Customer segmentation is the grouping of customers on the footing of some type of shared characteristics. Such shared characteristics may be age, gender, spending habits, interests, behavior etc. Segmentation aims to combine those customers who have a similarity in their actions, interests or attributes in regard to an online business. This helps a business to segment customers and figure out each segment’s exact nature and status.
To form an ideal customer segment, it is also necessary to have the required data on the basis of which the segments are meant to be made. For example: if an online business wants to segment customers on the basis of location, then it must have the location data for each customer. When the data is available and analyzed properly, customer segmentation can help in getting insights into the customer’s activity and behavior.
How Does Customer Segmentation work?
Customer segmentation works on the fact that although each customer is different yet each customer has some similarities with some other customer. That’s why it is more beneficial to target the marketing efforts on a specific group of customers who are most likely to engage and buy products from the store. A business must have a deeper understanding of its customer’s choices and needs, so it can serve what customers expect and want from the store.
Types Of Customer Segmentation
The segmentation depends on the key characteristics of customers that divide them into targetable groups. These differentiating characteristics are basically of four types:
- Demographic (age, gender, ethnicity, etc)
- Geographic (location)
- Psychographic (personality characteristics, lifestyle, etc)
- Behavioral (usage, consumption, spend amount etc)
All of these characteristics help a business to segment customers accordingly. Although, the first three types of characteristics are important to segment customers but Behavioral segmentation is something above the common standards.
Behavioral segmentation works on the concept of tracking customer’s behavior in the store and segmenting them likewise. Analyzing customer behavior is an insightful process for knowing customers and serving them what they’re interested in. Let’s get ahead and know which of the behaviors of customers are tracked and how they are grouped in segments.