Audience Segmentation: Is It a Way to Reach Your Ideal Customer or Just a Money Pit?

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Customers come in all shapes and sizes, and each day, businesses invest massive amounts of resources to learn more about them, their interests, values, and what they like about a particular service.

An innovative new marketing strategy, audience segmentation, aims to change how we learn about customers. It works by grouping them into meaningful categories so businesses can adapt and tailor their messaging to meet the needs of specific customers.

But can audience segmentation genuinely change how we conduct marketing? Or is it just another fad that may take up much-needed time and resources?

This article will explore all there is to know about audience segmentation. You’ll learn critical groups you can analyze to understand more about your customers and ultimately find out if it is a suitable strategy for you to implement.

Why should you use audience segmentation? And what groupings can you use?

Research from 2023 has shown that up to 73% of customers want a better personalized experience from the businesses they use. Personalization can only happen if you know what your customer wants.

Audience segmentation can help break down who your customers are. You can determine their needs, interests, values, opinions, and expectations. It can also help make informed decisions about everything from marketing plans, expansion into new territories, standing out from competition, and earning brand loyalty.

By breaking down customers into practical sets, you can find out what works and what doesn’t for the customers that matter to you.

But audiences can be incredibly diverse, especially for businesses that operate across several countries and demographics. So, what categories or groupings can yield the best information for you to use? And what are the pros and cons you need to be mindful of?

Below are five of the most common and effective ways to segment your audience:

  1. Demographic Segmentation

One of the first ways of segmenting an audience is by using critical demographic information, such as a person’s age, gender, location, education, and ethnicity.

The benefit of demographic segmentation is that it’s both easy to collect and understand without much investment. You can understand who your customers are and where they live and concentrate resources on existing lucrative markets.

One major caveat of demographic segmentation is the risk of stereotyping your customers. Not enough personalized details are collected to meet loyal customers’ needs adequately. As such, it is advised that you use demographics in tandem with other audience segments to paint a clearer picture of your customer base.

  1. Behavioural Segmentation

Another popular profile to segment customers is their behavior patterns. This includes examining how customers interact with your business and engage with you (e.g., websites, apps, and social media).

Behavioral segmentation can help create personalized experiences. By adopting this strategy, you’ll discover a customer’s attitudes toward products and services and the ideal conditions for a successful sale.

For example, you might segment your audience based on the time of day they use your website. This can help you to find an increase in sales at a specific time of day.

Or you might find that when a customer is met with a loyalty program on checkout, for example, an offer to buy more items for a discount, they’re encouraged to spend more.

Similarly, you might segment audiences based on when they clicked off your site, which could help identify problems with your service, e.g., a confusing checkout system.

However, you must remember that customer behavior can change over time, reflecting everything from new trends, seasonal changes, the economy, and more. As such, it’s essential to update your data collection periodically so it reflects who your customers are in the present moment.

  1. Technology-based segmentation

Technology-based segmentation classifies customers into distinct groups based on their technology usage, preferences, and engagement. This approach enables businesses to target their marketing efforts towards a specific consumer segment.

One of the emerging consumer segments to be mindful of is those who use a virtual private network (VPN). A VPN encrypts internet connections, adding a robust layer of security to all of a person’s online activities.

Research has shown that VPN users tend to be educated at the university level, prioritize privacy, are early adopters of new tech, and are more likely to be interested in personal travel and business trips. When paired with demographic information, they tend to be younger and male.

By exploring different VPN types, you can understand the values and priorities of this emerging segment and tailor your services to match their interests. For example, some users may want to prioritize security and privacy and opt for remote access VPNs. In contrast, others might use mobile VPNs to protect their online activity while on the move.

  1. Psychographic Segmentation

Psychographic segmenting is when you split your customers into groups based on their beliefs, social status, values, personality, and opinions. It can be an effective way of discovering the ‘why’ behind a purchase.

Markets can use psychographic segmentation to understand what motivates a consumer to purchase or ignore a product, helping to improve engagement and loyalty. A brand can use the information to improve its messaging toward a specific group that may align its interests, opinions, and values with your brand.

One of the most significant considerations about this type of segmentation is that psychographic information can be challenging to collect. It often involves consumers taking additional surveys, which may require extra privacy and security measures to protect customer data.

  1. Geographic Segmentation

As the name suggests, geographic segmentation involves separating your consumers based on their living and working location, including by country, state, town, or zip code.

This segmentation has many benefits, including the easiness and cost of collecting and analyzing information. From the offset, it can allow a brand to know what markets they’re most active in and potential markets they can expand into.

Geographic segmentation is useful for understanding regional or cultural behavior in a broad sense. For example, a clothing brand may discover consumers in warmer climates prefer bathing suits, whereas those in colder climates opt for warmer clothing.

One weakness of this segmentation is that it generalizes consumers with little to no room to personalize information. This means you will most likely need to combine it with other segmentation types to fully understand what consumers in a specific location want.

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