One of the key strategies to achieve greater revenue is to focus sales and marketing efforts on the right customers. To this end, customer segmentation is one of the standard practices followed by companies.
Segmentation helps brands divide their customer base into different categories and target them effectively. However, it has been bulk sms master observed that businesses often need help defining market segments in industries such as finance, healthcare, technology, etc. To boost sales, businesses need to adopt a more refined market segmentation method known as micro-segmentation.
In this article, we will look at what micro-segmentation is, its role in the B2B industry, implementation strategies and benefits, and some examples.
What is micro-segmentation?
Micro-segmentation is the process of dividing customers or markets into smaller groups. These groups, or segments, share common characteristics and are usually created based on criteria such as demographics, priorities, needs, and buying preferences.
Similar to macro-segmentation, micro-segmentation starts with traditionally defined groups created by companies for marketing purposes. However, micro-segmentation goes a step further to identify opportunities to retain potential and existing customers within those segments. This helps businesses learn more about the products or services that customers prefer, their purchase history, and how often they purchase from the brand, thereby improving customer service , as well as return on investment.
Typically, the groups created under micro-segmentation consist of a small number of customers, helping brands conduct highly personalized predictive analysis and marketing optimization. As a result, it becomes easier to predict the effectiveness of sales and marketing strategies targeting different micro-segments or customers.
Variables for micro-segmentation
The variables of micro-segmentation refer to different categories that divide customers into small groups. This includes segmentation based on demographics, product usage, purchasing behavior, and situational factors. Let’s understand what these variables mean.
#1. Demographic Segmentation
Demographic segmentation involves segmenting your customer base based on demographics like location, age, gender, job profile, income, etc. If you are a B2B organization, you can segment your customers based on parameters like industry, company size, and geography.
The 7 reasons you should a/b test your email marketing campaigns rationale behind segmenting consumers based on a demographic approach is that customers naturally tend to purchase goods and services based on their demographic characteristics. Segmenting your customer base based on demographics will also allow your marketing team to develop strategies that cater to the areas you should serve. For example, if the majority of your customers live in New York City, then your marketing strategy should focus on expanding in New York City.
#2. Product Usage Segmentation
Product usage segmentation is segmenting customers based on the products or services they use and their user or non-user status. For example, if you are a cosmetics brand, you can segment your customers based on the types of products they buy most often (e.g. skin care, hair care, makeup, etc.).
You can also segment your customers based on whether they are active or not. So, you can create and send marketing content to active customers and leads or inactive customers.
#3. Purchase Behavior Segmentation
Purchase or buying behavior is another way for B2B companies to segment their customers. Under this category, customers are segmented based on their purchase frequency, whether they prefer monthly or annual plans, or whether they have a centralized or decentralized purchasing approach.
#4. Segmentation by Situational Factors
Customer segmentation based on situational factors involves isolating customers based on variables like purchase urgency, order size, product use case, etc. In this case, since each customer’s situation is unique, segmentation further divides buyers into smaller groups.
Macro-segmentation vs. Micro-segmentation
Both macro-segmentation and micro-segmentation strategies divide customers into groups based on certain characteristics. So, how do they differ?
In terms of B2B marketing, macro-segmentation refers to dividing an organization’s customer base or market into smaller segments. These segments are created based on the company’s organizational characteristics, such as location, industry, and size.
Micro-segmentation, on the other hand, goes a step further and categorizes customers based on their purchasing behavior. Segments can be based on demographic data including age, gender, education level, income, job profile, lifestyle, purchase frequency, product usage, and situational factors.
To summarize, macro segmentation focuses on categorizing customers on a broader level based on their location and company size, while micro segmentation further breaks these segments down into smaller groups based on buyer personas. This helps companies better understand their target audience, helping them define their unique characteristics and design marketing strategies accordingly.
Types of Customer Micro-Segments
The process of micro-segmentation segregates customers based on behavioral, geographic, demographic, and psychographic categories. Let’s understand them in detail.
#1. Behavioral Segmentation
Segmenting customers based on turkey data their purchasing personas is considered to be one of the most effective classification techniques. Under behavioral segmentation, companies identify and categorize customers based on their purchasing history, purchase frequency, most purchased products, preference for online or in-store shopping, purchase intent, etc.
#2. Geographic segmentation
Under geographic segmentation, customers are divided based on location. This includes categories like country, state or province, city, region, postal code, etc. Also, customers can be divided into whether they live in urban or rural areas, cold or tropical, whether the store is standalone or located in a mall or shopping center, etc.
#3. Demographic Segmentation
Here, buyers are categorized based on characteristics like age, gender, religion, education level, employment status, employer name, income, interests, and preferences etc. In short, demographic segmentation focuses more on the socio-economic and personal characteristics of the customers.
#4. Psychographic Segmentation
In psychographic segmentation, consumers are divided into smaller groups based on their personality traits. For example, if you run a fashion brand, your customers can be segmented into ethnic fashion, sportswear, western wear, etc.