One of the key strategies for achieving greater revenue is focusing your sales and marketing efforts on the right customers. To do so, customer segmentation is one of the standard practices followed by companies.
Segmentation helps brands divide their customer base into various categories and effectively target them. However, it has been observed that businesses often need help to define the segments in terms of industries such as finance, healthcare, technology, and so on. To boost sales, firms need to adopt a more granulated approach to market segmentation, known as micro-segmentation.
In this article, we will learn what micro-segmentation is, its role in the B2B industry, implementation strategies, and advantages, along with a few examples.
What Is Micro-Segmentation?
Micro-segmentation refers to the process of dividing customers or markets into smaller groups. These groups or segments share common characteristics and are usually created based on criteria such as demographics, priorities, needs, and buying preferences.
Similar to macro-segmentation, micro-segmentation starts with the traditionally defined groups that companies create for marketing purposes. However, micro-segmentation goes a step further to identify opportunities for retaining potential and existing customers within those segments. This helps businesses learn more about the products or services customers prefer, their buying history, and how often they purchase from the brand, thus improving customer service, and return on investment.
Typically, groups created under micro-segmentation consist of a handful of customers, helping brands with highly personalized predictive analysis and marketing optimization. As a result, it becomes easier to forecast the effectiveness of sales and marketing strategies on the different micro-segments or customers.
Variables of Micro-Segmentation
The variables of micro-segmentation refer to the different categories by which customers are divided into small groups. This includes segmentation based on demographics, product usage, buying behavior, and situational factors. Let us understand what these variables mean.
#1. Demographic Segmentation
Demographic segmentation involves segmenting your customer base on the basis of demographics such as location, age, gender, job profile, income, and so on. If you are a B2B organization, you can segment your clients based on parameters like industry, company size, and geographical location.
The rationale behind segmenting consumers based on the demographic approach is that customers are naturally inclined to purchase goods and services based on their demographic characteristics. Dividing your customer base on the basis of demographics also enables your marketing teams to create strategies that are catered to the areas you should serve. For instance, if most of your clients reside in New York City, your marketing strategies should be designed to focus on expansion in New York City.
#2. Product Use Segmentation
Product usage segmentation indicates segmenting your customers based on which the products or services used by them and their user or non-user status. For example, if you are a cosmetics brand, you can segment your clientele based on what kind of products they purchase the most, such as skin care products, hair care products, makeup products, and so on.
#3. Buying Behavior Segmentation
Buying or purchasing behavior is another way B2B companies segment their clients. Under this category, segmentation takes place based on the customers’ purchase frequency, whether they prefer monthly or annual plans, or whether they have a centralized or decentralized approach to buying.
#4. Situational Factors Segmentation
Customer segmentation based on situational factors includes segregating your clients on variables such as buying urgency, order size, product use cases, etc. In such cases, the segmentation further divides buyers into smaller groups, owing to the fact that each customer’s situation is unique.
Macro-Segmentation Vs. Micro-Segmentation
Both macro-segmentation and micro-segmentation strategies divide their customers into small groups based on certain characteristics. So, how do they differ?
In terms of B2B marketing, macro-segmentation refers to dividing an organization’s customer base or market into smaller segments. These segments are created based on the company’s organizational characteristics, such as location, industry, and size.
Micro-segmentation, on the other hand, goes one step ahead and classifies the clients based on their purchasing behavior. The classification can be on the basis of demographics which includes age, gender, education level, income, job profile, lifestyle, purchase frequency, product usage, and situational factors.
To summarize, while macro-segmentation focuses on categorizing customers at a broader level – on the basis of their location and company size, micro-segmentation further breaks down these segments into smaller groups according to the buyer’s persona. This helps companies better understand their target audience, helping them define their unique characteristics and design marketing strategies accordingly.
Types Of Customer Micro-Segmentation
The process of micro-segmentation segregates customers on the basis of categories such as behavioral, geographical, demographic, and psychographic. Let us understand each of them in detail.
#1. Behavioral Segmentation
Segmenting your customers based on their buying persona is considered among the most effective classification techniques. Under behavioral segmentation, companies identify and place clients into categories on the basis of their purchase history, buying frequency, which products they buy the most, whether they prefer online or in-store shopping, purchase intent, and so on.
#2. Geographical Segmentation
Under geographical segmentation, customers are divided on the basis of location. This includes categories such as country, state or province, city, district, zip code, and so on. Further, clients are segmented into whether they reside in an urban or rural area, whether it is a cold or tropical place, whether the store is standalone or located in a mall or shopping complex, and so on.
#3. Demographic Segmentation
Here, buyers are classified based on characteristics such as age, gender, religion, education level, employment status, employer name, income, interests and preferences, and so on. In simple words, demographic segmentation focuses more on the socio-economic and personal characteristics of the customers.
#4. Psychographic Segmentation
In psychographic segmentation, consumers are divided into smaller groups on the basis of their personality traits. For example, if you run a fashion brand, your customers can be categorized as individuals into ethnic fashion, athletic wear, Western clothing, and so on.
Now that we have looked at micro-segmentation and its various categories, it is time to learn how to implement a few micro-segmentation strategies.
#1. Create Your Segments
Defining your segments is the first and foremost step toward creating an effective micro-segmentation marketing strategy. To do so, you will need to first collect data on your customer base. The data can come from multiple sources, such as your clients’ social media profiles, customer surveys, web forms, and transaction data.
Once you have collected the data, you should examine it for any trends, patterns, or observations that can help you divide your customer base into smaller groups.
#2. Develop a Persona For Each Segment
Once you have defined the segments, it is time to create a persona for each of them. A customer persona is a hypothetical individual representing a particular segment. To create a customer segment persona, you need to define common characteristics shared by every member of the segment, like demographics, buying behavior, and more. The best approach is to base user personas on proper user research.
#3. Build Targeted Marketing Campaigns
After creating personas for each segment, you need to create marketing campaigns for each of them. These campaigns should be customized to the needs and preferences of every segment and include tactics or techniques that will be used to target each customer in a segment.
#4. Modify and Evaluate
After implementing your micro-segmentation marketing strategies, you should track key metrics to evaluate their performance. This will help you gauge whether your efforts are in the right direction, find areas of improvement and adjust your marketing strategies accordingly.
Micro-Segmentation Marketing Examples
Let’s look at some of the examples of micro-segmentation in marketing that will help you get started.
#1. Pepper Content
Pepper Content is a content marketing platform that delivers businesses the content they need. With a large network of freelance writers and editors, Pepper Content has micro-segmented its content service into various subcategories for further filtering of its prospects or leads. It includes blog translation, email design, website translation, etc.
Furthermore, Pepper has micro-segmented its customer base by offering two different plans for businesses and creators. For B2B firms, they can provide details such as company name and size, followed by their marketing budget, and the type of content they need. Once done, Pepper then provides subscription plans as per your company’s needs.
And for creators, they have further funneled it down to different types of content specialization – text, design, and languages.
Notion is a note-taking software platform intended for companies to share and manage their work more efficiently. Not only does Notion provide different templates for enterprises and individuals but also segments them according to their industry, company size, and job profile.
Hence, you can find templates for startups, non-profits, remote work, and education. Moreover, you can create a customized note-taking template depending on when you are in the design team or engineering department. If you are looking for other options to Notion, several Notion Alternatives are available to meet your specific note-taking needs.
Zomato is an Indian food delivery and restaurant aggregator company founded in 2008. It practices micro-segmentation by providing its customers with deals and offers based on whether they prefer to order online or dine in.
On the basis of their previous orders, Zomato curates a list of restaurants or cafes from where consumers can order food or go and eat. Further, the platform offers recommendations based on the client’s preferred or most-ordered cuisine.
Why Is Micro-Segmentation Important?
Here is why micro-segmentation is crucial for your business.
#1. Provides a Highly Customized Digital Experience
Today, customers don’t want to scroll through a range of choices to get to what they want to buy. If a brand is able to recommend a product that they are going to enjoy, it increases their chance of buying them. Segmenting your audience allows you to run highly customized campaigns based on their persona and other activities.
#2. Increases Efficiency In Email Marketing
Email marketing is one of the oldest and most effective marketing strategies used by organizations. With micro-segmentation, you can increase the probability of email open rates. This is because the emails are curated according to your audience’s preferences and needs, making them relevant to your buying behavior.
#3. Helps Forecast Financial Performance
With many marketing strategies, there is no guarantee of profits. However, micro-segmentation can help you understand or calculate a concrete range of profits or revenue. As a result, you will also be able to predict where you stand in terms of your financial position.
#4. Monitor Movements Within Segments
By creating micro-segments, you can monitor any changes among consumers. These can include changes in buying preferences, frequency of buying, customer expectations, and more. Based on these preference changes, you can further improvise your campaigns for increased ROI.
Micro-Segmentation In B2B
In terms of B2B, micro-segmentation involves breaking down a business’s customer base into smaller sub-groups. These sub-groups share similar characteristics that are specific to individual consumers but may not necessarily represent the company as a whole. These characteristics can include job profiles of your clients, industry, organization size, and geographical location.
One good news is that technology makes it easy to segment your audience and create contact lists. Let’s say a sound virtual phone system will automatically segment your audiences based on predefined criteria. Your sales team can create different group names like virtual phone number providers, and they can start calling their leads without any disruption, increasing their productivity.
Similarly, you can integrate all your business systems and create a centralized database to store all information in a single place. You can then use the same lists to run various campaigns on multiple channels.
Micro-segmenting your audience into smaller groups allows you to better understand your customer’s needs and preferences. This, in turn, allows you to better target your customers more effectively through tactics that are customized to their needs and expectations.
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