What is Segmentation: definition, types, and segmentation tips
Segmentation, in sales, stands for the act of dividing your target audience, clients, customers or users into subgroups based on their similarities like demographics, behavior, needs, pain points, interests, company size, industry, paying capacity, and other metrics. Segmentation is essential for companies of all sizes as it helps business-owners build more targeted campaigns.
Segmentation is an ongoing process as you need to constantly review the prospects’ and customers’ actions and characteristics and divide them into smaller groups or transfer them from one group into another.
The importance of segmentation
Segmentation is a way to personalize your approach. Though it’s a time-consuming task (considering each segment is addressed and treated differently) the perks of it are immediately seen in the results through both KPI and (more importantly) ROI.
When you understand the pain points and problems of your target audience and segment it into smaller lists, catering to each group individually, your sales and marketing teams can:
- Find out which leads bring the most revenue:
Segmenting the groups and monitoring them, you will find out which ones have the highest values and which underperform. This will let you know in which way you should approach this or that segment of leads or clients.
- Organize more effective spot-on targeting:
Segmentation lets you realize highly personalized targeting: the leads who are looking to buy a new laptop won’t get an offer to buy a new chair.
- Offer better solutions to leads’ problems:
Having a bright idea of what kind of leads are searching for what, you can offer your own solutions to them. If your solution is exciting and affordable, you will soon become a lead’s frontrunner solution to their problem.
- Nurture better and maximize conversions:
Segmentation lets you create and share relevant content with your segments, both educational and promotional, depending on their stage in the buyer’s journey. In its turn, such precise nurturing lets you improve your conversion rate.
- Improve your product:
Communicating with the different segments of your customer base, you will not only know what sold them on your product, but also what could be improved to turn your customers into dedicated fans and even brand ambassadors.
- Decrease churn rate:
When you approach every lead in a unique way, reflecting their interests and desires in your offer, they feel special. This increases your chances to lower your churn rate.
All the above-mentioned points lead to what you as a professional are seeking most of all – better sales, higher revenue, and improved ROI. Here’s a handy infographic on segmentation:
Types of segmentation
The more you segment, the more targeted your campaigns will be. You can segment leads and clients however you deem best. However, there are four main types of segmentation, and you can use them as the basis to start your segmentation process.
- Demographic segmentation: This type of segmentation is the most popular and can be used as the basic one. To segment clients according to their demographics, you need to know the following:
- job position
- marital status, etc.
- Geographic segmentation: This type of segmentation is based on your lead’s physical location. This will help you avoid any cultural faux pas, use country-specific peculiarities in your favor, create campaigns that address location-specific needs, and send your campaigns on time. Here’s the data you’ll need:
- area type (urban, suburban, rural)
- time zone, etc.
- Behavioral segmentation: Analyze the way your customers and clients interact with your brand. This will help carry the lead to a purchase easier, as well as reduce the churn rate. Many characteristics can count as behavioral, here are some of the most popular:
- Customer journey-based segmentation: Divide all leads and clients into smaller groups based on the stage of the buyer’s journey they are at now and their status for your company overall:
- user status (lead, first-time buyer, regular, defector)
- stage of the customer journey, etc.
The best way to figure out what leads and customers want and how to segment them is to take a good look at your current clients. The answers to the questions below will help you.
- Who are they?
- What problems do your customers have?
- What are their pain points?
- Can you help them and how?
- What do your customers need from you?
- What are their buying concerns?
- What motivates them to make a purchase?
- What influences their decisions?
Once the answers are given, split all the clients and customers you have into groups. These tips will help you in segmentation:
- Create advanced signup forms: use as many fields with relevant questions as you can; the data you collect will later help you segment subscribers and clients into groups.
- Pay attention to the stage of the customer’s journey the prospects are at because each of them is characterized by specifics unique to that stage.
- Use time zones. If you want to be at the top of, let’s say, the recipients’ inboxes, you need to know the best time for sending emails and your lead’s location. This information will help you schedule your email sequences for maximum conversions.
- Take the recipients’ interaction with your emails into consideration. Set triggers in your email sequences and then divide all the recipients into groups: those who ignore the emails, open them, click the links, reply, etc.
- Do not add one person to multiple groups: this is highly likely to cause a lot of misunderstandings. Create groups that won’t overlap.
- Avoid creating tiny groups (less than 1% of the overall number of your clients). Such groups are economically irrational. Combine those people with some other groups instead. If you absolutely need to address a specific type of important clients (e.g. your “white whales”), address them individually.
- Pay most of your attention to segmentation based on previous purchases and experience: purchase history, subscriptions, what they are searching for on your website, etc., gives you the most important answer – which group brings in the most revenue for your business.
Through segmentation to better sales
Segmentation is a major part of your sales and marketing and no successful business can ignore it. You can segment leads, prospects, clients, and users depending on any information you have on them: this can be demographics, geographical or behavioral data, their stage in the buyer’s journey, their previous experience or their interaction with your emails, and so much more. Segmenting your audiences can increase your ROI by up to 450% and clear up the picture of your target market.