Customer segmentation models: segment & grow customers

Divide and conquer – how to use customer segmentation models to grow your business

The secret to successful marketing communication lies in your ability to deliver the right message, to the right customer, at the right time. Customer segmentation should always be one of the first considerations for any marketer, CRM manager, database manager or any other business decision-maker.

Everyone, by now, recognises the value in targeted communications and personalisation through customer segmentation. But how many brands can say that they are maximising their data to its fullest extent to truly understand their customers? 

Customer segmentation allows you to build personas representing different customer groups, in order to tailor campaigns with the right messages and relevant promotions for those personas. Once you perfect this, you’ll see heightened customer engagement, leading to increased revenue streams and enhanced customer loyalty.

Challenges of customer segmentation

Sounds like a no-brainer, right? But many brands struggle to execute this correctly. Often, it’s because they are using segments that are too broad or too narrow. Other times, companies underestimate how dynamic customer segments are and how often they have to be updated due to changing customer demands.

Some don’t consider the wider marketplace outside of their current database that could influence a change in attitude within their segments. For others, it’s as simple as failing to carry out an initial landscape analysis or beginning the process with poor quality data. (Working with a data services provider will help you to avoid making these mistakes.) 

Getting customer segmentation wrong can become a costly business. It can end up frustrating your customers and damaging relationships, not to mention the money wasted on communications going to the wrong people! 

Using customer segmentation models to strengthen customer relationships 

So, where do you start? A good place would be to look at the four key customer segmentation models. Applying a combination of these models, depending on the data you have available, allows you to segment your audience effectively and efficiently, based on their needs and expectations.

Let’s explore how each of the four customer segmentation models can help you plan a targeted marketing communication strategy. 

 

1. GEOGRAPHIC SEGMENTATION

Do not underestimate the power of geographic segmentation. Dividing your market by location allows you to better serve customers in particular areas. A clear example is their distance in relation to your business or store.

Example

A supermarket, for example, might want to send promotional vouchers to everyone who lives within 20 mins travelling time to their store. For those people more than 20 mins away they might want to send them online offers instead and direct them to their website.

There are the obvious ways to break down location, such as cities and towns, but you might also want consider other ways of segmenting people geographically. For example, a political party may want to reach a specific constituency. While a football club might focus on a completely bespoke area that makes sense for them.

Dive a little deeper and you start to see the impact that location has on the needs of your customers. When you think about it, our day-to-day lives vary significantly based on where we live. From the type of home we live in, our commute to work and how we spend our social time.

Our location shapes what we prioritise in life, as well as our needs and aspirations as consumers. For example, urban vs. rural is going to generate very different customer needs.

Example

A business looking to sell lawnmowers would probably avoid inner-city areas. But one looking to promote a range of tumble dryers would likely have more success in such a location.

This variation of customer needs can unveil some interesting trends. You can take inspiration from local amenities. For example, you might find that a high amount of ski gear is sold within an hour’s drive of a ski resort in France. You can then use this insight to target this region with other related products. School districts are going to be home to many families so targeting them with children’s clothes is likely to pay off. As you can see, there are already so many opportunities through geographic segmentation. And we’re just getting started!

 

2. DEMOGRAPHIC SEGMENTATION

This is often the go-to segmentation method. It’s straightforward, easy to define and most companies will have this sort of data readily available. It provides another layer of information to add to geographical segmentation. 

Demographics tend to focus on:

  • Age
  • Gender
  • Ethnicity
  • Income
  • Level of education
  • Religion 
  • Profession/job title 
  • House-hold make-up (i.e. are they married, have children… etc)

This is where you can really begin to build more of a solid picture of who your customer is and with that, what their individual needs are.

Take, for example, gender. While it is important to steer clear of sweeping assumptions based on gender, there is no denying that products and services are often heavily gendered. Using data segmentation to target specific genders, saves your customers from receiving promotions on products they have no need for. Or, you might want to segment your customers by age and target them with marketing content which will appeal to a particular generation.

Example

We worked with the Royal National Lifeboat Institution (RNLI) to apply audience segmentation to a campaign designed to raise money to build one of their boats. The team wanted to create a version of the campaign that would appeal to a younger demographic. They found that using creatives of young lifeguards and focussing the article on how they keep us safe, generated the most engagement from that market. In fact, segmenting their audience led to a 53.3% increase in responders to the charity’s summer campaign.

Now that we’ve added another layer to the segmentation process, let’s take it a step further… 

 

3. BEHAVIOURAL SEGMENTATION

Behavioural segmentation goes further than basic demographics. This looks at the actions of the customer and how they impact the buying process. This is based on what content your audience consumes and how they interact with your brand. It helps you to identify your most loyal customers.

You can also establish whether your customer is motivated by price or product. Or, for non-profit organisations, you can learn what motivates donations. As you apply behavioural segmentation to your database, you can build on it over time. And the more you learn about your customer, the more you can send them the right communications at the right time. 

Example

Tesco Clubcard is a great example of behavioural targeting. It allows Tesco to monitor customer purchases so that they can pinpoint trends and suggest further relevant purchase options. Tesco then offers discounts or rewards to support these shopping suggestions – ensuring the customer doesn’t shop elsewhere for the same item.

It’s not just Tesco, most big retailers have similar strategies. The competition is so fierce when it comes to supermarkets that they have to make sure they are constantly offering relevant and personalised rewards to their customers for shopping with them.  

 

4. ATTITUDINAL SEGMENTATION

Much like it sounds, this model separates customers on their psychological characteristics and the traits and habits associated with them. It helps marketers to understand what motivates their customers, what principles and inherent beliefs they hold and what drives their decision making. This is both at a conscious and unconscious level. It is all about understanding why that person is behaving as they are.

Once you understand this, you unlock a gold mine of marketing opportunities. This method of segmentation analyses how the customer lives, thinks and feels by grouping each one on a range of factors impacting their behaviour. These include the customer’s aspirations, values and opinions.

You can also establish the customers attitude towards your brand – whether it is positive, negative or neutral. This data can be collected through Qualitative and quantitative methods. By harnessing your customer’s attitudinal segmentation, you can use your findings to supplement your other models of segmentation. 

Increasingly, customers look for brands that can connect with them on an emotional level.

Example

Take, for example, the Always #likeagirl campaign. In 2014, the feminine product brand appealed to its audience by giving a new meaning to the term ‘like a girl’ with the view of empowering women and girls. The very people they are targeting with their product. This campaign was designed to align with the attitudes and beliefs of its target audience, to make an emotional connection. And it worked. Their video went viral, reaching a whopping 90 million views, and eliciting 177,000 tweets mentioning #likeagirl within the first three months.

This model of segmentation is ideal for developing a strong relationship with your customers and building on customer loyalty which then leads to an increased ROI. It’s all about adding value to your customers’ lives.

Apteco FastStats: your answer to customer segmentation

Now that you understand these segmentation models, you’re probably keen to apply them to your own customer base. But where should you start? At Qbase, we’re experts in customer segmentation analysis and we’ve worked with many organisations to help them find the right tools to get the most out of their data. Apteco Marketing Suite is the perfect tool to help you segment your customers. 

Apteco FastStats gives you a 360° view of your customer, using a suite of marketing and customer journey tools, including segmentation. The platform helps you to create highly targeted, onmi-channel campaigns and you don’t have to be a data scientist to get the most out of it. It gives marketers actionable insights to improve their campaigns and increase their ROI. 

Customer case studies

We have worked with many organisations to help segment their customers using Apteco. Two great examples are RNLI and Nisbets. For both organisations, we recommended Apteco’s FastStats to target different segments of their audience with more bespoke messages. As a result, both saw an increase in customer engagement among other outcomes. RNLI saw a £285,756 increase during their summer campaign managed by FastStats. While Nisbets saw a 600% increase in ROI on its catalogue campaigns.

Wrap up

While segmenting your data may seem like a daunting task, it is fast becoming a necessity for brands wanting to stay ahead of the competition. And, once executed correctly, it can open up a world of possibilities for your marketing communications. Applying these four models through Apteco Faststats will help you to lay the groundwork to build loyal and highly valuable relationships between your brand and your customers. So why wait? Speak to one of our customer segmentation experts at Qbase today.

To learn more about using data to improve your marketing, take a look at our blog Is Your Marketing Strategy Based on Strong Data Analytics?

 

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