Customer segmentation

Customer segmentation

Customer segmentation is the dividing of a firm’s customers into groups based on the resemblance they have on any dimensions relevant to your business. The dimensions could include channel preference, customers’ needs, customers’ profitability or their interest in different products.

Segmentation doesn’t have to be difficult. Always start with asking yourself this simple question: who are we marketing to? The answer is your customers. You surely must have studied your customers to an extent so that you can segment them based on any dimension relevant to your business, such as:

  • Gender
  • Age
  • Spending pattern
  • Where they live

The dimensions are not important, what is essential is the business you do. Your business would affect the dimensions. For instance, if your company sells car parts, and the dimensions you want to segment your customers includes; hair color, age, etc. do you think that dimension would work for you? No, because your firm is dealing in car parts. So before you start segmenting consider your business.

It is best for you to segment your customers in a way that would affect your company or firm positively. No matter what you segment your customers into, make sure it has an impact on your business, if not you are just wasting your time segmenting.

 Importance of customer segmentation

With customer segmentation, you would be able to address different customers in different ways that would be very effective. Customer segmentation analysis allows a marketer to be able to identify different groups of customers with accuracy based on behaviors, needs, and so many other indicators.

Every marketer’s goal is to maximize its company’s profit and its customer’s value and love. So it is essential to know how every marketing action will influence the customer. Using customer segmentation, you can know how every marketing action would influence the customer. Customer segmentation would focus on the long-term customer lifetime value instead of the short-term value of a marketing action.

Steps to customer segmentation

  1. State your segmentation objective. Give detailed reasons why you want to segment, and what you want your business to gain from segmentation.
  1. Decide on what data would be collected and how they would be gathered. Decide on the data based on your business, make sure the data you are collecting goes in line with your business.
  1. Collect data and get insights from various sources. The third step is data collection. Use insights from experts, company’s staffs, customers and research on competitors to collect data.
  1. Develop methods of data analysis for segmentation. You should develop methods of data analysis of segmentation. Some method includes:
  • executing data analysis to know relevant variable and validate your hypothesis
  • evaluating composite segmentation
  • Synthesizing validated segmentation hypothesis to form homogeneous, distinct segments of high-value customers.
  1. Establish effective communication about the segmentation among business units such as customer service and marketing.

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