What is Customer Segmentation?
Customer segmentation is a the process of segmenting individuals into audiences based on common characteristics and attributes. A comprehensive customer segmentation strategy can help to ensure long-term success in personalization efforts, and allow you to target your high-value segments with superior contextual experiences.
Benefits of Customer Segmentation
Customer segmentation is a tried-and-true method for marketers to target valuable customer groups. It allows brands to:
- Identify behavioral and transactional trends of customers
- Deliver targeted experiences and messages to specific customer segments
- Acquire new customers, retain customers, and reduce churn
- Optimize marketing campaigns and operations
Types of Customer Segmentation: Micro-Audiences
Starting with smaller audiences allows you to offer more targeted advertising to a more relevant audience, increasing your return on ad spend by not targeting too broadly. Focusing your audiences down to multiple micro-audiences will allow machine learning-based lookalike algorithms to start with less noise and be able to deliver the insights needed to apply hyper-targeted customer segmentation more effectively.
A few micro-audiences to think about:
- Product Categories
- Spend Groups (Average Order Value, Total Spend, etc)
- Geographic Differences
- Use Cases or Solutions
- High Profit (Margin) customers
CDP Use Cases for Customer Segmentation
The way you use customer segments dependent on your business, customers, and industry-oriented goals. By using a CDP to segment your audiences, you can:
- Identify customers based on where they are in the customer journey
- Group customers into separate audiences based on buying stage, preferences, or interests
- Avoid targeting loyal high-value customers with irrelevant messaging or experiences through audience suppression
- Analyze customer purchase history to find more opportunities for cross-selling and upselling to those high-value customers
- Offer next-best action recommendations for highly relevant recommendations and offers
- Respond to high-value loyal customers who engage in positive behavior with reward points and exclusive discounts
- Routinely analyze customer segments for changing behavioral patterns, to optimize marketing campaigns
