Client segmentation: how well do you know your customers?

With customers becoming increasingly cautious about purchasing due to economic pressures, businesses need to tailor their services closely to their customers' needs.

Building a clear picture of your customer and their needs can be vital.

The tried and tested method for businesses of all shapes and sizes is to conduct customer segmentation, which is the process of grouping customers together based on shared traits.

At the same time, it enables a business to adjust its model to suit the customer's needs.

Since 80% of your business's revenue often comes from 20% of your customers, understanding your existing customers and provide them with what they want is invaluable.

Also, by understanding the different segments, you can help ensure your marketing efforts reach the right people.

Why is segmentation important?

By segmenting your customers, you can:

• Provide faster support.
• Build customer loyalty.
• Ensure you are offering the right products or services to each group.
• Understand what customers are bringing you more value.
• Tailor customer communications.
• Tailor your marketing.
• Identify new opportunities for products and services.

Segmenting your customers, can help you know what they need, when they need it and what they need it for. These insights will help enable you to tailor better services and products aimed directly at customer groups.

It also means you can focus on your more valued customers, enabling you to adjust your servicing and value-adds to their needs.

Understanding the perfect customer

Understanding what your perfect customers look like and what makes them so is essential.

Creating a range of customer profiles can help with this. For example, if you run a pet food business, one of your customer profiles might be dog or cat-owning, city-dwelling Millennials who are stereotypically devoted to their pets.

So how do you categorise your customers?

There are a number of key segments:

Behavioural segmentation

Behavioural segmentation examines a customer's purchase history and reaction to marketing campaigns. It divides customers according to how they relate to your brand, products and services. This is a key indicator to tailor your business to their needs.

Value-based segment

Another important area. Are certain customers generating good revenue? Certain demographics tend to spend more, and if so, you may want to invest more time and marketing activities toward these customers. 

Psychographic segmentation

This helps you understand your customers on a more personal level. By analysing your customers' values, lifestyles, interests, and opinions, you can ascertain how their values align with your business values and tailor communication and marketing material accordingly.   

Standard demographics

Demographics help you identify your customers by age, income, and gender. This is especially important in marketing, as different generations respond differently.

Geographic segmentation

Where do your customers live and work? If many are based near you, this could be a chance to promote yourself as a local or home-grown brand.

Technographic segmentation

How tech-savvy are your customers? This will help determine what medium you communicate through and market to them. For example, if your business is popular with older demographics, you may want to consider more in-person conversations and physical marketing such as flyers or newspaper advertising. 

How to gather information on your customers

So how do you gather the information and data on your customers to analyse what segment they belong to?

Analysing your sales data can give you a picture of what your customer wants.

Customer surveys are an excellent option. They can be implemented in your store, on your website, or after the customer purchases their product or service.

Social media is an ideal place to gather data. Customer feedback about your business (and your rivals) can be analysed via social media outlets, providing you valuable data on what your customer really thinks of you.

To sum up

While all customers are important, they are all different with different needs to tap into. Segmenting your clients can help you to be more targeted and strategic with your marketing and business development.

Important notice

This article provides information rather than financial advice. The content of this article, including any information contained in it, has been prepared without taking into account your objectives, financial situation or needs. You should consider the appropriateness of the information, taking these matters into account, and seek appropriate financial advice before you act on any information.

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