For anyone who is either dipping their toes into the world of segmenting data or has considered doing so to level up their customer communications, the following breakdown of segmentation and its benefits is a great place to start. Segmentation is a journey and is meant to be the building blocks on which you structure your marketing strategy. The better you understand your customer data and how you can use it to personalize your messaging, the greater results you’ll see in conversion, retention, and authentic customer relationships.
The four types of market segmentation
Segmenting your customers divides into four primary categories: demographic, geographic, behavioral, and psychographic. Each of these tells a different story about the customer, their needs, and their buying journey.
- Demographic — Includes identifying factors such as age, gender, income, occupation, education, nationality, and so forth.
- Geographic — Identifies a customer based on their location, including country, city, county, population density, and climate.
- Behavioral — Focuses on how consumers interact and engage with products and brands, such as purchasing habits, spending habits, browsing habits, brand loyalty, and others.
- Psychographic — Focuses on customer personalities and interests, such as hobbies, personality traits, influences, and social priorities.
Say, for instance, that you are a ski resort, and you want to send marketing messages to families. An email with photos of steep downhills and deep powder are likely to be demotivating. Instead, you can use your demographic and psychographic data segments to identify who your family-oriented customers are and send them messages with warm, smiling faces on a beginner run. Leveraging their behavior allows you to accelerate the sophistication and personalization of your communications.
Another massive benefit to marketers is being able to carve out your high value customers. Segmentation allows you to determine this based on a Recency, Frequency, Monetary Value (RFM) score, which is a five-point scale that ranks your customers from least valuable to most valuable (one through five). For example, your VIP customers are those who have purchased recently, buy frequently, and spend the most. You are likely to want to invest more time into communicating with these high value customers.
Static versus dynamic segmentation
Static and dynamic segmentation both serve important purposes in different ways. It makes sense to use static segmentation if you want to assign a specific set of customers to a segment permanently. Segmenting customers based on their demographic data is often static. If you are an apparel retailer and you are running a sale on summer dresses, you may want to build a segment specifically geared toward female shoppers only, and that list will remain the same for future initiatives geared towards females.
An example of dynamic segmentation would be using dates or date ranges to identify a segment. As a retailer, you may want to reach out to customers who have just recently made a purchase and send them a welcome or thank you email. Although this will always be the “same” segment with the same identifying factors, that group of people will change every time you run it and provide you with different insights.
How often should you adjust your segmentation?
Segmentation is meant to be an ongoing journey. After testing segmentations with certain identifying factors, you may find that your engagement score or conversions are not performing well. You might decide to be more granular or change the product and service focus (e.g., family bikes versus mountain or road bikes). Ultimately, you will use the data to inform those decisions and continually optimize the cycle for your segmentation.
Segmentation can range from being incredibly simple (one qualifier) to more complex (several qualifiers) depending on the needs of your organization. It doesn’t have to be daunting, though — at Ascent360, we always recommend the crawl, walk, run method. Start with the fundamentals and build upon that as you see success.
Our data-driven marketing platform at Ascent360 is a sophisticated tool that empowers organizations to achieve this level of segmentation and improve their communications with customers. The platform uses an extremely straightforward, easy-to-use drag and drop canvas where you can choose segments from the field library to start building custom audiences and turn that into powerful, automated campaign cadences. We also have a comprehensive, out-of-the box reporting system that allows you to consistently measure your marketing attribution and adjust your campaigns as necessary to improve results.