Visitor segmentation, also referred to as customer segmentation, is a method of segmenting potential customers into groups that allow businesses to promote a focused message to the right audience. Segmentation can be broken down into large categories, such as location, or more narrow categories, such as innovators. By using these data tools, marketing campaigns can reap higher rewards in a more cost-efficient manner.
What Are Different Segmentation Criteria?
Segmentation definitions, in the broadest sense, are typically broken down into four separate categories. These are:
- Behavior – most often related to specific needs and how the product is used
- Geographic – country, region, city, town or area
- Demographic –age or race
- Psychographic – which usually refers to matters of lifestyle and opinion
While these four customer segmentations are well defined and understood, they are generally superficial and require further filtering before any real insights can be harvested. For example, middle-aged men and young women may both be interested in running shoes for separate reasons, such as comfort, fashion or sport. These cannot be simply defined using the broad criteria listed above. To be truly useful, we must dig further into each segment.
User segmentation is simple in theory, but complex in practice. Each segmentation definition is like a Russian doll, with smaller categories within each of them. This can be particularly the case for behavior. Big data has shone a light on behavioral customer segmentation in a way that has never been possible before. The uniqueness of online behavior, as well as the depth it provides, allows a great deal of insight for segmentation and is enormously beneficial for focusing marketing efficiently.
Each segmentation definition is like a Russian doll, with smaller categories within each.
For example, particular shopping habits can lead to focused campaigns for high-value products, such as jewelry. Browsing habits might uncover an interest in hiking, and relevant products, such as tents or hiking boots, can be presented to the right group. Behavior may also provide deeper information. Someone who might have searched for a dark colored hair dye would be more likely to respond to a shampoo designed for dark hair. Value of product, reliability and how regularly the product or service might be used can all play a role. This type of information is therefore highly valuable, complex and user specific.
- Price awareness
- Specific advantages required
- Behavioral usage
In no other segment is the question “What is customer segmentation?” better defined than geographically. This is partly because it is much easier to explain and understand than the other three. Geographic segmentation can often be self-explanatory, such as marketing sunbeds in Florida, not Alaska. But this is not to say that all examples of geographical segmentation are obvious.
On the first level, national segmentation requires little explanation as different countries require different types of products due to culture (e.g. music), climate (e.g. clothing) or location (e.g. country specific businesses). At the other end of the scale, however, communities within cities or towns can be vastly different for several reasons and need to be marketed to accordingly.
Other defining factors can be rural or urban, coastal or landlocked and high-income or low-income areas. While geographical segmentation is important, it is typically employed alongside other segments, such as demographics relating to income that is mentioned above.
The segmentation definition of demographics is one of the easier to understand on the face of it, but it can get extremely complex as the more granular elements are defined.
On the other hand, age can be very easily defined and has been one of the most successful parts of user segmentation for some time. These are made up, at present, as:
- Seniors – born before 1945. Typically more interested in healthcare, thriftiness and are not Internet savvy
- Baby Boomers – born 1946-1964. Large population that accounts for half of all spending
- Generation X – born 1965-1979. Multitaskers adverse to borrowing
- Generation Y (Millennials) born 1980-2000. Innate technological abilities open to borrowing
With such well-defined traits, marketers are able to focus on specific tendencies and needs of each generation. For example, with the most money to spend, retro items can be focused on Baby Boomers to great success, while the largest generation, Millennials, will likely respond to the latest technology with the most enthusiasm.
Gender is another important aspect of demographic marketing, with well-defined shopping habits informing campaigns successfully. For segmentation to be truly effective, however, the understanding must go further than the common understanding of gender preferences. These can be homemakers, mothers, fathers or professionals, and the often related marital status.
- Marital status
- Religious belief
Psychographics is largely related to lifestyle and is one of the most inherently complex segments of the four main categories. Unlike demographics of gender or age, these can relate to as diverse a range of elements, such as ethical concerns, hobbies, and beliefs. The most common way of gauging the main aspects of this segment is through extensive surveying and feedback.
Probably the most celebrated of these surveys was performed in the 1980’s, called VLAS (Values, Attitudes, and LifeStyles). The survey asked many thousands of Americans to answer specific questions with a simple “Agree” or “Disagree” answer. Each question was designed to understand the three aspects of psychographics and helped researchers segment the population further into eight groups. These were:
- Innovators – Confident, high achievers
- Thinkers – Mature, idealistic and responsible
- Achievers – Career and family orientated
- Experiencers – Enthusiastic and impulsive
- Believers – Traditional and conservative
- Strivers – Fashion aware, approval seekers
- Makers – Hard working and expressive
- Survivors – Seeking security, adverse to change
This further segmentation is designed to cover the aspects of customer segmentation that the other main definitions cannot.
Segmentation Mistakes To Avoid
Because visitor segmentation can be so complex, it is understandable how errors can occur, and while the benefits are well documented, so are the mistakes. Mistakes may not only make segmentation ineffective, they can be a hinderance.
Common mistakes include:
- Over customer segmentation
- Segmentation without strategy
- New segmentation definitions
- Over focus of demographics
- Too many segments
Over Customer Segmentation
As has been explained previously, segmentation can produce highly specific information that, when used properly, can produce significant results. The trouble is, it can also segment to such a granular perspective that the results are too small to be of any use. Over segmentation pre-supposes results, while proper segmentation begins as broadly as possible.
Segmentation Without Strategy
What is customer segmentation without a clearly defined strategy? It’s all well and good having a plan in place to maximize the data needed, but what is it that was needed in the first place? The very definitions of the segmentation are what makes the entire project effective and this takes more than a little forethought.
New Segmentation Definitions
The basic principles of segmentation do not change, but the segments themselves do, if only slightly. These can be generational, for example, what happens when Generation Z come of age, or psychographic, such as political shifts. It is important to stay on top of these changes by auditing visitor segmentation regularly to maximize their efficiency.
Over Focus On Demographics
One of the most common mistakes in user segmentation is an over focus on demographics, particularly at the expense of behavior. While demographics is an extremely important part of the process, it should not come at the expense of other segments. Behaviors, such as buying patterns at specific times of the month, can tell you a lot more about a customer than their background.
Too Many Segments
Customer segmentation is only successful when focused, producing too many segments results in confused data that creates more problems than it solves. There is no magic number when it comes to the amount of segments to use, this will depend on the specific needs of the campaign, but a decent rule of thumb is to limit it to around five.
How Can Segmentation Be Used For Website Personalization?
Personalization is key to the future of online marketing, and segmentation is a key component in making it the most effective tool possible. Recent research by the Boston Consulting Group showed that those that utilized digital tools and data for personalization purposes increased revenue by somewhere between 6% and 10%, which is up to three times faster than those who didn’t.
Segmentation can help target the right person with the right message at the right time, thus making email campaigns, for example, much more efficient. Segmentation is not personalization, but segmentation can be an effective part of a personalization strategy. Segmentation differs from personalization because it deals with groups rather than individuals, but it can help predict and influence an action, and subsequently trigger a message to maximize an interaction (perhaps upselling or a subscription).
Ultimately, segmentation can be useful for several reasons and is a tried and trusted method of focusing ad campaigns and gaining customer satisfaction.