The Importance of Data Segmentation


Having a solid segmentation strategy is key for differentiating your company from your competitors. Data segmentation gives companies the ability to identify high-opportunity groups within their customer database and can help you better communicate the benefits of your products and services to targeted groups.

Through segmentation you can identify how each segment is likely to react to an offer, a price, a promotion or product enhancement. Segmentation is about dividing your customer database based on characteristics such as demographic, geographic, lifestyle, life-stage, or behavioral/attitudinal.

Segmenting your database doesn’t mean that you target one segment and exclude the others from marketing communications. It helps determine the appropriate channels for sending offers to your targeted groups. With this knowledge you can develop a strategy that gets the best possible response from each segment and communicate your message using the appropriate marketing channel. Here are a few key benefits of data segmentation:

Better Communication
Segmenting your customer database helps to better target and focus marketing messages, offers and activities so they are more relevant. The more relevant your marketing message is then the likelihood it will resonate and generate a response increases.

Improve Resource Management
Segmentation allows for the effective allocation of marketing resources and the maximization of cross- and up-selling opportunities. When a customer is sent personalized messages that are designed around their needs, it’s easier for companies to send those customers special offers meant to encourage them to buy more products.

Increase Profitability
You can segment your customers into high, moderate, fair, and poor profitability. A marketing strategy can be developed that fits the needs of these targeted groups. For example, those highly profitable customers may be moved to the top of the phone queue for your sales team.

Customers can be segmented in an infinite number of ways. Here are a few suggestions on how to create segments of your consumer data:

• Base segments on location such as continents, countries, states, metropolitan statistical area, zip codes, or radius distance.
• Base other segments on age, income, ethnicity, gender, family size and type of family, such as married without kids, married with kids, empty nesters and retirees.
• Additional segments can consist of people or companies that have a similar level of interest in a comparable set of benefits.

In summary, segmentation ensures that marketing effectiveness is optimized and allows for a targeted sales drive. If done right your segments can feed into marketing campaigns that cater to your customers’ needs in an effective manner. If you target the proper segment you’ll achieve better customer engagement and higher profitability.

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