Increasing Income – Customer Segmentation

As business advisors, we often ask prospects and clients who their target market is. One answer that comes up from time to time up is “Everyone”. Would that be your reply too? If so, here are some tips on customer segmentation which might give you a new perspective .

What is customer segmentation?

The purpose of segmentation is to identify different groups within your target audience so that you can deliver more targeted marketing messages to them. It doesn’t mean ignoring one group in favour of others, but it does mean tailoring your messages to each group.

If you haven’t thought about customer segmentation before you’re probably wasting a large part of your marketing budget, so read on.

Demographic segmentation is perhaps the most straightforward way of defining customer groups and looks at identifiable non-character traits such as:

  • Age
  • Gender
  • Ethnicity
  • Income
  • Level of education
  • Religion
  • Profession/role in a company

The main benefits of knowing WHO to sell to are:

More efficient spending

Targeted marketing should produce a better return on investment, and you’ll waste less money trying to reach the wrong audience.

Higher quality leads

You’ll also notice that the more targeted your marketing is, the better your leads become. You’re reaching the right people, and they’re starting to notice you!

Improved customer retention

By identifying your customers by their needs, you can put out marketing that offers irresistible reasons for a return visit. This is proven to increase customer retention, customer loyalty and lifetime value.

Segmentation isn’t just about your business reaching customers more effectively – it’s also about those customers seeing messaging that is relevant to them. Here’s an example:

Demographic segmentation might target potential customers based on their income, so your marketing budget isn’t wasted directing your messaging at people who probably can’t afford your product. Luxury goods manufacturer Montblanc presented a selection of offers across their website. One sought to raise conversions using a Father’s Day deal that offered a free gift to those spending over £200 – an amount that acknowledged the spending expectations of Montblanc’s target audience – and saw a +118% uplift in conversions for those targeted. Another offer was aimed specifically at corporate gift buyers – a market segment that Montblanc particularly appeals to – and resulted in a +30% uplift for that segment.

Your marketing to consumers will be very different to the way you approach business customers. The marketing channels and language you use may well be different for different age categories. In other words, a ‘one size fits all’ approach will be less successful than a carefully targeted one, so think about your target customers and consider how this might apply to your business.

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