Insights Article

Getting started on customer segmentation
1st September 2019

Getting started on customer segmentation

How many times have you used demographic data to segment and target different customer groups in a marketing campaign? While it is certainly fair to assume someone is going to behave in a certain way, based on factors like age, postcode or income, regular readers of this blog will know that I favour an evidence-based approach. Indeed, by looking at attitudes and behaviours, you can replace the guesswork with an actionable customer segmentation that delivers a strong ROI on your marketing activity.

The different types of customer segmentation

Demographic segmentation is a common but blunt way to target potential and current customers, assuming that people who fall into the same demographic groups, act and think in the same way.

By looking at people’s attitudes as well, you can improve the accuracy of your segmentation, as long as these attitudes relate to products and services from a specific market. Psychographic segmentation, which groups people according to their beliefs, values and motivations, adds further depth to the process, since it helps you to identify their likely triggers.

Problems arise, however, when there is a disconnect between what people say they will do and what they really do. People could, for instance, state they would only buy organic, environmentally-friendly products in a supermarket, yet choose ones with fewer eco-credentials because they are cheaper. As we all know, it is how people actually spend their money that drives a company’s profits and losses.

Segmenting customers according to their needs can also be effective, since it is closely linked to motivations. This allows you to be more strategic in your messaging, while identifying gaps in the market. But once again, you could arrive at false conclusions because people sometimes behave very differently to what you’d expect from their perceived needs. Furthermore, both needs and attitudes are subjective and hypothetical, making it difficult to place a value on or prioritise needs-based segments.

Other customer segmentation examples

As mentioned earlier, the most effective form of segmentation is based on a combination of behaviours and the factors that influence them, including a group’s barriers, motivations and propensities. What makes someone more or less likely to choose one brand or product over another, and would they change their mind if there was a different proposition?

The value of this approach lies in the fact that you gain a strong understanding of each segment’s current or potential value, as well as how to target them.

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