Not every customer is equal in their tastes & temperaments. They come from different backgrounds, demographics, belong to different age groups, incomes & occupation.
This Holiday Season instead of becoming “Jack of all customers” try to “Master upon specific customer segments”
According to a recent survey, about 70% of business takes customer segmentation into account while making a plan of their business strategies.
Beginning your holiday sales by focusing on a specific group of customers will surely help you to make your market strategies relevant to your customer’s taste & preferences, you can get the idea of niche products which will be likely desired by your segmented customers.
In our earlier conversations, I have already told you about different niche markets which you can target upon this festive season. Now here, I will tell you about the need of customer segmentation & how it can prove beneficial for your holiday sales.
What is Customer Segmentation?
“Segmentation” is in itself a whole concept which brings a division of areas, functions & ideas.
But when this term is used in market’s perspective, then nothing is better than Customer Segmentation.
Yes, Customer segmentation refers to dividing your customers into a group of individuals who share similar characteristics, background, age group & class.
Focusing on a specific group of customers will help you to generate more revenue than simply
Investing it on those leads who don’t find your products useful for them.
Just like we focus upon niche markets, it is very necessary that we should invest our maximum time in searching for those group of customers who can become a wonderful prospect for us in the future.
Clay Christensen, A Harvard Business School Professor says that around 95% of products become useless due to inefficient customer segmentation.
Therefore, in this Holiday season, it is very necessary for the companies to make correct customer segmentation keeping in mind the different aspects which could affect the purchasing decision of the customers.
Why should I use Customer Segmentation?
Every customer wishes to have a personalized communication. They generally search for those organizations who can best cater up their specific needs.
There are many companies who start their business with a general target of reaching almost every customer’s needs. But in this wide era of competition what exactly makes you different from my your immediate competitor is when you focus only on a particular segment of customer.
Selling to people who actually want to hear from you is more effective than interrupting strangers who don’t” -Seth Godin
Let’s learn about the key points which highlight the importance of customer segmentation for your holiday sales.
1. Helps in identifying a discrete group of customers
Holiday sales season brings a lot of business opportunities & making different marketing strategies for serving the need of different customers will definitely gonna waste your lot of time & money.
Hence, you should divide your customers into discrete groups & discover out which products are mostly liked by them. Try to find out which festive market attracts which group of customers & then draw up your strategy.
All it depends upon the responses that any customer is making towards your marketing channels.
2. Helps in better allocation of resources
Segmented group of customers provides a better allocation of resources. You can easily invest in your marketing efforts & can provide your customers with more attractive offers in a personalized way rather than using just one common email.
It also helps in providing the best customer services & assists them with more upselling opportunities. You can easily decide upon specific budgets which are to be allocated for each segment & accordingly can direct your sales team to work in the direction of achieving holiday seasons sales target.
3. Helps in enhancing customer loyalty
Serving the needs of your customers in a personalized way wins the trust of your customers & in return, they prove their loyalty towards your product.
Forex: A Person is writing a book choosing a youth-centric audience & if he is relating their real-life situations with the story of his book, slowly & gradually he will be able to win the maximum number of readers & as soon as they become his loyal customers he don’t have to spend any money on the promotion of his book.
It doesn’t take much time to convert your prospects into your loyal customers if you are providing them those services which directly correlate with their needs & desires.
Delight your specific customer with alluring offers, discounts, coupon codes & try to make them your lifetime loyal customers.
The Basis of customer segmentation
You might have a question in your mind that ok I have known about customer segmentation and its needs but on what basis I can divide my customers? What are those dimensions who can help me to do successful division of my customers?
Let’s move forth…
Stratifying your customers on the basis of location, areas, regional climate, natural resources & population density.
Well, it also depends upon the scale of your company. If your company is Multinational then you have to build up your holiday sales plans keeping in mind the needful aspects of customers located at a different geographic unit. While if you are running a small business, you only have to target customers located in different cities & locality.
Forex- If any multinational company is dealing in clothing then it will surely divide its customer base on the basis of climatic regions or we can see the example of radio channels, they are running in different states in different languages just to serve the needs of the customer.
Segment your customers on the basis of age, income, gender, culture, family size, education level, occupation etc. There is a lot of variations in customer needs when seen in respect to these dimensions.
- Age – Age factor has a great role in the market segment. Companies selling products like soaps, shampoos, clothing powders these all have different marketing plans to cater to the needs of different customers.
- Gender – TheBest example of gender-based segmentation is the cosmetic industry. Especially in holiday sales, these industries keep on booming. During the festive season, special packages are offered to females for their self-grooming. Similarly, suitings & shirting companies bring attractive brands for their male customers.
- Income – Automobiles, Furniture, housings, Food & Beverages, Travelling, these are some of those industries who directly varies with the income level of the customers. It depends upon the purchasing abilities of the people.
- Culture- Depending upon cultural diversities, different festive holidays sales are meant for different cultures. Many companies are their who sell their products for a specific culture of people. It varies with the social & cultural traditions followed by them.
Different customers have different usage rates, consumption habits, knowledge, loyalties, awareness & attitude towards different product.
Like Companies have such customers who are always strictly loyal to their brands & some are there who show their loyalty seasonally. Usage rate is also one of the factors of customer segmentation. Measuring their usage rates you can easily know who are regular users & who are one time users.
Similarly, occasional customers are those who prefer any companies product only when it matches with their occasional requirement. Forex- Snickers have a great demand during Halloween holiday sales in the United States.
Customers purchases products on the basis of their lifestyle needs. Alcoholic beverages, Cosmetics, gyms, furniture, these all markets gain customers on the basis of their lifestyles.
Similarly, personality features also affect the purchasing decisions of the customers. Some customers are very enthusiastic as if they like any product on the first sight they do not think much about purchasing that product while there are some customers who make several comparisons before purchasing any product.
Therefore, make your holiday sales plans as per the lifestyle & personality feature of your customers.
Step-by-Step Process of Customer Segmentation
Customer Segmentation is the long process. You have to make complete analysis before deciding your market segment as your whole business plan depends upon that particular segment only.
Steps which need to be followed for an effective customer segmentation is-
1. Collecting & Analysing Customer Data
Gather all the information about your customers & make a centralized data. It will give you an extensive view of different customers purchasing behavior. Make a complete analysis of your customers tastes & preferences. Look out
- Which holiday sales comprised which type of maximum purchasers?
- At what price they were willing to buy those products?
- What type of customer service was suitable for those customers?
- How much percentage of sales revenue was collected through gender-based products?
These all questions will give you a clear idea about a target audience you need to focus on this holiday season sales.
2. Determining Segments Criteria Through Market Research
Market research will enable you to determine the best segments criteria on the basis of which you can easily divide your customers. There are many factors like age, income, gender, occupation, culture etc.
You can make the best use of Google analytics, Automation software & Social Media to take a decision on that segment which has generated maximum revenue during holiday sales.
One other way of segmenting your customers can be calculating your customers lifetime value (CLV), means predicting the total future value of your customers derived by your company.
3. Selecting Most Attractive Segment
Select that segment which best matches with your business idea in this holiday sales. Investigate whether your selected segment will do justice with your products & services or not.
Measure all the risks which you have to take for the best implementation of your customer segmentation policy.
Remember! A good segmentation policy will be successful only when it best serves the need of your customers.
4. Developing Unique Market Strategies
Once you have done with deciding upon your customer segment. Start formulating your market strategies for the successful accomplishment of your holiday sales target.
Allocate resources for quick manufacturing & delivering of your products. Give clear guidance to your sales team for tracking up the changing market trends & buying patterns of your customers. Specify budget allocation for different departments like sales, customer service and channels of distribution so that at the end moment no confusion shall be created.
5. Regular Follow-up
Your work is not finished just after doing customer segmentation, you have to keep an eye to make a regular follow up. Check whether your marketing strategy is moving in the correct direction with your respective customer segment or not. In case of any deviations, try to control the loopholes & meet up your holiday sales target.
How customer segmentation can benefit my business?
According to Theodore Levitt,” If you’re not thinking segments, you are not thinking marketing”
Without Customer segmentation, A business is like a shelf arranged in a haphazard manner.
You are blindly selling your products to everyone without even knowing who exactly considers your product. So, this is the right time to get rid of this situation & make your selling plans as per the requirement of your wanted customers instead of unwanted.
Learn about 7 benefits which you can avail this holiday season with customer segmentation-
#1 More customer retention
A personalized connection with your customers will help you to win satisfied customers.
About 75% of satisfied customers are more likely to remain with that organization who regularly meet up their needs.
Customer segmentation helps you to understand the needs of a particular group of customers only. Rather than focusing on a diverse number of customers, you can identify those groups which require more marketing efforts & which possess higher potential value. Conduct loyalty programs for your customers, easy delivery services, return policies & best after-sales services to capture their attention towards your brand.
#2 Enhances Competitiveness
More customer retention more will be the revenue generation & all of this will enhance your competitiveness in the market. If you segment up your market, you are well known to your customers & accordingly, you will work to give them the expected result.
This will tremendously scale up your sales revenue graph & in return, you will be able to cover a larger market share. In this way, you will be able to give a tough competition to your rivalries.
#3 Establishes Brand Identity
By segmenting your customers, you can make them well aware of your brand. Identifying your brand will help your customers to directly engage with your products. This will increase your goodwill in the market & a brand value will be established among your other competitors.
Brand equity highlights the commercial value of your products which is derived from the perception of your target audience.
#4 Better Customer Relationship
Better Customer segmentation will lead to developing a better relationship with your prospective customers. Communicate with your customers on their queries & requests. Regular communication will make you update about the new upcoming changes & opportunities to be availed of.
This will make your customers comfortable with your policies & he will surely make repeat purchases from your company in the future too.
#5 Leads to Price Optimization
If you are able to discover the social & financial status of your customers, you can easily decide upon the optimized price at which you can provide your services to your customers.
Do best Price Optimization so that even after offering your customers at their desired price, you are able to generate maximum revenue for your company. Generally, customers prefer those companies only who serve them with best qualitative services & that too at their desired price level.
#6 Best economies of scale
Customer segmentation helps in better allocation of resources which in return helps you to gain economies of scale.
Economies of scale mean when you are able to achieve your desired goal and that too at best efficient cost. This can be done through customer segmentation only. Therefore, focusing on a limited number of customers will create a best-optimized allocation of resources which will increase your profitability.
#7 Improves Channel of Distribution
Customer segmentation will improve your channel of distribution. By knowing the right number of customers you can direct the right channel of distribution. This will remove confusion among your team members about whom they have to deliver the product & at what time.
You will be able to choose a precise channel of distribution & that too at minimal cost which eventually serves the best need of your customers.
Customer segmentation should be done very carefully as your whole business plan depends upon your target audience only.
In this blog, we have discussed everything related to customer segmentation, its basis, importance, benefits which you can avail this holiday sales season. Choose wisely your customers & make a well marketing plan to accomplish their needs & desires.
How much Profitable your customer segmentation is? Please share your thoughts with us in below comment box.