It could be argued that no two of your customers are the same. While that may well be true, it is also true that there will be similarities between many of your customer base. Those similarities may be marked by varying factors, including age, location, gender, and buying behavior. Being able to group customers according to those factors can have many benefits, and it’s a marketing activity known as “customer segmentation”.

Customer segmentation can inform everything from your marketing strategies to the products and/or services you offer. Just what is customer segmentation and how can you use it to boost your business’s revenue? Let’s find out more in this article.

What is customer segmentation?

Customer segmentation is a process that happens when you analyze your customer data and see patterns that identify common characteristics or behaviors. For example, you might notice that 40% of customers who buy your inbound call solutions do so in the first week of the month and that they also do this with other products or services. Thus, you could create a segment based on that buying behavior. 

Customer segmentation is most commonly used by your sales or marketing teams. With the former, you can identify purchasing behavior as in the example above and know when to reach out to customers. With the latter, you can use segmentation to inform personalized and targeted marketing tactics based on what your customers want. 

How to segment customers 

There are two things to consider when it comes to customer segmentation: how you segment your customer base and how many segments you should have. The number of segments is going to depend on how large your customer base is. A business with 1000 customers will use fewer segments than one with 10,000. 

How you actually segment is going to depend on the patterns you identify. You might see that customers buying an mt domain are mainly in a specific location, so you can use that as your segment in this case. The most common ways of segmenting your customers include: 

• Age group 
• Location 
• Income bracket 
• Relationship type (and family) 
• Job type (is the person a decision-maker in the business?)
• Income (equals spending power).

4 ways to use segmentation to grow your revenue 

One of the main points of customer segmentation is to better serve your customers and, of course, boost your revenue. How can you use customer segmentation to achieve that latter aim? 

1. Identify your segments 

The first step to boosting your revenue is to have a good segmentation strategy. That means analyzing your current customer data so that you can highlight common behaviors and other patterns. To do so, the data needs to have as much personal information as possible, such as location, gender, relationship status, etc. You also need the company data relating to customer interactions with all facets of your business, such as websites and social media platforms. 

If you find that your existing data is incomplete – or not enough to demarcate segments – you can look at adding to that data through surveys, focus groups, and so on. As well as leading to segmentation, this can also help you see which segments create the most revenue.

2. Create buyer personas 

Now that you have your various segments, you want to create buyer personas for each one. This will help your marketing team create more targeted marketing for each group. The whole idea is that you want to be as customer-centric as possible and to appeal more to those buyer personas than your competitors do. 

Having a buyer persona for each group helps your teams identify what people do and don’t like, both in terms of actual products and/or services and in terms of marketing type. Some people may prefer to see marketing on social media, while others may want to receive email updates.

3. Personalize your marketing 

With segmentation and buyer personas, your teams can look at how personalized they can make their marketing. One segment might be particularly price-sensitive, so you may decide to target them with special offers and discounts. Another segment may ask questions such as “what is VoIP phone service and how will it benefit my business?” so you might target them with white papers and customer reviews. 

One of the advantages of personalization and segmentation is that you can break down groups into costs and revenue. What is the CACV (customer acquisition cost), and what is the average CLV (customer lifetime value)? Knowing these figures can help you when it comes to allocating marketing budgets for the different segments so that you maximize revenue and profit. 

4. Refine and tweak 

One important thing to note is that customer behavior can change over time, so you shouldn’t rest on your laurels. What worked one year may not be successful the next. If you want to continue to grow revenue, you need to change with your customers. Review the data regularly so that you can see if your original segmentation is still valid. Embracing technology, such as new data analytics and AI tools, can provide valuable insights to adapt your strategies.

By identifying any changes in customer behavior, you can then adjust your marketing tactics to suit. Again, it’s about being as customer-centric as possible and ensuring that any customer journey meets their needs while boosting your revenue.

The takeaway 

Every business is constantly looking for ways to improve its performance, whether that is in terms of better revenue, higher customer retention rates, or improved profits. Customer segmentation can be an integral part of any growth strategy as it recognizes what makes your customers tick and offers them exactly what they want. 

As previously noted, customer segmentation should not be a static strategy. You should recognize the fluidity of customer behavior and be prepared to change your tactics to suit the changes in behavior. Finding a tactic that helps grow your revenue is something that should be revisited on a regular basis and changed when needed.