Customer Segmentation: Definition, Three Benefits and a Best Use Case
Reaching your targeted audience is crucial to the success of any marketing campaign. If the data you’re using isn’t yielding positive results, you might as well be throwing darts blindfolded in the hope of reaching your target. This is where customer segmentation can make all the difference.
Customer segmentations help marketers and advertisers create promotions and content relevant to their ideal customers.
Suggested Read: Using Behavioral Data to Ramp Up Segmentation
Defining Customer Segmentation
Customer segmentation is simply narrowing down an audience to receive your targeted, relevant messaging — whether it be solely or by any combination of:
- Life events
- Socio-economic factors
- Geographic area
- Interests (including fitness)
- Seasonal/holiday interests
- Purchasing histories and more.
Precisely defining your audience is effective, whether you’re trying to connect with a business professional or the “at-home” consumer. An essential step is first deciding which channel(s) to utilize, whether by email, social ads (Facebook, Twitter, etc.) or other forms of digital or traditional advertising.
Three Benefits of Customer Segmentation
While there are a variety of benefits brands and companies can realize from effectively segmenting their audiences, let’s focus on three key benefits:
1. Targeted, relevant ads equal higher engagement.
Make targeted creatives that “speak” to your relevant audience. Whether you’re marketing to millennials, seniors or those in business, create compelling images and content that appeal to your target audience. Studies have shown that open rates were more than 14 percent higher and click-throughs more than 100 percent higher in segmented email campaigns versus non-segmented ones.
2. More bang for your buck
Greater efficiency and lower ad spend equals increased ROI. Customers want ads that are relevant to them. Precise segments help accomplish that without wasting ad spend on the wrong audience.
3. Ability to A/B test and gauge response rates
Not sure which creative to go with? Consider A/B testing to analyze which creative design and/or content has greater responses. While it may work best with longer campaigns, an experienced and agile team can make changes relatively quickly and painlessly.
A Best Use Case of Stirista Data for Customer Segmentation: L’Oréal
L’Oréal, the largest cosmetics company in the world, has a wide variety of personal care and beauty products for both men and women, ranging from professional to high-end/luxury to indie to mass market/drug store brands. So, it’s important that they market the right products to the right customers to maximize ROI and gain market share among their target customer segments.
For example, it wouldn’t make sense for L’Oréal to target consumers who bought their cosmetics at drug stores with ads for its high-end brands, Lancôme or Urban Decay.
Stirista has provided L’Oréal with segmented data for their various campaigns using several factors including age and gender, life events such as new moms, newly married, and holiday/seasonal segments. By using different customer segments provided by Stirista, L’Oréal is able to tailor its marketing message and creative to fit their specific audience.
For one recent project, Stirista connected individuals (L’Oréal’s prospects) who followed a competitor’s Twitter handle and matched it to both names and postal addresses to create segments instrumental for competitive conquesting. The result: L’Oréal realized a lower cost per click and a greater than 12 percent increase in product usage, month over month when analyzed over five months.
With so much competition for a share of consumers’ purse, it only makes sense to cut through the marketing clutter to get your message in front of the right customers.
Segmenting your audience, whether based on age, gender, economic, life event or holiday/seasonal factors, does this effectively, as it helps to reign in “spend” and better targets your relevant message and creatives while increasing your brand’s ROI and market share.