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Data. Your company collects it, stores it. You have lots of it because as every business knows, it’s a vital asset. However, all this storing, saving, collating, collecting customer data serves no purpose unless it is used to assist and improve customer engagement, business decisions, processes and growth. – How can you monetise your data? One word: segmentation.

Customer segmentation is the practice of dividing customers into groups based on specific and relevant attributes. These groups can be used to analyse and extract real value from your data.

These groups can be based on criteria such as demographics, location, lifestyle, behaviour and personality. Market segmentation can, therefore, be defined “as a process of splitting customers, or prospects into different groups, or segments, within which customers share a similar level of interest in the same, or comparable, set of needs satisfied by a distinct marketing proposition.”

Given that each customers’ characteristics and needs will never be identical, businesses can breakdown the total demand into common groups and choose those groups that provide the best ‘fit’ for its product or service at the right time. Few companies are equipped to address or supply the needs of an entire market so the characteristics a company chooses to focus on depends on the type, sector and size of the business.

“Knowing who your customer are is great, but knowing how they behave, is better” – Jon Miller

Segmentation can give your business a huge advantage as the insights you uncover can be used to inform and feed your other business activities. You will be able to;

  1. Spot patterns in customer behaviour
  2. Identify profitable customer groups
  3. Create a tailored service
  4. Position products
  5. Develop and improve products and services
  6. Forecast trends and patterns
  7. Focus your business activities more accurately


1. Spotting Customer Behaviour Patterns

Customer segmentation allows companies to get to know their customers better. By analyzing data and distinguishing groups of customers from each other, patterns in their purchasing and contact preferences become more apparent. These patterns also highlight needs and pain-points, which can help shape subsequent interactions with the customer to create individual customer journeys. This understanding of what the customer requires is highly valuable in forming a lasting and sustainable relationship, as it makes each customer feel unique and that their custom is valued. For more information about how to segment your data successfully sign up here for our 15 day Business Growth Challenge

Building blocks of basic market segmentation

2. Identifying profitable customer groups

Identifying profitable customer groupsThrough segmentation, groups that produce the most revenue and, therefore, most potential for company growth can be identified. This gives a steer on how budgets can be allocated in a proportional and effective way. This enables the business to nurture relationships with profitable customers and disinterested customer groups who consume resources, for little return are let go. Ensuring that the most valuable customers receive proper customer satisfaction is vital to the future of any business. Competition is growing and keeping your customer service level top notch, encourages returning business.

Building blocks of targeting strategy types

Undifferentiated Strategy
Single marketing mix* for entire market (*product, price, placement and promotion) – assumes all customers within the market share similar needs. Does not require targeting of individual market segments.

Concentrated Strategy
Concentrates marketing efforts towards a single market segment with one marketing mix. Used for specialised products.

Differentiated Strategy
Marketing efforts directed at one or more market segments with different marketing mix developed for each segment. May be natural progression from a concentrated strategy

3. Creating a tailored service

We have all received marketing communications that are totally irrelevant to our needs. What reaction does that cause? Typically we dismiss future communications from the same brand. Customer segmentation mitigates this waste of resources and enables more personalized marketing that takes into account within the target segment, the customers’ common particular needs and purchase history. Individual customers can be grouped for campaigns, with prospects and clients who share comparable characteristics. Similarly, segmentation can be used to help determine the levels of sales focus, customer support and service delivery for each group or segment of customers. This allows resources to be more effectively managed and focused on the most profitable areas of activity.

4. Positioning products

Positioning can be described as ‘the place occupied in a particular market, as perceived by the customer segment at which that product is targeted’. Customer insight and product knowledge is indispensable to successfully communicate your product attributes where your potential customer will see and relate to them.

Simply put, customers respond to the attributes of a product, to the imagery and promotional messages as well as a company reputation, coupled with its other products and competitor activities.
By focusing on individual segments, messages and the wider promotion and positioning of the product can be tailored to better fit key the target audience, gain more impact and improved results.

5. Product Development

Product DevelopmentThe value of customer segmentation goes so much further than marketing and promotion. A deeper analysis of customer needs through segmentation may produce unexpected insights, such as gaps in the market where customer needs are not quite being met. Speedy identification of areas for potential improvement, or new product development drives customer satisfaction and increased loyalty. Crucially, customer-driven product development also helps businesses stay ahead of competitors. When it comes to introducing new generation products, insights from segmentation is vital in helping determine the rate to migrate customers in order to ensure a smooth and profitable transition between old and new product ranges. For more information about how to gather data and utilise is successfully sign up here for our 15 day Business Growth Challenge

6. Forecasting Trends and focussing activities

Forecasting Trends and focussing activitiesOnce businesses have a greater understanding of their segment and customers’ profiles, it gives you insights to predict future behaviour. Predictive behaviour modelling is a well-documented discipline which can help to shape business decisions and ensure maximum preparation for potential developments. However, it is important to recognise that segmentation cannot always be pre-determined or forced by the organisation but is defined by its customers. Similarly, too many segments can be counter-productive and lead to confusion. Segmentation should reflect the real differences in the needs of consumers for products and services.

7. Focus your business activities more accurately

CONCLUSIONThe time spent storing, saving and collating data will bring huge dividends when your incorporate segmentation into your business. Your insights enable various departments from product development to marketing, sales through to customer service and finance to improve the time they spend and their outcomes. Segmentation, when utilized properly will equal business success.

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