11 Things Every Business Owner Should Know About Customer Segmentation

There are many reasons customer segmentation has become an effective marketing strategy – but the most important is that it works. Identifying who your customers are and which messages will resonate with them avoids embarrassing missteps and maximizes your advertising budget. Want to learn more? Read on for 11 things every business owner should know about customer segmentation.

How customer segmentation works:

Customer segmentation uses demographics and psycho-graphics to identify the habits, opinions and – to a certain extent – thoughts of your customers and potential customers. That information is compiled into “personas,” rough sketches of theoretical customers based on information gleaned from your existing consumer base.

It goes by many names:

Depending on who you are talking to, customer segmentation can also be referred to as market segmentation, audience definition, persona-based marketing and audience analytics, which all refer to the process of analyzing your customers and creating personas to more effectively market to them.

It should be actionable:

Developing personas about your customers is nothing but an exercise in navel-gazing unless the information also includes effective ways to reach and motivate real people. Great customer segmentation will tell you not only where your customers live, what they do and which media they consume, but also which marketing messages will resonate with them.

You need to be part of the process.

Accurate audience definition requires that your company is part of the process – not doing the actual analysis, but by contributing historical information and purchasing trends.

Customer segmentation needs to be data-based.

In order to be effective, market segmentation should be based on real information – not just who someone thinks your customers are or should be. If your agency isn’t using industry-leading datasets, they are not doing it right.

Garbage in, garbage out.

It’s an old saying in the data-processing world, but it’s one that applies here as well. If your marketing agency doesn’t have accurate information about your customer base, there’s no way they can create an accurate report.

It should drive your future messaging.

A customer segmentation report does not do any good if it’s shut in a drawer – or dumped in a forgotten computer file — and never thought of again. The reason your company is determining how to reach your customer is so you can reach your customers.

Your personas should be people you recognize.

Not literally, of course, but once your report is completed, the personas that are created should resonate immediately as the kinds of people who shop in your store, dine in your restaurant or order services from your company.

It may change over time.

Your business is dynamic and so are your customers. The types of people who spend money with you today may not be the same type of people who spend money with you five years from now. As your business changes and evolves, make sure you are keeping up with the customer base that supports you.

It’s not one-size fits all.

Your business is unique – and so are your customers. Market segmentation will look different for your business than it will be a someone else’s. Anyone who’s selling an out-of-the-box solution isn’t individualizing the process for your business and they’re not going to be able to create a report that is effective for you.

You don’t want to go it alone.

Audience definition requires a powerful skillset and access to an array of demographic datasets. There are plenty of advertising initiatives you can bring in house – this is one that most likely requires outside help, such as the data scientists at OpenDoorData in Austin, Texas.

To schedule a free consultation about how customer segmentation in Austin can help your business more effectively reach your customers, click here.