Why do we divide customers into groups?

Customer segmentation is the process of breaking a customer base into smaller groups (or segments) based on demographics, industry, company size, or other shared characteristics.

Businesses can tailor the overall customer experience by creating different sales, marketing, and customer success strategies for each group of customers.

Segmentation looks different for each business, but the idea behind it is always the same: put people into groups that make sense and have similar wants and needs.

Some common ways businesses divide their customers are:

• シPopulation facts
• Industry level
• Size of the company
• Psychographics (like buying habits or tastes)
• Where It Is
• Talked language
• Tech-related things

Companies also divide their customers into groups by making products with different prices, feature sets that are specific to each field, add-ons, and upgrades.

Businesses can better understand their customers’ needs when they divide them into smaller groups. This helps them make and offer more targeted goods and services that meet those needs.

Like words

• Customer segmentation study
• Types of customer segmentation models
• Software for customer segmentation
• A plan for dividing customers into groups

Why customer segmentation is important for sales and marketing

Customer segmentation helps you figure out which groups of possible customers are most likely to buy from you and what goods or services they would be most interested in. In almost every part of a company, from sales and marketing to product development and customer service, it is very important.

Creating New Products

Different types of customers can use the same core offering, but they don’t all want and need the same things.

Product developers can find and make goods for specific groups of customers with the help of customer segmentation. Product designers can make their products more appealing to customers if they know what each group needs, wants, likes, and usually buys.

It also helps with the creation of new features, add-ons, and small services. DealHub’s main product, CPQ, is designed for sales teams, but it also has a set of tools for subscription businesses, such as billing and membership management.

Focusing on the Customer

Companies can find the most common traits of their best customers and improve their ideal customer profile (ICP) by learning about the traits and tastes of each group of customers.

Businesses don’t have to send everyone the same message. Instead, they can tailor their marketing and sales messages to meet the specific needs and desires of each group.

Messages for marketing

Marketing usually builds relationships with customers through a number of different platforms, such as

Campaigns for email marketing

SEO stands for “search engine optimization.”

Marketing with content

• Facebook and paid search
• Pure social media
• Direct marketing

Two customers may not react the same way to the same marketing strategy, even if they are using the same platforms. Customers can be divided into groups, and businesses can send different messages to each group. This makes marketing efforts more effective and relevant.

Different types of marketing are popular for businesses, even if they use the same platform. Many times, businesses run more than one ad campaign on the same site, with different ad copy for each audience.

Another example of this is buyer enablement content. Companies make some content for executives and decision-makers and other content for employees who will actually use the goods.

Selling to Individuals

Now, 80% of B2B buyers want the same personalized experiences as B2C buyers. Segmentation helps sellers, marketers, and customer success teams give those buyers what they want.

When sellers know about the type of customer their prospect is trying to reach, they can give them relevant content at the right time, sales demos that show them exactly what they need, and personalized help after the sale.

After a customer buys something, the customer success team can use segmentation to make the experience even more unique. They can offer extra help to new customers and come up with new ways to add value through upselling and cross-selling.

How to Keep Customers

Getting new users is much more expensive than keeping the ones you already have. It also means that the product fits the market, and the business is doing well if a lot of customers stay with it.

By using data to figure out which groups of customers are loyal and valuable, customer segmentation helps businesses figure out why customers stay or leave.

They can also use the groups of customers they have to offer discounts, awards for loyalty, and other things that make people want to stick with them.

How to Divide Customers Into Groups

Most businesses use more than one approach to divide their customers into groups. These are some of the most well-known:

Group of people (B2C)

The most common way for B2C businesses to divide their customers into groups is by demographics. Demographics include things like age, gender, level of schooling, income, job, marital status, and the size of the family.

One of the best ways to reach a specific group of people is to use this segmentation method. It lets businesses tailor their messages and goods to people who share common traits.

When a business has a lot of different types of customers, like an online store or a fashion brand, demographic segmentation works best. For instance, a fast fashion store might offer more trendy clothes to attract younger customers, while a luxury store might focus on older people with more money.

Number of firms (B2B)

Firmographic segmentation is like demographic segmentation, but it’s used to divide businesses into groups instead of users. Businesses-to-businesses (B2B) use this kind of division because each buyer (company) has different needs that the business’s goods and services can meet.

Firmographic data includes things like the size of the company, its business, its location, and its revenue. Businesses that sell to other businesses use this data to learn more about the companies they work with and how their goods and services can best meet the needs of each group.

General Information

Businesses usually think about a customer’s country, area, or city when they think about geographical segmentation. This is important for businesses that need to change their prices, products, and marketing efforts for different areas where they sell different goods.

For example, foreign fast food chains change the menu items they serve in each area based on what people there like.

Geographic segmentation is another thing that business-to-business companies do. National companies split up their offices into different areas, while global brands treat their customers from different countries with respect for their own traditions.

How they act

There is a method called behavioral segmentation that looks at how people use a product or service, from the time they learn about it to the time they buy it.

Some behaviors that companies usually look at are:

• What people buy, how often they buy it, and how much they spend are all examples of purchase behavior.
• How people use the product or service is called usage behavior.
• How they feel about the product, business, or company is called their attitude.

Because it looks at how people use the product or service, behavioral segmentation is one of the best ways to figure out what they want and need.

Let’s say a company wants to keep customers coming back. By looking at what their most loyal customers have bought in the past, they can find patterns that make them buy from them again and again. They can then use this knowledge to make campaigns and offers that make people buy more often.

Personality types

People are divided into groups based on their psychographics, which is a bit more complicated than behavior or demographics. When you use psychographic segmentation, you look at a customer’s values, hobbies, lifestyle, and attitude, all of which can affect what they buy.

This way of dividing customers can be seen in lifestyle ads and expensive brands that want to reach specific groups of people. Companies use it to make marketing efforts that are perfect for people with certain personality types. The copy, images, and messages are all customized to appeal to the interests and values of a particular customer.

Segmentation Based on Needs

The most likely products to be successful are those that meet a few specific wants. Needs-based segmentation helps companies figure out what their customers want and then give them products or services that meet those needs.

This method looks at how customers use a product or service and why they pick it over other choices. It is mostly used for product development and customer service. Businesses can make sure their products and services meet the wants of all kinds of customers by figuring out how their customers make decisions.

Segmentation by Technology

When it comes to B2B and B2C, technological division is used in different ways.

In B2B, sellers look at what kinds of tech their clients use (like CRM systems, sales enablement tools, and cloud solutions) and which companies they work with.

The idea is that if a company already uses a certain set of options, they will probably buy more that work with what they already have. If Company X uses CRM from Vendor Y, they might be easy to spot as a good lead right away.

Businesses that sell to consumers (B2C) study how people use technology in their daily lives and make customer profiles based on the gadgets and apps those people use. For instance, a fitness app might try to reach people who have fitness trackers or who have already downloaded other fitness apps.

How to Put Customers into Groups

The steps below show how the customer segmentation process works to put people into groups based on traits and identifiers they share:

Figure out your goals and variables for customer segmentation.

Setting clear goals is the first step in the process of customer segmentation. What do you want to achieve by dividing your customers into groups? It could be making customer service better, sales going up, new marketing possibilities being found, or product development being made better.

The next step is to figure out the factors that will affect your plan for segmentation. They should have a lot to do with your goals and could be about a lot of different things.

If you want to better meet the needs of your customers, you could divide them into groups based on how they’ve used your product or website content in the past. You might need to change your sales and marketing tactics to reach your new target customers if your goal is to make more money.

Gather and look over customer information

Next, get information about your customers by surveying, interviewing, conducting focus groups, looking at what they’ve bought in the past, and other ways of analyzing their behavior. You’ll need to gain more knowledge about the factors you named in your segmentation goals.

You can also get customer data from CRM, ERP, or other programs that keep track of what customers do.

The ad sites of social media tools already have customer segmentation data built in. For example, Facebook lets advertisers choose who sees their ads based on age, gender, hobbies, behaviors, and other factors.

Once you have all the information you need, use a customer segmentation tool to look at it and find patterns and connections between customers, as well as things they have in common.

Make segments that are focused on customers

Once you know which groups of customers you have, you can make marketing plans that appeal to each group. Make campaigns and materials that are specific to their wants and needs.

If you want your product or service to best meet the needs of each of your target customers, you might want to offer discounts or deals that are only available to that group, change the way your products are packaged, or change how you set your prices for each group.

A big-picture plan that can be used in many areas and processes is helpful for dividing customers into groups. Take a moment to think about how you can use customer segments to make the customer experience better in areas like product development, customer service, marketing, sales, and more.

At this point, a lot of businesses also choose to sketch out their strategy by making a map of the different customer journeys and connecting each section with the best deals and experiences.

Market to the groups of customers you have

Once the basics are in place, you can start engaging the buyer. You can do this in a number of ways:

Emails that are tailored to you and drip programs

₷ Personalized ads

• Content and messages that are relevant
• Campaigns on social media
• Reward and loyalty schemes
• Show off specific deals to specific groups of people
• New customers are given a personalized welcome.
• Cold calling and specially-aimed outreach

There’s a good chance that each of these methods needs a different approach for each group of customers. Marketing that moves B2B buyers through the sales pipeline usually works better. On the other hand, marketing that appeals to B2C customers’ emotions is more likely to get a direct reaction.

Make selling and CPQ more personal

Once clear groups of customers have been identified and new tools and methods have been added to the sales process, personalized selling can begin.

Personalized selling helps sellers connect with their customers, speeds up sales, and makes it easier to make a purchase.

Businesses can make quotes and proposals that are unique for each customer by using CPQ (configure, price, quote) software. This helps them quickly and correctly come up with offers for the goods and services that will help them the most.

Examples of Customer Segmentation

In different fields, customer segmentation is used in different ways. For example, B2B and B2C companies use customer segmentation in different ways. Here are some examples of how different types of customer segmentation are used in different fields:

Online shopping

Online stores often divide their customers into groups based on what they buy, their age, gender, and personal hobbies.

An online fitness equipment store might divide its customers into groups like “health enthusiasts,” “beginners,” and “professional athletes.” This way, the store can send more targeted marketing messages, suggest better products, and run special deals for each group, making its marketing more effective and personalized.

(SaaS) Software as a Service

Customer segmentation in the SaaS industry is often based on the size of the business, the type of business, and how the business uses the software.

A company that makes project management software could, for instance, divide its clients into “small businesses,” “enterprises,” and “nonprofit organizations.” They could put people into groups based on how often they use the service and which features they like the most.

This in-depth knowledge helps make product offers more relevant and improves strategies for keeping users interested.

Cellular phones

A lot of the time, phone companies use both demographic and usage-based grouping together.

They divide their customers into groups, such as “international callers,” “heavy data users,” and “family plan users.” By doing this, they can make sure that their service plans are tailored to the needs of each group, which will make customers happier and more loyal.

Customer segmentation is also used by telecom companies to send relevant offers to the right users. One example is that they might send customers, who often make foreign calls, deals or discounts on those calls.

The Style

Fashion brands have to know what the newest trends are and come up with creative ways to divide their customers into groups.

They could divide people into groups based on fashion tastes, age, way of life, or place. A clothing store might divide its customers into “trendy,” “casual,” and “sporty” groups so that it can give them better product suggestions and more personalized deals.

One store that does this really well is Nordstrom. The department store sells a wide range of items at different price points, so they need to use their audience tracking data to make sure that the right customers see their ads and hear their marketing messages.

Technology Used to Divide Customers Into Groups

There isn’t a single piece of software called “customer segmentation software,” but there are a lot of programs that collect data and help with customer segmentation research.

CRM

The most important part of customer classification is CRM software. It’s where all the information about customers is kept and handled, so marketers can divide customers into groups based on what they like and how they act.

CRM keeps track of every contact a sales or customer success rep has with a prospect or current customer. As leads move through the sales process, they are also tracked on a visual sales chain.

Automation in Marketing

Email marketing software, A/B testing tools, and multichannel marketing systems are all types of marketing automation. With these tools, marketers can make personalized emails, ads, and drip programs for each group of customers and send them.

More importantly, they record information about what worked and what didn’t, which helps marketers improve how they divide customers into groups.

CPQ

CPQ software lets you set your own rules for things like taxes, discounts, product packages, and more. It helps sales reps make quotes for customers quickly and in the best way possible.

When businesses use CPQ, they will add their own scenarios based on the tastes and groupings of their customers. This makes it easier for sellers to tailor their offerings to each customer, which means more satisfied and loyal customers.

Information about revenue

The goal of revenue intelligence is to predict future trends and actions by looking at data about customers. Businesses can learn more about their customers by looking at how they connect with them, what they buy, and other factors.

Revenue intelligence comes from all contacts with customers, like emails, website visits, calls to customer service, and more. It helps salespeople and marketers figure out where to put their money and time and which customers to keep focusing on.