The results of
marketing
depend on which customers you approach. Customer
segmentation
is especially important when selecting targets. This time, we will explain customer segmentation along with classification examples and practical methods.
What is customer segmentation? Why is it necessary?
Customer segmentation refers to the activity of dividing the target market of a company’s products and services into specific elements. By segmenting the market, you can find areas where your company can have an advantage in competition with other companies, and make decisions on effective marketing activities by changing the customer base you approach with other companies.
Furthermore, it will be possible to deliver the appropriate message to that customer group through advertisements, etc., and realize marketing measures that aim for the maximum effect with the minimum cost.
Many companies are reaffirming the importance of customer segmentation, and this has been triggered by the spread of the Internet and SNS. Before it became popular, most marketing was one-way, targeting an unspecified number of people, mainly through the mass media.
However, with the spread of the Internet and SNS, the amount of information has increased explosively, customer purchasing behavior has changed, and customer values have diversified, creating a variety of
needs
. As a result, companies need to find a customer group that suits them within the market.
In addition, with the evolution of IT technology, it has become easier to obtain information about customers’ interests and purchasing behavior through social media, etc., and the number of companies distributing advertisements optimized for customers has increased.This has also made segmentation more important. This is a factor that increases the
Main classification examples in segmentation
Here are four main classification methods for customer segmentation.
Geographic variables (geographical variables)
This is a method of classifying based on characteristics related to geographical conditions. Products and services are divided into countries, cities, regions, municipalities, etc. For example, for
BtoB
, it is used to segment by the location of the company/office, and for BtoC, it is used to segment by place of residence.
Especially in BtoC, it is used for products and services whose sales are affected by seasonal fluctuations and regional characteristics, such as food, clothing, and home appliances.
Demographic variables (demographic variables)
This is a method of classifying customers based on their attributes. For BtoB, this can be categorized by factors such as the company’s industry type, number of employees, years of establishment, department and position of the person in charge, and for B2C, such as the customer’s age, occupation, gender, family structure, etc.
It is easily measurable, highly relevant to customer needs, and often used by customer segments.
Psychographic variables (psychological variables)
This is a method of classifying customers based on characteristics related to their psychological state. It can be divided by factors such as the customer’s individual personality, values, hobbies and preferences. Particularly on SNS, the accuracy of data regarding users’ values and hobbies and preferences has become increasingly high, and has become a focus in recent years.
behavioral variables
This is a method of classifying customers based on characteristics related to their behavior patterns. User behavior can be categorized based on purchase history, such as whether or not products and services have been purchased and the frequency of purchases, as well as user behavior such as visits to service sites, downloads of materials, and inquiries. It is now possible to measure various user behaviors using data, and this classification is being given the same importance as psychographic variables.
Segmentation evaluation
There are ways to evaluate whether the segmentation performed using the four classification methods is appropriate. It is called the “4R principle” and is evaluated based on four conditions: 1) Priority (Rank), 2) Effectiveness (Realistic), 3) Reachability (Reach), and 4) Measurability (Response).
① Are priorities based on business and marketing strategies? ② Is the market large enough to generate sufficient sales and profits? ③ Is it possible to deliver advertisements as well as products and services to customers in that market? ④ Is it possible to measure the size and characteristics of the market and the effectiveness of marketing measures?
How to practice segmentation?
STP strategy
Segmentation is essential in
STP strategy
and is a very important task. STP strategy is used to formulate strategies such as “what products and services should be sold to what customers and how?” and is necessary when organizing the market and understanding needs.
This framework consists of three parts: segmentation, targeting, and positioning. Segmentation is performed at the very beginning of STP analysis. We narrow down our targets in a fragmented market and find a position where we can gain an advantage over our competitors.
By performing appropriate segmentation while checking that the position is correct or incorrect using the “4R principles” mentioned above, the accuracy of subsequent targeting and positioning will increase.
Also for development and advertising
In addition to STP analysis, segments can also be used for product development, advertising, etc. In the case of development, by analyzing the hobbies and preferences of each customer segment and their impressions of products and services, it becomes possible to deliver the most appropriate products and services to the most appropriate people.
When conducting listing advertisements or SNS advertisements, it is possible to pinpoint the target customer’s attributes such as gender and age, as well as hobbies, preferences, and interests.
Easier with MA tools
Marketing automation (MA)
tools can also be used to efficiently segment your customer list. You can approach only the segmented target customers at the right time. You can not only approach customer segments and customers, but also measure effectiveness.
summary
Regarding customer segmentation, we introduced classification methods, evaluation methods, and practical methods. Customer segmentation is extremely important in finding the right market for your product or service. Implement effective marketing measures through customer segmentation.