A Guide To Customer Segmentation

64% of customers expect tailored engagement when it comes to dealing with businesses. So sending batch and blast messages in your campaigns doesn’t cut it. Customer segmentation is now more important than ever to ensure that your customers are engaged.

The goal of segmentation is to improve the relevance and performance of your campaigns. Targeting specific audiences with content that reflects their interests and behaviour is what makes it work. The desired result is better open rates, click-throughs and conversions at every stage of the customer journey.

However, the impact that comes with using segmentation doesn’t come without doing a significant amount of work in the background.

The Importance of Data for Customer Segmentation 

Your data plays a role in all aspects of your marketing efforts. But when it comes to segmentation, it takes the driver’s seat. You need a good understanding of your data to know how to group together your segments.

Customer segmentation relies on accurate first-party data, whether that’s information on the customer’s behaviour, spend or interests. It generally happens towards the end of the data management cycle, as you prepare your audience for activation.

A recent development in the digital engagement space has been the idea of the Single Customer View (SCV). Essentially, this means consolidating all of the data you have on a particular customer in one place. Doing this makes segmentation a lot easier for your business to deal with and carry out in the long run. It also means that your segments will be much more in-depth, drawing on multiple different data sorts.

Using your data to segment your customers opens up your ability to personalise your messages. Here, personalisation comes in two forms: 

• Ensure the actual content of your campaigns is individually relevant (their names, account details, products they’ve bought etc)
• Only send them messages that are relevant to their interests or where they are in the life cycle.

Segmentation is the most effective way of putting your data into action.

Building Customer Segments

As your customer base grows and expands it can be difficult to control it and know how to go about customer segmentation. There are plenty of different elements that you can consider in order to make a decision on which customer enters which segment.

In this guide, we’ll focus on the three core elements.

Conditions

The conditions are the qualifying reasons for why a particular customer has been included in a segment. The range of conditions is massive and boils down to how you want to set up your segments. 

It can include things like the type of device your customer is using, the source of their attribute, and their general behaviour with your business. The options really are up to you.

Attributes

Attributes are one of the most important things to concentrate on when it comes to segmentation. These are essentially a “tag” that is assigned to a customers’ profile. Again you choose which attributes you’re interested in, and a profile can have as many different attributes assigned to it as you want.

The attributes you choose are then used to segment your customers even further for micro-targeting.

Events

Events are often the starting point for a campaign. They can also be used as a condition for including or excluding customers from a segment. Any action a customer carries out on your website or app can be considered an event.

Creating Effective Customer Segments

When it comes to putting your segments together there is some thought that needs to go behind it.

There’s two common ingredients we see across segments. Take multiple data points to create highly targeted groups and make sure you have a very well-defined purpose in mind for each segment.

ROI & goals

This must be your starting point when creating your customer segments. You shouldn’t waste time, resources, and money creating segments that won’t help you drive core business goals.

Your goals should be quantifiable in some way shape or form. Whether that’s directly attributable revenue from a campaign, driving traffic to your website or app, or regaining a lapsed customer. Only then should you start to apply rules to identify the ideal segment, before creating the actual campaign itself.

Having a clear goal in mind is also a good way to identify where the gaps in your data are. If you don’t have the right data to create the segment you need, then that’s something that needs to be looked at and addressed.

Multiple conditions 

The most successful marketers create segments based on multiple conditions, using classic Boolean and/or rules. For example, you create a segment of users who haven’t opened your app in the past 3 months and are interested in boxing and are using an Apple device. 

This level of depth allows you to create hyper-personalised campaigns that resonate with the recipient and drive key business goals. The ability to layer multiple conditions in this way means that your messages and campaigns are hitting all the right notes when they get sent out.

Typical Customer Segments

Every business will have their own challenges and ways to categorise their customers. No two brands are the same, of course. However in general, regardless of what you decide to name your segments, here are five that are universally accepted and used.

New customers

There’s no surprise who might be added to this segment. But there is a bit more to it than just adding in customers who have made their first purchase. You should go a little bit deeper than that.

You should also factor in things like what product they purchased, when they bought it, and where they came from (email campaign, google search, etc). In doing this, you can create a more personalised onboarding journey for them. 

Welcoming them to your brand in this way will engage them more and potentially nudge them to make a second purchase.

Potential loyal customers

These customers have the potential to become very important to your business, but just aren’t there yet. They may have made a handful of purchases and are showing signs that they may continue to do so.

This segment could be nurtured into loyal customers through membership/loyalty schemes that offer rewards. This keeps them keen on continuing to buy from you and leads them down the road of loyalty.

At risk of churn

There are some customers that tend to fall off the radar, regardless of how they interacted with your brand at the beginning. You can identify this by looking at how often they use your website or app, or if they are not spending as much with you as they once were.

As we all know, it’s more cost-effective to retain a customer than it is to acquire a new one. So, it’s crucial to engage these customers with a personalised incentive to make sure they don’t disappear for good.

Loyal customers

These are your high priority customers that make purchases on a regular basis and spend a lot on you too. They are certainly the ones you want to keep with you, so treat them well!

Use customer segmentation here to offer them exclusive things and make them feel important. Early access to new products or services usually works well here. This should be done with a view to turning them into advocates on social media or review sites.

It’s also important that you are engaging with these customers on a regular basis. Failing to do so might lead to them feeling as though you don’t care as much as you should. Customers won’t forget that.

Churned

Sometimes it just doesn’t work out. Despite your best efforts to engage with them, some customers just leave one day to never return.

But that doesn’t mean you should give up and forget they ever existed. There’s still a window of opportunity to engage churned or inactive customers.

Creating a segment for churned customers allows you to deliver highly targeted win back campaigns. These more than likely include offers or discounts that you wouldn’t want going out to all of your customers.

If a certain amount of time has passed and there’s been no activity or signs they will return, you’re better off just deleting them from your database. This is a core principle of good data management.

Put Your Segments To Use

Once you’ve built out your segments, it’s time to get building campaigns that resonate with your audiences. Although different customers will want different things, there are some campaigns that businesses usually run. These include:

• Early lifecycle and onboarding 
• VIP customer engagement
• Abandoned cart recovery
• Re-engaging dormant users

There are no limits to the segments or campaigns you can create, as long as you have the data to support it. So get creative and start putting your customer data to good use!

If you want to hear more about how Xtremepush can help you with your data consolidation and segmentation efforts, get in touch with the team to book a demo today.