A Practical Guide to Target Marketing – what marketers call Customer Segmentation

Are you looking to expand your business and boost profitability while keeping your customers satisfied? If so, customer segmentation (commonly known as target marketing) might be the key strategy you have been searching for. In this post, we will walk you through a practical guide to understanding your customers, by targeting customers into groups, or customer segments that reflect similarity among customers in each group.  Then the strategy is to decide how to relate to and resonate with your customers in each group segment for business success.

Why Segment Your Customers?

At the start of your business, serving a handful of customers with personalised attention is manageable. However, as your business grows, maintaining this level of personalised service becomes challenging. This is where customer segmentation comes into play. Segmenting customers involves categorising them based on their preferences, behaviours, and needs. It’s like “mass personalisation” – you can cater to diverse customer groups while ensuring profitability.

The Steps to Effective Customer Segmentation –

Let’s dive into the step-by-step process of segmenting your customer base for maximum impact:

1. Identify Profitable Customers

Start by identifying your most valuable customers – those who contribute significantly to your bottom line. These customers will serve as the foundation for your segmentation strategy. For example you may discover that people ages 45-65 are your most profitable customers based upon the length of time they have been buying your product.

2. Profile Your Customers

Understand your customers’ usage patterns, behaviours, and preferences. Consider factors like how often they purchase, the benefits they seek, and their lifestyle. This profiling helps create a clear picture of each customer group such as to help create the best advertising strategy that connects with a specific customer group and cost-effectively.  Business context profiling may include:

• B2B – profile map by company’s size, industry, location, revenue, and target audience. The profile may also include decision-makers at the company.
• B2C – focus on individual customers and feature demographic data like age, gender and lifestyle preferences.

3. Define Customer Segments

Based on the profiles you’ve created, define distinct customer segments. For instance, an artisan Gin producer might target “females over 35 who reside within a specific area of Cardiff.” These segments should be unique, identifiable, and relevant to purchasing decisions.

4. Choose Your Target Segment

Not all segments will align with your business objectives equally. Select one or two segments that pass the following tests:

• You can satisfy their needs with the same marketing mix.
• The segment is unique and reacts to your marketing efforts.
• It’s expressed in clear terms relevant to the purchase decision.
• The segment is identifiable and large enough to cover costs.

5. Compile Your Target List

Once you’ve chosen your target segment(s), it’s time to build a list of potential customers within those segments. You can create your list through networking and research, anonymously pool prospects on social platforms, or purchase lists from reliable sources. Make sure your list aligns with the segment criteria you’ve established.

Bringing It All Together

With your target list in hand, you’re ready to take the next steps:

• Initiate contact with potential customers using a well-crafted message.
• Guide them through the sales process, tailoring your approach to their needs.
• Choose appropriate communication channels based on your segment’s preferences.

Benefits of Customer Segmentation

Segmenting your customers has numerous benefits for your business:

• You can effectively cater to larger customer groups as your business grows.
• Maintaining or increasing profits becomes feasible even with a growing customer base.
• Tailoring products and services helps retain customers and build loyalty.
• Focused marketing efforts yield better results by resonating with target segments.
• Niche needs that larger competitors overlook can become your expertise.

Customer segmentation is a powerful tool that can drive business growth, profitability, and customer satisfaction. By following this practical guide, you can refine your approach, effectively tailor your offerings, and build stronger relationships with your customers.

The Strategy 360 aim is to help you make the right business decision – with a strategic approach of knowing the why, how, and when, to achieve your objectives for tangible results.  With over 25 years in marketing, Strategy 360 has a proven track record of supporting businesses to make the best business decisions to achieve, succeed, and grow.