What Is Customer Segmentation?

Customer is the king is an old adage that stands true for every industry and business type. Every profit-seeking entrepreneur is trying to capture the attention of potential buyers to convert them into loyal customers. Losing customers is bad news for entities trying to increase their revenue. Thus, acquiring and retaining customers are ongoing pursuits for entrepreneurs to sustain their businesses and help them grow.

The process of grabbing the attention of the target audience begins with an understanding of the market. It involves customer segmentation that entails identifying potential buyers and dividing them into categories to develop targeted marketing and sales strategy. Let us help you understand customer segmentation with a detailed description to help customise services.

What is Customer Segmentation?

Customer segmentation is the categorisation of potential buyers into different marketing groups based on their shared attributes, such as gender, age group, income, ethnicity, buying habits, etc. The classification helps in understanding the needs of each segment to offer them a high-value proposition that resonates with them. It makes the business create personalised messages to sell directly to these segments with a planned strategy that grabs eyeballs and develops a connection with the audience.

Customer segmentation is the need of both start-ups and entrepreneurs who have acquired a business for sale in United Kingdom. The categorisation ensures that every customer profile among the target audience is covered. For example, a business selling anti-ageing creams has a vast customer base of women in the age group of 30 to 70. However, the aspirations and preferences of this target audience will differ for every segment Women in their 30s will have high purchasing power and frequently buy, whereas women in their 60s will have low purchasing power and will buy selectively. So, the business owner has to prepare advertising campaigns and customer service guidelines differently for every segment.

Different Customer Segmentation Models

Businesses in the United Kingdom use market research and customer segmentation models to classify the target audience. Here are the most common ones used in consumer markets.

1. Geographic Customer Segmentation

The location of the audience helps to segment them. It is needed by businesses that have high seasonal sales. For example, an apparel brand selling winter and summer wear will use different campaigns for customers living in the snowy and warm parts of the UK.

2. Demographic Customer Segmentation

Demographic segmentation involves classifying customers into various categories based on age, gender, income, ethnicity, education level, interests, marital status, etc. If the business wants to target married men in the high-income bracket, it can use this segmentation to reach its audience and build a strong brand identity.

3. Psychographic Customer Segmentation

Psychographic segmentation is based on the lifestyle of the customers. It includes their likes, dislikes, value systems, social status and leisure pursuits. For example, some people in the target audience will be using mobile phones as social status, while others as a necessity. So, you will cater to customers in different segments with low and high price brackets.

4. Customer Buying Behaviour Segmentation

Buying behaviour determines how customers respond to marketing techniques and advertisements. How frequently do they purchase the product, and what triggers lead to the transaction? It studies their exposure to campaigns across media channels and their impact. For example, if the survey reveals that your target buyers respond to email marketing, you can focus on this initiative to make them purchase again.

5. Value-Based Customer Segmentation

Value-based segmentation is used by businesses when they are desperate to boost profits or want to increase their return on investment. It involves targeted marketing campaigns to only customers loyal to the brand. It ensures that their marketing budget will not go to waste and they will get the desired sales. It can also identify leads that convert quickly without much effort. Thus, businesses focus on them to reduce their expenses and gain more profits.

6. Needs-Based Customer Segmentation

As the name suggests, needs-based segmentation considers the financial, emotional and physical needs of the target audience to reach them. For example, if you sell footwear, you will understand that a college student will need an affordable pair that is also stylish. On the other hand, a working professional will opt for a durable shoe without thinking about the price or appeal. So, you will cater to their needs accordingly.

Benefits of Customer Segmentation

Entrepreneurs who have purchased a business for sale in the United Kingdom or plan to start-up have limited budgets. Customer segmentation helps to maximise their returns through effective targeting of buyers.

• Customer segmentation allows marketers to create appropriate marketing messages that influence potential buyers and increase sales. It ensures that they are targeting the right people through their preferred media channels.
• It increases customer engagement because of the personalised experiences extended to them. They become loyal buyers and help in bringing referrals and spreading word of mouth.
• Improve product features and create offerings that satisfy customers perfectly and help to gain a competitive edge.
• An entrepreneur understands the customers at a deeper level and can empathise with them to price and package the product effectively. It is also beneficial in enhancing customer service and experiences.
• The data collected during the market segmentation helps understand the response of the target audience towards different marketing efforts and competitors’ products.

How do Businesses Segment Customers?

Customer segmentation is done through market research that involves collecting data from various sources. It includes surveys, focus group interviews, industry reports, etc. The information gathered must be analysed with the help of business analysts and professional researchers who use software and tools to get the results. They draw inferences that help make informed decisions and build a winning marketing and sales strategy that assists in expansion and business development. Entrepreneurs who are looking for businesses for sale in the United Kingdom must leverage customer segmentation to enter new markets and move ahead.

Wrapping Up

Businesses do not speak to customers universally. They need to divide them into different categories based on their shared characteristics that meet their expectations efficiently. Thus, entrepreneurs need to pay attention to customer segmentation to stand out from the crowd.