Once you found the root cause of the problem, you need to understand who are the groups of potential customers that are affected by this problem. Depending on how narrow the problem is, you may find one or more customer segments that can benefit by using your product. Continue reading to find out how to do a customer segmentation analysis?
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What is customer segmentation analysis?
Customer segmentation it the process through which you will better understand who is the groups of customers that have the same needs or encounter the same problem. Further, you can analyze, understand and find different traits or similarities between those clients, in order to form smaller groups. It is an essential step that can help your business really focus on those clients that really need your product/services. Also, it can help you form a community, and, if done right, can help you put the basis for your future brand.
Why do we need customers segmentation analysis?
Each segment will have different attributes, slightly different needs, and delights. For some of them price will be irrelevant, for other the price will be the main criteria. For some will be important the timing, for others the Brand.
No matter the case, it is important to know which is which, because:
- Depending on these answers, you will find the balance between product benefits and price.
- You will know where you can find your customers.
- You will adapt your messages for better targeting.
- You will build and test different pricing strategies.
How do you do a customer segmentation analysis?
First, we need to be clear about one thing. Depending on your business model, you will have B2C or B2B segments. Almost every business has more than one segment, and it is important to clearly define them and to use them in building your strategy.
First of all, you should know what can be the criteria after you can construct your segments. There can be many ways in which you can look at your customers and divide them into different segments, but the most common ones are:
1. Geographic
Understand where your customers are located and how this influences their buying decisions. You need to know the country, the region or the city they are in. Are they living in an urban area, or a rural area?; What time zone?; How many seasons does that place has?; What kind of climate is it there?; What culture?; What habits do the people in that region usually have?;
You don’t want to market winter jackets in Australia, neither surf boards in Alaska.
2. Demographic
You can divide your target audience by age, gender, marital status, religion, occupation, income, level of education, family situation.
3. Behavioral
This is true especially for online businesses. If you are at the beginning, you may either make some assumption about the behavior of your customers, and taste those in the market. Or, if your marketing communication will be mainly online, you can have a broader targeting, and let the pixel to find your right customers. After a period of learning, you can revisit your customer segmentation and adjust those accordingly.
At this point is important to find out:
- What is your conversion cost?
- How frequently do they buy?
- How engaged are they with the brand communications?
- What CTR do you have?
- How much time do they spend to your website?
- What are the most important platforms for them?
- On what page do they drop off?
- Are they subscribing to your email list?
- What percentage of your clients that subscribed to your Email List, open the emails that you send?
4. Value-Based
Different customers are willing to pay different prices for the same product or service because they see different value in it. Some time they are willing to pay extra because of the values associated with the brand, other times because of the problem that it solves. Other times because they are in the different stage in the sales funnel.
For example, if you are going on foot, to an important meeting, and starts raining, you will buy an umbrella from someone on the street for 20 dollars or more, but if you decide one day that you will need an umbrella this autumn, and start looking for one on the internet, probably you will be willing to pay between 5-10 euros on it.
5. Need-Based
A Theory of Human Motivation motivation, written by Maslow, and covered in How to find the root cause of a problem?, gave us a clear overview of the category of needs that we have. In the visual representation, known as Maslow Pyramid, we can see the different needs that our customer may have. Understanding this will help us find a Positioning Strategy, and have a better Price Strategy, depending on the classification of this needs.
In order to better understand what are your products CTQ (Critical to Quality attributes), and what is the main benefit that you need to highlight in your communication, answer to the following questions:
- On what level of the Maslow Pyramid are your customers?
- What needs do they try to satisfy?
- Do clients need a brand association?
- What are the additional futures that your product has over the competition?
- What are the positive emotional triggers that capture the attention of your client (like nostalgia, freedom, connected, etc.)?
6. Technographic
- We can segment our customers, based on the technology that they are using day by day.
- Where do they make their online purchases, desktop, mobile or tablet?
- What applications do they use: Facebook, LinkedIn, Instagram?
- What software do they use: Windows, IOS, Android?
- Where they search for their products: Google, Bing, directly on Amazon?
- What sites do they use to make the research before purchasing: Google, blogs, vlogs?
7. Psychographic
This type of segmentation is based on values, hobbies, lifestyle, or attitude. Usually, you can make these kinds of segmentation if you have a well-defined group of customers that you can analyze.
- If you are at the beginning, you may use marketing approaches to accomplish this job.
- You may conduct Focus Groups.
- You may create and distribute surveys.
- You may make field observation, with your competitor’s customers.
- You may talk directly with your competitor customers.
8. Lifecycle’s stage
It is important to understand and build messages that are customer oriented and speak to our customer in a tailored way. Depending on their position in the life cycle phase, you may have different educational content, messaging or promotion.
The lifecycles of a usual customer are:
- Awareness – customer acquisition. How can clients find us?
- Evaluation – How can we help our customer evaluate our Value Proposition?
- Purchase – Conversion
- Retention
- After sale – Win-back. Not all the customers will become recording customers. But what can we do to win back some clients that weren’t completely satisfy the first time?
Conclusion
If you have a single product business, you may think that you don’t need to make customer segmentation. If this is the case, you need to understand that every business has different customer groups that may have the same basic needs, but with slightly different CTQ or perspectives on delights.
Now that you understood How to do a customer segmentation analysis, you can build a clear picture about your different customer groups. This may help you to:
- Develop the product in such a way to delight different customer groups.
- Batter target your audience via online marketing activities. Which will have a great impact on your CTR.
- Better understand your clients. This will help you better satisfy their needs and concentrate your efforts on the things that really matter to them.
- Better allocate your resources, for different product or branding developing, in a data driven matter.
- Build a differentiator that will allow you to have a customer advantage and stand out from the competition.
- All this will form the basis for a strong brand.
Make this step rigorously, and don’t forget to test your assumption, improve them, and test them again. In the long run, you will have a lot to gain by knowing who is your customer and how can you serve them better.
Additional resources for How to do a customer segmentation analysis?
Customer segmentation template
