Customer segmentation and its benefits

No matter the size of the business or the industry, one goal is the same for all the players in the game – provide the best possible service or product for your customer and be better at it than your competition! As the years go by, with all the digitalization, market saturation, and customer demand and expectations, this task becomes more and more complex. Who will understand the customers’ needs better, who will be the first to offer a quality solution, and in the end who will make the most profit by doing so?

With all of this in mind, one step in doing business was created and added into the machinery- customer segmentation. By definition, customer segmentation is the process of dividing a company’s customers into groups, based on the similarity among customers in each of those groups. The goal with this is so simple, yet so important for success and achieving other company goals and that is- deciding how to relate to customers in each segment in order to maximize the value of each customer to the business.

Customer segmentation provides a better understanding of customer behavior, as well as tracking the movement of the customers between segments.

The established segments should enable better customer insight and response to their needs and desires.

Migration between segments can provide information about migration frequency, the stability of segments, and other important factors. These segments include age, gender, buying behavior, job title, or various interest affiliation. Furthermore, there are many customer segmentation strategies that companies can follow depending on their size, the industry they work in, customer base, and what they are looking to achieve. For example, a company selling software to other businesses will have a different approach than a small business selling personalized jewelry to individuals on Instagram.

Breaking down a large customer base into more manageable pieces will make it easier to identify your target audience and launch relevant campaigns using relevant channels. Think about it through a simple example- different groups of people in your life. You don’t talk to your parents the same way that you do to your friends or coworkers. It’s the same with different customer segments. Personalized marketing communication for customers leads to a better relationship between the customer and the business. Users love personalized targeting and when they receive something that is made just for them, they’ll feel more comfortable purchasing from your company, because it shows them you care.

Acknowledging them as more than an email address in the database can go a long way for a brand’s equity. This starts a chain of positive effects. You can learn more about your customers on a deeper level and tailor your content to their specific needs and challenges. You can improve your customer service and customer support efforts by understanding those specific challenges different groups are likely to experience. Increasing customer loyalty, understanding who are your most valuable customers, identifying new opportunities for products… The list goes on and on.

One type of tool that can be of great use to a business in this process is a AI based CRM solutions. Next-generation CRM platforms enable building strong relationships with your customers and shifting to a data-driven way of doing business, which is crucial when it comes to customer segmentation in this digital era. These type of solutions mostly have integrated Analytical module which is empowered with a Customer segmentation machine learning model can help you divide customers into relevant groups, track their behavior in and between those groups, and help figure out what you can do to improve the journey for each of those.  You can also use the Campaign management module to create those important personalized marketing messages, send them to each of the groups through their preferred channel and track the campaign’s success through various KPIs. This allows you to utilize the customer segmentation to its maximum during the offer creating process, choosing which product or service will be a part of that offer, introduced to your customers, and improved over time.