Audience Segmentation: The What, Why and How

Posted in Consumer Promotions and Loyalty, Customer Loyalty

by Chris Baldwin on Jul 31, 2017 2:00:00 PM

Understanding your audience for better communication and engagement

Be honest – how well do you know your target audience, or what effective audience segmentation looks like? Unless you sell a ridiculously niche product (coffee-scented beard wash? Vegan motorcycle gear?) that sums up your potential customers perfectly, we’re willing to bet you could do a little bit more to understand the best ways to reach, motivate and engage them.

Most businesses have customers that are a little harder to pin down – coming from all backgrounds, all walks of life, and all with different wants, needs and interests. Coming up with a cohesive marketing message that reaches all of these people effectively enough to turn them into loyal customers can be tricky – especially if you’re trying to reach them all with the same message.

Let’s go back to our motorcycle gear example for a second. Say you sell all different kinds, not just to the vegan niche. Vegans aren’t going to react well to any ads that talk about the high quality of your leathers, while meat-eating bikers won’t be quite as stirred by mentions of a cruelty-free approach.

It’s a pretty simple example, admittedly. But the difficulties we all have in reaching, engaging and motivating all of our different kinds of customers often does come down to something that simple. This is where audience segmentation can really help out.

What is audience segmentation?

As individual as we all are, people do tend to behave fairly similarly – or at least have specific wants and needs – based on certain aspects of what makes them… them. Different genders, different age groups, and different social classes are three of the biggest dividers that can have an impact on preferences, buying power, and the best methods of reaching people, for example.

Audience segmentation simply means dividing your audience into different chunks, and communicating with each chunk using messages, mediums and deals that appeal specifically to them. It makes sure that broadly similar groups of people are receiving information and offers that are as likely as possible to be relevant and engaging for them, delivered on a platform that they’ll definitely be using.

Free case study: How to be the best for your customers  Driving loyalty isn't always easy. Ask insurers. For some, they've got it spot on, like 1ST CENTRAL. Click to read their story.

Why bother with audience segmentation?

Segmentation can make a huge impact customer loyalty. If you’re able to show people that you know and understand them – at least better than your competitors do, anyway! – by giving something relevant, in the way they want to use it, then they will stick with you.

That sounds motivating and engaging, right? That's what it's about. Understanding what they want.

It’s simple, really. Collecting data on your customers – their interests, demographics and purchase history, for example – gives you unique insight into the most effective incentives and rewards to use as part of a loyalty programme. Whether it’s providing discounts for retailers you know they use – so their money stretches further when they register with you – or exclusive access to deals and experiences that they can’t get elsewhere, these benefits will need to be relevant, or they won’t work.

Audience segmentation can have a huge impact on the effectiveness of your marketing strategy, your sales, and your customer retention. It’s essential to understanding your customers, and finding the most effective ways to reach them.

The data that just about anyone can now gather on online consumers means that this deeper understanding is more important than ever for staying ahead of the curve. If you’re not targeting the right people in the right way, someone else will swoop in and do it instead!

So, how should you segment an audience?

We’ve already discussed some demographics you could use to segment an audience above – age, gender and social class – but it’s becoming more and more clear that you can’t always just segment your audience in simple demographic groups like this anymore.

While it is true that younger people are more likely than older people to have a tablet, like an iPad, for example, is it also true that a younger person from a less well-off background is more likely to have one than an older person from a richer background? And this is just a simple example – your segments will likely need to be much more nuanced and intersectional, taking a wide range of things into account.

It shouldn’t just be about their background, either – people’s behaviour should play a key role in the way you segment customers. For example, if you have customers that have added a product to their shopping basket on your website, but not finished a purchase, then they’re at a totally different stage in their buying journey to someone visiting the site for the first time. Target this segment with details on free shipping or temporary price reductions, while saving information on the extent of your range for people who haven’t made a decision on the right product for them yet.

One useful method for understanding complex, intersectional audience segments – as well as putting a more human face on these groups – is to use customer personas. Personas use sales data and customer research – as well as a bit of imagination – to build a picture of your ideal customer. Who are they, what do they want, and how will they engage with you? What are they likely to be thinking?

Learn more about audience segmentation

We’ve really just scratched the surface here – there’s so much more that smart, switched-on segment analysts will need to consider to get it all spot on. The changing demographics in the UK, the ethics of targeted marketing, the importance of continuous engagement, omni-channel communications, and more.

We go into everything in far more detail in our new eBook, How to inspire customer loyalty using audience segmentation’, as well as giving you some customer persona examples, and sharing our research into what people across the UK really think about marketers who know a little bit more about them. Click below to learn more.

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