these connections are given.
Putting customer groups to use
The company says that a business can use customer segments with similar traits to decide how to market to each group and what products or services to push to each group. Based on what they know about their customers, a small company that sells hand-made guitars, for example, could decide to sell lower-priced items to younger guitarists and higher-priced, higher-quality instruments to older players to boost sales.
This is because musicians who are younger have less money to spend than musicians who are older. Also, a business that delivers meals can focus on how convenient it is for millennials while baby boomers can focus on how it “tastes just like mom used to make.”
Customer segmentation can be used by any business, no matter how big or small it is or what it sells. It can also be used by any business that sells in person or online. The first steps are getting information and figuring out how to use it. The second and third steps are acting on the information in a good way.
Conclusion
Customer segmentation can be a very useful tool for businesses of all sizes if it is done right. If you know who your customers are and what they want, you can better target your marketing and sales efforts. This will increase your return on investment and make your customers happier.
When dividing your customers into groups, make sure to use data-driven criteria, such as their age, where they live, what they buy, and how they act. And make sure your customer segments are always up to date as your business (and customer base) changes.