5 Ways to Handle Customer and Market Segmentation Like a Pro

Hand holding a magnifying glass looking at figurines of people

Marketers who use market segmentation are seeing a 760 percent increase in revenue. What’s stopping you from seeing similar results?

If you’re not already using market segmentation techniques and would like to, then make sure you’re doing it the right way. You can use segmentation to improve your email campaigns, ads, and even your blog content.

In this guide, we’ll show you how you can properly segment your customers and market to maximize your revenue.

First, Let’s Define Customer Segmentation

It’s simple, really — segmentation is the process of grouping together people who are similar. In the case of marketing segmentation, you can group together customers based on characteristics such as age, gender, geographical location, profession, and so on.

This way, when you target a segment, you can use unique content that caters to each. It’s an ideal way to personalize your campaigns so they connect with and convert your audience.

Why Does Market Segmentation Matter?

There are several reasons why every marketer should include customer segmentation in campaigns.

Here are just a few.

Boost Your Competitive Edge

You learn a lot about your prospective customers when you use market segmentation. However, it’s not just about learning; if you’re able to apply it, then you can improve your chances of converting.

Through segmentation, you’re putting your ear directly to the ground and hearing the complaints and feedback from your target customers. The more you learn about your core audience, the easier it’ll be to attract, engage, and satisfy them.

Identify New Markets

Are you targeting every potential customer you possibly can? Likely not.

It’s difficult to know this without data, but not just any data. You need data that’s organized, so it’s easier to read and understand. Segmentation enables you to keep track of who’s buying or inquiring about your product or service. If there’s a unique group of customers you’re not already targeting, then you can start, thereby further boosting your competitive edge.

Increase Your Conversions and Revenue

The ultimate benefit of using market segmentation is that you can better target your core audience. When you can do this successfully, you’ll find it easier to convert them.

A conversion can be an email subscription or the purchase of a product or service. The end goal is the same, namely, an opportunity to grow your revenue.

So what can you do to benefit from customer and marketing segmentation?

Here’s a look at the five ways pro marketers segment.

1. Demographic Segmentation

This is the most common type of information marketers and businesses gather about their customers. When many marketers think of demographic data, they may picture factors such as:

  • Age
  • Race
  • Gender
  • Education
  • Ethnicity

Admittedly, you need to know this about your customers. This rudimentary demographic segmentation can yield a few insights. For example,  90 percent of adults between 18 and 29 use social media. This stat showcases age demographics about a young target audience. If this is the market you’re targeting, this stat shows you can (and should) use social media to reach them.

However, while you might start with these basic factors, it is important not to end your demographic research there. Especially for B2B marketers, you need to dig deeper and gather additional data, including factors such as:

  • Job title and seniority
  • Job responsibilities (which differ according to company or industry)
  • Technologies in use already
  • Specialties or industry expertise

Armed with this information, you can create targeted content designed to attract a highly specific audience. For example, the promotions you create for the C-suite would differ from the campaigns you aim at middle management.

2. Behavioral Segmentation

With the first segment, you learn about what your customers look like, but how do they act? Knowing their behavior will allow you to understand them better.

For example, how do they search for your product, how do they use your product, and what are common hesitations they have about buying?

Your segmented lists can look something like:

  • Prospective users
  • Past users
  • Current users
  • Prospects who know about your product/service
  • Prospects who don’t know about your product/service
  • First-time users

Of course, you can expand on this list depending on your market. The idea is to learn your audience’s behaviors, where they are in the sales cycle, and how they engage in each area. This can help you learn things like whether a prospect is brand-loyal, competitor-loyal, or brand-neutral. You can also label them as occasional or heavy users.

For instance, when you look at purchase occasion, you can see that some customers buy certain products/services at specific times for particular events (birthdays, summertime, etc.). Then you can look at which benefits they’re looking to find. Based on this, you can push key features in your promotions that the target audience will find valuable.

3. Psychographic Segmentation

Here’s a segment that gets ignored by some marketers, but it contains critical data you can use to improve your campaigns.

What does psychographic mean? Psychographic segmentation is when you group together prospects by lifestyle, social class, interests, opinions, and hobbies.

This advances your data in a way that allows you to supercharge your marketing strategies. With this information, you can personalize your marketing so that it resonates with your target audience.

For example, you can improve your website design, the language in your marketing copy, and the pricing. If your target customers are upper-class citizens earning six figures, then you want your price point to show you’re a high-end product. There’s evidence that people are willing to spend more on products they perceive as high-quality or luxury. This is because low prices are commonly associated with poor-quality products and services.

You also want your marketing messaging to resonate. The language you use in your content will differ for senior citizens than it would for Millennials (or at least it should).

4. Geographical Segmentation

Where your prospective customers are matters when you’re planning your marketing campaigns. This is especially true when you’re a brick-and-mortar business.

Even if you aren’t, targeting customers that reside in key areas of the world can help boost sales. For instance, you may find more of your customers are in North America vs. Europe. If so, you want to ensure your ads show up in North America, so you don’t waste money on weak leads from PPC campaigns.

A whopping 75 percent of marketers believe geo-targeted marketing is vital to their business.

You’ll find targeting your audience geographically will significantly improve the quality of your traffic. If you’re using PPC ads and SEO, then you can integrate this by using geo-specific keywords (i.e., cars for sale in Austin, TX).

This also comes in handy if you have different demographics and psychographics you’re targeting in each area. Maybe you have more teen customers in L.A. and more senior buyers in Boca Raton, FL. The way you set up your ads and promotions will differ based on this data and how you segment.

5. Firmographic Segmentation

B2B marketers will particularly find this information useful. Firmographic data tells you critical data about a prospect, such as their company size (number of employees), location, revenue, years in business, and so on.

This is crucial information when you’re prospecting. You can learn a lot about a company using firmographic data to determine if it’s the right candidate. For example, if you’re selling a big-ticket item or service, then you’ll know you should be targeting businesses of a certain size. Maybe it’s a company with 1,000-5,000 employees and earning at least $100 million in revenue.

The more information you can gather, the better you can pre-qualify leads (and boost conversions).

Getting Started with Customer and Market Segmentation

We’ve touched on the different ways you can segment your customers. Now, it’s time to review how to put it all together.

Here’s a look into the steps you must take to develop a successful segmented campaign.

1. Do Preliminary Research

It’s impossible to segment your customers if you don’t know anything about them. Take a look at the folks visiting your site and, more importantly, converting into customers. See if you can gather details about their demographics, geographical location, etc.

2. Identify How You’ll Segment Your Market

What are the criteria you’ll use to segment your customer base? The answer depends on your business and its offer. If you’re a B2B company, then it’s critical to segment using firmographic data. Now, this isn’t to say you have to choose one over the other. You can create segments and then subgroups.

For instance, you can first segment by location and then by demographic data. You want to have it so your campaigns are super-targeted, without hurting your growth potential.

3. Create a Survey

Now, it’s time to test the market. Surveying your customers and prospects is the best way to learn who they are.  

To make this successful, you’ll need to ask a mix of demographic, psychographic, firmographic, and behavioral questions. Make sure your they’re quantifiable. It’s critical that you collect accurate data. 

4. Begin Segmenting Your Customers

After gathering all the data you need, you can start building your customer segments. You can either do this manually or use software to assess the data. Create multiple segments and then develop customer profiles so you have an idea of who you’re talking to in your marketing copy.

5. Continuously Test and Refine

Your segments mean nothing if they’re not helping your campaigns to convert. Make sure to monitor and test your segmented emails, PPC ads, and other content to identify weaknesses in your strategy. You may find you’ll need to segment using other criteria to improve your results.

Building Effective Customer and Market Segmentation Campaigns

How do you know when you’ve successfully segmented your market? The only way to find out is to make all of the data you gather:

  • Measurable
  • Accessible
  • Substantial
  • Actionable

There’s no cookie cutter formula behind market segmentation. When you employ the above tips and continuously experiment, you’ll find your bread and butter easier.

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The only way to achieve this is to ensure all the data you collect is accurate and usable. Curious to know what B2B marketing data should look like (and how to use it)? Get in touch.