Your business thrives on its customers. It’s crucial to grasp their frustrations, aspirations, desires, and requirements. Modern technology and customer surveys empower you to gather valuable insights about your customers. This data helps you understand them better, enabling you to provide exceptional service while boosting revenue, enhancing customer service, and maximizing your return on investment. This process, known as customer segmentation, allows you to comprehend every facet of your customer base. We’ll explore nine customer segmentation models and illustrate how they can elevate your marketing efforts.

Decoding Customer Segmentation

Customer segmentation involves categorizing customers based on shared traits. Imagine organizing a wedding reception: you arrange tables for your friends, tables for family, and a designated table for food. Various customer segmentation models group customers by geographical location, behavior, demographics (age and gender), and values. The criteria for segmenting your customers are entirely up to you.

Advantages of Customer Segmentation Models for Your Business

Customer segmentation models provide invaluable insights into your customer base. By understanding their age, gender, location, values, and behavior, you can tailor your offerings to their specific needs.

Elevated Customer Service

Customer segmentation empowers you to deliver superior service. When customers contact your support team, agents armed with information from segmentation models can provide smoother and faster assistance. This is a win-win for your business: 90% of customers are more likely to spend more with companies that personalize their customer service.

Enhanced Advertising Campaigns

A farmer in rural Indiana and a first-time homeowner have distinct needs, yet both can find suitable products from John Deere. Advertising combines to homeowners would be a waste of resources for the company. Customer segmentation models allow John Deere to divide its customer base into segments, enabling them to pinpoint and target specific needs. John Deere, like any company, can then deliver relevant ads and communications to the right audience. This translates to marketing leads, higher conversions, and reduced wasteful spending.

Engaging Communications That Resonate

Customer segmentation models offer deeper insights into customer needs and desires. Communications become relevant to their lives and interests, capturing their attention instead of being ignored.

9 Customer Segmentation Models to Empower Your Business

Leverage these nine customer segmentation models to connect with specific customer groups, boosting sales, optimizing advertising expenditure, and enhancing customer service.

1. Demographic Segmentation

Demographic segmentation, perhaps the most familiar model, classifies customers based on:

• Age
• Race
• Gender
• Marital status
• Income
• Education Marketing teams, customer service representatives, and researchers can all benefit from demographic segmentation. The applications are limitless! Consider these possibilities:
• Utilize age demographics to engage different generations through chats, email, and phone calls.
• Employ education status to identify individuals interested in higher education.
• Target budget-conscious customers based on income level.

This school likely employed demographic segmentation to target current students.

2. Behavioral Segmentation

Behavioral segmentation categorizes customers based on their interactions with your brand. For instance:

• Product usage patterns
• Buying habits
• Shopping preferences (in-person or online) This information is invaluable for personalized ads, allowing you to target loyal customers with similar products. Your customer service team can also benefit. Analyze customer behavior, identify frequently asked questions, and create a FAQ page, help desk, or automated customer support chats to address them effectively.

3. Psychographic Segmentation

Psychographic segmentation delves into the inner feelings and attitudes of your customers, encompassing:

• Values
• Interests
• Attitudes
• Personality types
• Lifestyle
• Opinions This model provides the most intimate understanding of your customers’ thoughts, beliefs, and feelings. Conduct customer surveys to gather this valuable data. Then, leverage psychographic segmentation to appeal to their perceptions:
• Showcase your environmental, LGBTQ, and diversity initiatives to passionate customers.
• Sell handmade goods by highlighting the personal stories of their creators.
• Identify customers with shared interests (e.g., reading) to offer related products (e.g., bookmarks).
• Craft customer personas (fictional representations) for each customer segment.

Appeal to your customers’ minds. Free guide >> 26 Brilliant Ways to Use Psychology in Your Copywriting

4. Value-Based Segmentation

Value-based segmentation focuses on the value customers bring to your business. This model measures customer return on investment (ROI), identifying your most loyal customers and areas where value is lost. Customers are categorized by purchase frequency, spending habits, and purchase amounts. Utilize value-based segmentation to understand customer lifetime value and enhance ROI:

• Identify customers who purchase high- and low-priced products.
• Implement a chatbot to promptly address customer inquiries.
• Target unsatisfied customers with personalized messages and special offers.
• Launch a rewards program to drive sales growth.

5. Geographic Segmentation

Geographic segmentation is self-explanatory, grouping customers based on their location: country, state, city, or town. Understanding customer location enables you to serve them better. Consider these strategies:

• Craft tailored communications celebrating local festivals and traditions.
• Use local terminology, slang, and knowledge to resonate with the audience.
• Identify potential opportunities for secondary locations. This is also crucial for targeting ads to local customers.

6. Technographic Segmentation

Technographic segmentation categorizes customers based on their comfort level with technology. Gather this information through:

• Customer surveys
• Analyzing website access patterns
• Identifying preferred device brands (Apple, Android, etc.)

Google Analytics provides insights into the devices people use to visit your website. Utilize this knowledge to:

• Evaluate the viability of launching a mobile app
• Identify areas for improvement in your existing SaaS product
• Design products for users less familiar with technology This information also guides decisions regarding marketing strategies like geofencing or SMS marketing to target mobile device users.

7. Needs-Based Segmentation

Every customer has unique needs from your company. Needs-based segmentation helps identify areas for improvement by grouping customers based on problems and desires. Consider food delivery service Home Chef. Delivering food boxes at inconvenient times would result in customer dissatisfaction due to spoiled goods. By allowing customers to choose delivery days, the company enhances customer service. Another example is accessibility. Not all customers can perceive brand photos or hear videos. Implementing accessibility measures ensures inclusivity for all customers.

8. Firmographic Segmentation

Firmographic segmentation categorizes customers based on company attributes such as size, structure, industry, revenue, and organization type. Obtain this information from public data sources, company websites, annual reports, and press releases. This segmentation model is particularly useful when your target audience primarily consists of companies, small businesses, and other organizations.

9. Lifecycle Stage Segmentation

Lifecycle stage segmentation groups customers based on their position in the customer journey. This helps tailor your approach based on their stage.

Utilize data from your CRM or lead management software to track, tag, and effectively target customers or prospects using this model. Applications of lifecycle stage segmentation:

• Identify how to assist potential customers
• Discover innovative ways to maintain customer engagement
• Enhance onboarding experiences for new customers
• Reduce customer churn rate

Embrace Customer Segmentation Models Today

Customer segmentation models are invaluable for categorizing customers based on shared characteristics. These insights inform new strategies, processes, and policies that drive business growth. Here’s a recap of the nine essential customer segmentation models:

1. Demographic segmentation
2. Behavioral segmentation
3. Psychographic segmentation
4. Value-based segmentation
5. Geographic segmentation
6. Technographic segmentation
7. Needs-based segmentation
8. Firmographic segmentation
9. Lifecycle stage segmentation By implementing these models, you’ll deliver exceptional customer experiences, fostering loyalty and driving more sales.