Friday 3rd of February 2023

Solving the Customer Insights Puzzle with Micro-Segmentation

[Free Takeaway Included – Ready-to-Use E-Commerce Segments]

Have you ever tried solving a mega jigsaw puzzle? To get started, you would have to sort the pieces based on their color, edges or size. Rather than tackle the entire puzzle in one go, dividing your jigsaw pieces into smaller groups first can help you assemble the picture faster.

In a customer-driven world, marketing teams also face a similar conundrum when defining their target audience. Marketers can no longer afford to target everyone. Having a well-defined target market is now more important than ever.

If you think of the whole puzzle as your target audience, there may be several groups of customers with certain shared behaviours, traits or characteristics that can be clustered together for effective targeting.

Building a great marketing segmentation strategy is a lot like assembling a jigsaw puzzle – where you have to start by defining the borders and then delve deeper to identify patterns and build associations.

In essence, customer segmentation is all about clustering customers into different groups based on a specific set of criteria. Though customer segmentation is not a new concept, its time marketers move beyond surface-level segmentation to micro-segmentation.

What is Micro-Segmentation?

Micro-segmentation is the practice of separating customer groups into smaller and sharper subgroups based on extrinsic and intrinsic attributes of the customer. This advanced form of segmentation can help businesses to swiftly divide customers into manageable micro-buckets and then target specific marketing actions to each one.

Studies revealed that segmentation brought 77% of marketing ROI. However, another survey indicated that only 4% of marketers segmented audiences based on multiple data points while 42% of them did not use segmentation at all.

Rather than looking at high-level demographic groups, marketers can overlay a wide array of data points from first and third-party sources to identify hyper-relevant segments. The result is a rich mosaic of tens, hundreds or thousands of micro-audiences that will help you paint a holistic picture of your target consumers and their needs.

Moving Beyond Macro-Segmentation to Micro-Segmentation

Although macro-segmentation is a great starting point to group your customers, businesses need to evolve and adopt micro-segmentation as part of their digital marketing strategy. Micro-segmentation drives personalization at scale by delivering messages, offers and promotions that appeal to individual customers.

Macro-segmentation will result in broader segments with a higher level of heterogeneity, making it difficult for marketers to push personalized messages. On the other hand, micro-segmentation will lead to fine-tuned segments with very few, homogeneous customers, making it easier to drive personalized interactions and engagements.

Steps to Get Started with Micro-Segmentation

Micro-segmentation strategies can help reinvigorate the performance of outbound marketing efforts, increase the return on your inbound efforts, and in turn build a high-yield marketing portfolio.

Here’s how you can arrive at the right micro-segments for targeted marketing actions:

  1. Define Broad Segments and Identify Subgroups

Start by broadly dividing your customers into groups based on demographic, behavioural and psychographic attributes. Next, identify an in-depth index of attributes for each group. Using this, refine each group to define granular micro-segments based on a combination of traits such as buyer persona + funnel stage or buyer persona + website activity, for instance.

microsegments with subgroups

Image Source – Forrester

  1. Create Micro Segments

To ensure good coverage, it’s recommended to create at least three to four micro-segments for each audience base. Here are some micro-segmentation attributes and variables you can consider for the same:

  • Behavioural – Lifecycle stage, website activity, last customer engagement, purchase history
  • Psychographic – Interests, lifestyle, personality, values
  • Benefits – Based on different benefits sought from products such as quality, performance, features, customer service, etc.
  1. Develop Micro-segmentation Targeting Strategy

Prioritize and rank different micro-segments based on their value and profitability to the business. Streamline your marketing campaigns and customize communication in alignment with the individual needs and preferences of each segment.

Using Micro-Segments to Optimize Marketing Campaigns

Once you have built a micro-segmentation strategy, it’s time to optimize marketing campaigns for each group by foreseeing customer needs and tailoring differentiated offers.

Here are some approaches to creating relevant experiences for customers within a given micro-segment:

  • Personalize Landing Page for Different Segments – It is essential to customize the landing page of your site that is instrumental in driving audiences towards the next best action. For instance, you can personalize the hero banner according to browsing behaviour, purchase history or product affinity of the micro-segment.
  • Present Visitors who have Abandoned Carts or Forms with Personalized Reminders – Engage returning visitors who fall into cart or form abandonment segments with actionable notifications that encourage them to continue their journey.
  • Deliver Segmented Time-Sensitive Offers to Drive Engagement – In a study, 49% of participants stated that they purchased something on impulse as it was presented to them with a personalized message. Offer limited-time coupons or deals with personalized messaging to your audiences based on their interests and buying patterns.
  • Offer Proactive Support to Hesitant Users who are Stuck in the Buying Process – Building trust is a key factor in reducing customers’ concerns and driving purchases. Initiating a proactive one-to-one conversation through a phone call or an email can be an effective way to address any concerns and enable customers to progress in their buying journey.
  • Present User-Generated Content to Active Users in the Research Stage – Prospects that are in the research phase of their journey can be presented with social proof to influence them to buy.
  • Reward Frequent and Loyal Customers with Exclusive Offers over Email – Send loyal shoppers automated emails triggered based on custom events. Include within the emails product recommendations and relevant incentives, based on real-time consumer onsite behaviors and affinities.
Here’s a free download of ready-to-use e-commerce segments based on the transaction frequency of shoppers.

Micro-segmentation, like all other data analytical methods, is as much an art as it is a science.

Discovering valuable segments and creating personalized experiences is a continuous process that requires businesses to constantly adapt to shifts in customer expectations and preferences.

Micro-segmentation helps marketers engage with their target audiences with the right messaging and customized marketing campaigns. It might just be the perfect way to solve your customer insights puzzle.

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