What is customer segmentation?
Customer segmentation is the division of the entire database of people who purchased your product or service according to specific common features. Depending on what you offer, other categories will apply. The base can be divided based on e.g.
- Demographics – e.g. age, gender
- The number of purchases made
- Place of residence
- Likelihood of making another purchase
When creating categories according to which we will segment the base, it is worth making sure that they are precise and clear. Their task is to enable you to work more effectively with clients, so it’s good that they are intuitive. Beware of creating groups that are not relevant to your business and separating them will only make you work – instead, focus on a few, most important categories. If you run an electronic equipment service, it may be important for your which devices your customers bring to repair, as well as which age group is the most prospective. Based on this knowledge, you will reach potential customers more effectively and offer an additional offer or promotion to people who have already used your services.
How to segment
There are several methods for customer segmentation. The easiest way to do it is through an interview or analysis of relationship history. The second method is easier to carry out. In practice, it looks like that by analysing the history of customer relationships, you select the right categories relevant to your business. You match new customers to already existing categories, thanks to which segments are created in the whole database. From time to time, it is good to assess whether the selected categories work. It may turn out that they were incorrectly adjusted, and then the key is to quickly change the adopted parameters.
Where to segment
In theory, it can be done even on a piece of paper or in an Excel spreadsheet. However, this is an inefficient solution because it does not allow effective analysis of the collected information. Therefore, the implementation of an appropriate IT system is much more effective. Why?
- To get constant access to current data from any devices
- To quickly and efficiently search the database by any combination of parameters
- To make an effective assessment of the accepted segmentation categories
- To work most intensively with clients with the greatest perspectives
- To more effectively shape marketing activities
A piece of paper or spreadsheet will not allow this. While at the beginning, with a small number of customers, this is not a big problem, while servicing a larger number of them, effective segmentation becomes crucial.
In what IT system to segment customers?
The solution that works best in this role is the CRM (Customer Relationship Management System) system. This class of application allows:
- Creating customer profiles
- Adding key parameters from the point of view of relationships (e.g. number of purchases made, contact attempts, reason for refusing purchase)
- Quick data search based on any criteria
- Effective analysis of actions taken with individual clients or in segments
- Assessment of the accuracy of segmentation
- Building customer base and information
- Access from any mobile device
- Raising the level of customer service
We have a choice of dedicated software and ready systems. Depending on the development of the needs of your company and the number of clients served, you can either commission the system from scratch or purchase a license for the created application. Identifying needs and translating them into system capabilities can be a difficult task, which is why it is worth using the help of an IT consultant in a programming company. For example, what such segmentation in the CRM system may look like is illustrated by the following screenshots:
As you can see, the information collected varies and is tailored to the needs of a particular business. Solutions in this class, however, not only allow saving information, but also exporting it. By setting a specific profile pattern, we can export data in a CSV or PDF file at any time. Thanks to this, it is possible to undertake further segment analysis or report on actions taken.
Dedicated CRM systems, unlike Excel sheets, also allow for multi-level information retrieval. Thanks to this, you can filter the database based on a combination of parameters, e.g. the date of the last purchase, the amount spent and the number of consultations before buying. The system will only show you profiles of people who meet all of the above criteria. It enables precise planning of phone or e-mail for a given day and has a real impact on sales.
Ready or dedicated CRM system?
The answer to this question is ambiguous and depends on the needs of your company and the requirements for the application. If you do not need a very extensive system, but only an application for collecting customer information and segmentation, then this solution may be ready for you. On the other hand, only dedicated software created to order will fully adapt to the needs of your company and the specific processes that take place in it. Identifying your needs is a key step in deciding which system to decide on. If you are not sure how to do it, contact an IT consultant who will guide you through the entire process, helping you choose the optimal solution for you.
Segment customers or not?
Customer segmentation requires time and regularity. The right one, however, translates into your company’s financial results. Why? Because it allows you to reach people interested in your products or services more effectively. Information gives you a competitive advantage. All you must do is use them properly.
Halton Powell – Web Application Development Specialist. In the Orange team, he is responsible for running company blogs, marketing activities and application development. He uses the skills acquired at work in his social initiative. He works remotely, and after hours he practices yoga, reads and walks around Essex.