Implementing a good customer segmentation strategy is one of the best ways to boost business success.
Without effective division of your customer base, your sales communications will be less focused, which means that you may not engage as many of your ideal customers as you would like.
Effective client segmentation can help you to build and retain brand loyalty. It allows you to present meaningful offers to different segments, based on their preferences, part of a process known as personalisation.
In this article, we’ll help you to understand the fundamentals of customer segmentation and personalisation, how to implement an effective combined strategy, and how to avoid some common pitfalls along the way.
What is customer segmentation?
In simple terms, it is the act of dividing and organising your target customer base into groups, based on various characteristics.
Some customer segmentation examples include creating groups based on:
- age range,
- buying behaviour,
- spending habits,
- hobbies and interests,
- and personality traits.
The above list is not exhaustive and there are plenty of other ways to segment your market or customer base.
The next step is to identify the factors, demographics, and attributes necessary to segment your customer base, by gathering or gaining access to specific data. Next, the data needs to be analysed carefully.
The main benefit of customer or client segmentation is that it allows you to communicate the value of your products or services in a more personalised way. A recent McKinsey report revealed that generating focused audience segments can increase sales by 3 to 5%.
You can also use customer segmentation to gain more control over your sales and marketing budget and gain more focused feedback from your customers to improve your offering. Additionally, to help you improve the effectiveness of your customer segmentation strategy, you should set clear KPIs and measure the performance of each segment.
How segments can help you personalise your sales activities
The aim of personalisation is to build rapport and generate a positive impression and customer relationship.
You can achieve personalisation by communicating in a way that resonates with people in the segment you are targeting. In other words, applying personal touches means you can engage them in a conversation that helps to nudge them towards a sale.
Some examples include:
- Targeted sales calls – use your CRM lead scores to identify highly qualified leads and reach out to them by phone, which is still one of the most effective ways to convert sales leads.
- Personalised invitations – use your CRM data to segment your leads and prospects by events they have attended, such as webinars, then invite them to similar upcoming events.
- Offers based on previous purchases – use historical sales data to segment existing customers by the types of products or services they bought, then present them with related offers.
- Industry-specific business proposals – segment your prospects and leads by industry and present them with offers and proposals related to their needs.
- Loyalty rewards – segment your existing customer base using loyalty data, then reward high value repeat customers and clients with gifts and discounts.
Avoid customer segmentation pitfalls
Before we look at ways to combine your segmentation and personalisation strategies by analysing data, it’s important to understand some of the most common obstacles that businesses face.
As the old saying goes – you can have too much of a good thing.
The same is true when you’re segmenting your customer base. There’s no doubt that it’s good for your sales and profits when done properly and to the right level, but if you overdo it – there can be some unintended side effects, such as increased complexity.
The more customer segments you add, the more complicated your sales strategy becomes. As things become more complicated, you’ll need to spend more time managing sales calls and emails. You may even need to hire more staff to oversee the personalisation of each different segment. Depending on how effective your strategy is, there’s a point at which it may become unprofitable to add more segments.
In other words – start small, with two or three segments, and build up from there, closely measuring the performance of each one.
Inadequate use of data
To add customer segments effectively, you’ll need a decent amount of data. It’s no good adding segments when you don’t have the data to back it up, so concentrate on accumulating relevant data on your leads and customers.
A good CRM system is a must-have for any company that wants to optimise their segmentation efforts. A powerful CRM solution like Efficy will allow you to segment your contacts based on demographics, behaviours, and more, enabling you to take your first steps towards starting more personalised sales conversations.
Market shifts and trends
Very few markets are static. Buyer trends change over time, so it is important that you keep your customer segments up to date by reviewing them frequently.
Once you have the right segments in place and you’re keeping an eye on buyer trends, you can use the data and your personalisation strategy to initiate better sales conversations and anticipate customer queries.
Harness the power of customer data with a CRM solution
As mentioned earlier, audience segmentation and personalisation rely on an accurate and plentiful supply of customer data.
A CRM solution gives you a comprehensive overview of the data you have collected on prospects, leads, and existing customers. This will give you all you need to identify and build profitable customer segments.
You can make smarter segmentation choices by applying the data available in your CRM system, such as:
- Demographics – Information such as location, age, education level, earning level, and gender can help you to sort define specific segments of your customer base. For instance, if you sell a product range that appeals mainly to men in warm climates, you can use the data to filter down to people that fit that demographic profile.
- Purchase history – segmenting customers by their buying behaviour can be very profitable. You can filter the data to reveal loyal or high-value customers or people that only buy at certain times of the year.
- Engagement level – you can use your CRM’s call answer or email open rate stats to create a segment for highly engaged customers.
If you’re interested in building an effective, personalised customer segmentation strategy, then why not see what Efficy can do for you? Book your free demo here.
Find out how Efficy is the best option for your business!