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Customer Segmentation

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

Read More: How to Improve Ad Spend with a CDP

Amy Onorato
Amy Onorato
Amy Onorato is the Managing Editor of CDP.com and Senior Content Marketing Manager at Treasure Data. Prior editorial and creative roles include journalism, content marketing and content strategy for CBSNewYork, Newsday, DMN, and Publicis Sapient.

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