Customer segmentation - Why is it important and what can you achieve with it?

Marketing your products is not about broadcasting anymore. It is about getting to know your individual customer and learning how you can be of value to them.

A lot of companies have large amounts of data on their existing customers. Think of purchase history, invoices, browsing history, demographics,… But not every company knows how to use this data to identify specific groups of customers based on their behavior.

Segmenting these customers allows a company to target them with personalized communication based on their interests. This will not only generate a higher response rate, this will also increase customer loyalty as they feel more personally addressed and understood.


Gathering and connecting the right data

Customer (or prospect) data is often scattered across multiple tools. This can be excel sheets, ERP, CRM, mailing systems, website analytics, ... Therefor it's important to be able to both connect the data coming from all these sources to the same person as well as dividing them into the different steps of the funnel. This way you can interfere on the right time with the right message to the right person.

But what is relevant data to capture? What KPI’s should you measure? And how can you increase customer loyalty?


Define your KPI's and increase customer loyalty

A customers purchase history alone already says a great deal. You can create a segmentation based on type of purchases or do an RFM analysis. This last one is a very intuitive framework to categorize customers based on 3 factors:


When was the last activity of a customer or lead? This can be a purchase, filling in a contact form, a visit to your website,... Has it been a year since his last transaction and should you remind him or her of your new products or services? Or did your customer recently subscribe to your newsletter and is he or she expecting an email offer? In most cases, the more recently a customer has interacted with a brand, the more likely that customer will be responsive to communications from that brand.


How often has a customer interacted with your brand during a specific period of time? If a website visitor keeps coming back to a specific productpage, maybe you can give him or her that last nudge by offering a discount or letting a chatbox pop up for any questions. Customers with frequent activities are more engaged, and probably more loyal, than customers who rarely do so.


Also referred to as “monetary value”. This factor reflects on how much a customer has spent on your brand during a specific period of time. Turn your biggest customers into brand ambassadors by offering them a free product or discount for their loyalty. Because they are already a fan of your brand, they will even more spread the word.

What’s the impact of customer segmentation

Because your customers will feel more personally addressed and understood, they will feel more related to your brand. Not only will you prevent churn but also achieve higher levels of response. By gaining insights in your customer landscape you will be able to increase their loyalty. This means more transactions, more mouth-to-mouth marketing ergo more revenue.

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