7 Undeniable Advantages of Customer Segmentation


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So what’s the one way to get your customers to pay attention to you? You have to give them what they want.

And no it’s not money or free stuff of the travel sized variety, although that wouldn’t hurt either.

Authenticity has become paramount in the marketing and branding industry. Especially because this industry has garnered a reputation for playing on people’s desires.

It is at this point when humans crave a genuine entity that they can rely on. They need someone who is not going to deceive them into believing something that isn’t true.

Cue the segmentation strategies: one of the best ways to make a customer feel like their needs are being met.

The following explains the advantages of customer segmentation and why it is, in fact, a big deal.

 

1. Increased Clarity

Customer segmentation allows companies to focus on the stuff that matters.

Companies are not going to want to advertise their parkas and ski equipment in desert areas. Unless they want to waste money.

Customer segmentation allows for more personalized engagement with their intended audience.

It allows them to gain a better understanding of their customers’ interests. It also allows them to maximize the use of relevant information in their ads and content.

 

2. Competitive Advantages

Resource Allocation

By focusing on a few market segments, this allows you to better adapt to changing market trends.

Know who your customers are, be better able to adapt to trends, thus be better able to allocate resources.

Say for example more of the market was turning into health nuts and tree huggers. A company will want to know how to keep their product relevant. Thus it would benefit them to allocate more time and resources in their R & D department.

Beyond that, you will likely find that the majority of your profit is generated by a small portion of your customer base. Leveraging customer segmentation will allow you to identify your Primary Customers, those most valuable to your business, as well as your least valuable customers.

By focusing on your Primary Customers and decreasing your focus on your least valuable customers, you will grow your profit margin.

If you haven’t heard of The Pareto Principle or the 80/20 principle, here’s a quick video for you:

Value Chain Optimization

It’s all about knowing where and how to augment value that will best match the targeted segment.

Let’s go back to the example above. If a market consists of converted environmentalists, it’s beneficial to associate with like-minded companies.

Partnering with other companies that support environmental practices would increase perceived value.

 

3. Opportunity for Expansion

There are two ways that a company can expand: geographic and internal expansion. Strategic marketing is possible with customer segmentation. It enables expansion into other geographic locations with like-minded populations.

Product and service growth is also more likely with segmentation.

Innovative ways of solving customers needs through products or services is a valuable growth tactic. As a customer comes to trust a company then the more likely they will invest in new concepts.

 

4. Increased Customer Loyalty with Customer Segmentation

In the words of Gregory Ciotti, “small business success is highly dependent on the satisfied customer.”

You’re more likely to grab a consumer’s attention and satisfy them if they feel a message is relevant to them.

This increases the likelihood of that consumer becoming a paying customer. That customer is then more likely to become a repeat customer, and ultimately a loyal customer.

Let’s go back to the root message that this article is trying to establish. How do you as a company leverage segmentation to create genuine and lasting relationships with your customers?

You must be able to develop their trust in your company first. Here are a few tips on how to start developing trust between you and your customers:

5 steps to customer loyalty in an infographic highlighting advantages to market segmentation

MKTR.AI Tips tip to earn customer loyalty

 

5. Make the Most of Big Events

Understanding what your target segments want, when they want it, and why they want it is key to profit.

As is the case with occasion-based segmentation, there is a time and a place for product or service demand.

Take Peeps marshmallows for example. Is there ever a time when Peeps are in higher demand than during Easter? Not likely.

Through segmentation, companies know the right time to ramp up efforts, who to target, where, and why.

 

6. Maximize Pricing Options

Once you gain a loyal customer base, then you will be able to implement a value-based pricing technique.

This means offering customers a reasonable price depending on perceived value.

Determining the value of your segment is critical in pricing strategies.

Start by determining the percentage of the market that generates the most revenue. This will offer an idea about what segments to focus on based on perceived loyalty to the product or service.

7. Better Product Development

There are numerous reasons why new products fail.

Here is what Pawel Grabowski had to say about AT&T’s Picturephone failure:

“Blinded by their own vision the company ignored negative user feedback right from trials and developed a product that failed to meet customers needs and wants.”

Customer segmentation can remedy this by offering a better idea of what your most valuable customers want to see. Companies can then use this focus info to improve product features and benefits for the people that are the lifeblood of the company.

Another reason why products fail is that companies target the wrong market.

And why does this occur? Because companies underestimate the value of proper segmentation.

Conducting interviews or even concept testing can prevent such a mistake from occurring.

Conclusion

Pay attention to your customers and they will pay attention to you.

Customers receive relevant info that they can refer to in their buying process. Companies gain a boost in their business that derives from successful segmentation.

Everyone reaps the rewards; it’s a win-win situation.


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