Understanding customer segmentation is essential for merchants looking to connect with their audience on a deeper level. By grouping customers based on shared traits, businesses can tailor their marketing strategies to meet unique needs and preferences. This approach not only enhances engagement but also boosts sales. In this blog, we’ll explore the different types of customer segmentation and how to leverage them effectively for more impactful marketing campaigns.
Understanding Customer Segmentation
We all are unique and different, and so are our customers. They are not just numbers, but unique individuals who come from different cultures and backgrounds. Hence, merchants are recommended to use customer segmentation to group customers based on similar traits.
Often without realizing it, the idea of customer segmentation occurs quite frequently in our daily lives. For example, when you want to share a personal announcement, you might post it to your Instagram’s ‘Close Friends’ list first, rather than sharing it with all your followers. Well, the same applies to your customers.
Customer segmentation helps Shopify store owners understand their customers on a deeper level - their wants, needs, pain points, and expectations. Why? So merchants can tailor their marketing and products according to their customer needs. And when customers feel that you care, purchasing a product from you is easier.
Types of Segmentation
There are different types of customer segmentation. Let’s go over different types of customer segmentation.
Demographic segmentation
The main goal of demographic segmentation is to learn more about our customers based on their age, gender, income, and education. Let’s learn from L’Oréal Paris. They use demographic segmentation to offer different products for teens, young adults, and older adults.
With demographic segmentation, here are some campaign ideas you can run:
- Educational background campaigns
- Age-specific promotions
- Gender marketing
- Income-based offers
Geographic segmentation
Thinking about growing your market beyond your current location? Then it's important to understand geographic segmentation, which includes their country, state, city, or town.
With brands expanding globally, fitting in with the market can be difficult. But it doesn’t have to. Businesses can use geographic segmentation to tailor their marketing efforts based on regional interests. By doing so, you can connect better with new audiences and make your expansion efforts more successful. A famous example would be McDonalds. We can see that they tailor their menu based on geographic locations. In this case, it’s Singapore and Indonesia.
With geographic segmentation, here are some campaign ideas you can run:
- Localized advertising
- Region-specific products
- Culture celebrations
- Local partnerships
Psychological segmentation
For this type of segmentation, our focus is on our customers' lifestyles, values, and personalities. So, we can create campaigns that speak to their values and drive their emotions. To do this, we have to consider the following key factors: lifestyle, values, personality traits, social status, and opinions. Unlike the other campaigns, this approach goes beyond data and aims to create emotional connections.
For business owners, they can segment their customers by lifestyle and daily habits. Here are some examples:
- Eco-friendly buyers
- Health-conscious individuals
- Adventurous travelers
We can learn from Apple. They utilize psychological segmentation to target their customers. Here’s how they do it:
- Lifestyle: Apple targets tech-savvy individuals who value innovation and design. Their products, like the iPhone and MacBook, are made for people’s modern lifestyles
- Values: Apple appeals to customers who prioritize creativity, self-expression, and simplicity. This can be seen from their marketing campaigns, as shown below:
Behavioral segmentation
Depending on your goals, behavioral segmentation can be useful for merchants that would like to understand how people interact with products. It answers questions like: How well do they know your product? When do they usually buy it? How do they use it? What makes them buy?
To answer these questions, merchants have to take a closer look at their data points including their purchase history, likes, page views, purchase timing, and brand loyalty.
When your message is delivered at the right time and channel, you can form a strong relationship with your customers—leading to customer retention. Take Netflix, for example, which uses behavioral segmentation to offer the right content to the right audience. They suggest contents like “You might like…” and “Because you watched…” to keep users interested. Netflix makes their customer experience enjoyable and customers can see value in it.
How to use customer segmentation to drive more effective marketing campaign
Now that we’ve learned the details of customer segmentation, let’s learn how we can apply this knowledge on your business!
1. Define and Understand Your Segments
Before starting, it’s important to know the goals. Do they want to create marketing campaigns that appeal to emotions? Or do they just want to understand their customers better? Once the goal is clear, merchants can choose the right type of segmentation by collecting data. Tools like the Ako Marketing CRM dashboard can help analyze and organize this data. With the insights from the CRM, merchants can create targeted marketing strategies, personalize messages, and improve their campaigns.
2. Tailor Your Messaging and Offers
To capture the heart of your audience, merchants can craft messages and offers that speak to their needs. Once your customer segmentation is decided, merchants can craft messages to each group.
In the case of behavioral segmentation with frequent shoppers, merchants can create messages like: "Thanks for being a frequent shopper with us! We value you, so here’s a special 20% off". This is similar to how Abercrombie and Fitch engages with their loyal customers:
Using apps like Klaviyo integrated with Ako Loyalty Retargeting CRM, you can create personalized offers that make your customers feel truly valued.
3. Implement and Automate
You can use automated responses for actions like cart abandonment or specific browsing behavior. Here are two practical ways to do this:
First, send a cart abandonment email within a set time frame. For example, if a customer leaves items in their cart, you can send an automated email within an hour.
Try a message like: “Oops, it looks like you left something behind! Complete your purchase now and get 10% off .”
Second, merchants can use retargeting to create ads based on user behavior. One simple tip is to target ads differently for users who visit your site often but don’t make a purchase, versus those who have bought something but haven’t been active lately.
You might send a message like: “We see you love our products! Here’s 15% off your next purchase.” It’s a great way to bring back both frequent visitors and past buyers.
If you haven’t had the chance to try out a retargeting app, then Ako Marketing’s Retargeting app is the ideal choice. This tool opens up endless opportunities towards loyalty and retargeting approaches where in, you get the Comprehensive CRM Dashboard to manage your retargeting strategies, customer engagement and sales growth.
Conclusion
Customer segmentation helps you understand and reach your audience better. By grouping customers based on their traits and personalizing your messages, you can improve engagement and increase sales. Automating responses to actions like cart abandonment also helps in maintaining customer interest and boosting conversions.