Learn About the Five Most Common Types of Customer Segmentation
Gautam Mane, January 28, 2021
It is no secret that B2B marketers require quick, clean, and actionable insights to conduct business successfully. This is possible only by selecting the right client group from a vast pool with the help of customer segmentation.
What is Customer Segmentation?
Customer or market segmentation is a way to perform in-depth market research and split the customers into smaller groups or profiles based on their shared traits. By splitting up the total market into fragments, it becomes easier to identify customers’ individual needs and cater to them in a personalized manner. Market segmentation allows B2B salespeople to develop more targeted sales pitches to gain a higher conversion rate.
Furthermore, market segmentation allows you to divide your target audiences based on data points such as age, income, behavior, lifestyle, and other socio-economic factors. Once you gain access to these insights, you can tailor your strategies and gain a distinct advantage over your rivals. The five main types of customer segmentation are:
- Demographic Segmentation
- Geographic Segmentation
- Psychographic Segmentation
- Behavioral Segmentation
- Technographic Segmentation
Let us understand each one of them in detail:
Demographic segmentation fragments customers based on age, sex, income, marital status, occupation, education level, and nationality. By breaking down your Total Available Market (TAM) according to these variables, you can divert your resources towards obtaining conversions from this segment.
Demographic data has made it easier for companies to connect with their ideal customers and cut down on investment. This is the most common type of segmentation and is primarily utilized by firms to keep a record of the segment amongst which their products are the most popular. Demographic information is relatively easy to collect and can be obtained through surveys.
B2C companies predominantly use this type of segmentation. For B2B firms, their target companies’ cursory data is more helpful than that of individuals. This is called firmographic segmentation and can be understood as the demographics of firms and companies.
Using firmographics, B2B companies can acquire information like the number of employees, annual turnover, industry, job titles, and more. By leveraging this information, B2B organizations can decide whether investing in a particular company will be fruitful.
This type of segmentation is the easiest to identify. It uses the following region-based factors to group customers:
- Population density
These parameters can be highly beneficial for international organizations, as geographic segmentation can be used to narrow down the needs and preferences of individuals and companies based on their physical location. It also includes nuanced factors like climatic conditions, localities, neighborhoods, and economic status to make astute expansion decisions.
This type of segmentation focuses on customers’ qualitative attributes, which could be influenced by their upbringing, socio-economic status, religion, gender, etc. These conscious and subconscious traits inform buyers’ marketing decisions and can be used to gain a unique insight into an individual’s psyche.
Psychographic data is segmented on beliefs, opinions, habits, religion, lifestyle, and societal status. Acquiring this information about thousands of customers can be challenging as it requires in-depth research, but it is highly rewarding. You can utilize this information to appeal to the inner beliefs of buyers and gain brand loyalty.
Behavioral segmentation divides the customer base by analyzing their buying patterns, product usage, satisfaction level, lifestyle, etc. For instance, a customer aged between 25 to 30 years may have a greater spending capacity than those in the age bracket between 55 and 60 years. This type of segmentation requires analysis of subtle behaviors like spending habits and brand loyalty.
The data insights for behavioral segmentation can be accessed by assessing the engagement level of shoppers, utility derived from your product, and time spent browsing your website. If a particular customer is spending more time checking out your competitors’ products, you can create optimized offers to retain them. Behavioral segmentation allows you to make future assumptions regarding buyers’ behavior and prepare accordingly.
The word ‘Technographic’ is derived from ‘Technology’ and ‘Demographic’. It generates segmentation based on the type of technology and the extent of its usage in an organization. This is highly beneficial for technology marketers, as they get in-depth insights regarding the technological applications employed by a company.
By tapping into an organization’s technological preferences, you can easily personalize your advertisements and make sure they reach the right audience.
Today, the B2B marketplace is highly competitive, and you need a clear advantage to shine amongst your competitors. By leveraging the right segmentation techniques, you can offer the right products and services to the right customer with perfect timing.
In that case, it is now time to intricately weave the above-listed customer segmentation practices into your organization’s daily workings.