How do you use segmentation to identify and target your most profitable customers?

I agree but segmentation isn’t about customers being equal. It’s about identifying groups of customers who are more likely to need or want your products. In addition to having different needs, goals, and challenges, they also may have different motivations for using your product. For example, if you are selling a plant-based meat product, some customers may be motivated to purchase your product for environmental reasons; whereas, others may purchase your product for health reasons. How you would market to each group would need to align with the motivation behind the purchase. One customer group would be motivated by marketing messaging emphasizing health benefits, while the other would be more motivated by environmental benefits.

Segmentation is an effective strategy for identifying and targeting your most profitable customers. Here's a step-by-step guide on how to use segmentation successfully: 1. Establish Segmentation Criteria: Begin by determining the criteria that will be used to segment your customer base. This can include demographic factors (age, gender, location), psychographic factors (lifestyle, interests, values), behavioral factors (purchase history, frequency, loyalty). 2. Collect and Analyze Data 3. Develop Customer Segments: Utilizing the segmentation criteria and data analysis, group your customers into distinct segments. 4. Assess Profitability: Evaluate the profitability of each customer segment by analyzing metrics

Segmentation allows you to identify gaps in the category and customer needs that you can fulfil based on the company constraints you are working with. Once these filters are put in you arrive at the product or USP, price, customer and communication for your offering targeting the most profitable or revenue-generating customers.

Imagine a big box of colorful building blocks. 🌈 Each block is different, right? Now, think of customers like those building blocks! 🧱 Segmentation is like sorting blocks into groups based on colors, sizes, and shapes. 🧩 Just like some friends like certain toys, some customers have similar needs. Businesses use segmentation to understand what different customers like and need. By doing this, they can offer the right things to the right people, making everyone happy! 🎁👍 Segmentation helps businesses make sure everyone gets what they want and need, just like sharing toys with friends!

To segment your customers, you can use different methods based on available data and your goals. 🎯 Demographic segmentation: This groups customers based on basic attributes like age, gender, or location. 🧑👩🏽🌍 Psychographic segmentation: Here, psychological factors such as values or interests are used to group customers. 💭💖 Behavioral segmentation: This looks at observable actions like loyalty status or response to marketing campaigns. 🛒📈 Needs-based segmentation: Customers are grouped based on their problems or desires. 🤔💭 You can use these methods alone or combine them for more precise segments. But remember to consider data quality and your marketing goals. 📊🤝

Segmentation is an extremely broad term and has applications in almost all domains. If the domain is known, factors can be identified. Broadly, it could be data (primary or secondary) driven or PMR driven or both.

Attitudinal segmentation is the most common method as it uses surveys to collect information on how and why people use a product. Behavioral segmentation can also include purchase data (e.g., how often they purchase, where, quantity, if they purchase primarily on promotion, etc.). The most effective way to segment customer is to include data points across these different methods so that customer groups can be differentiated across as many variables (demographics, attitudes, behaviors, usage, motivations for purchase, psychographics, lifestyle, etc.) as possible.

In addition to identifying your most valuable customers today, you can also identify emerging or aspirational customer groups who may be more valuable in the future. For example, the majority of your current customers may fall into one customer segment; however, you may have a smaller emerging consumer segment who is more valuable or profitable to pursue as they spend more on your products, are more motivated to purchase, younger/emerging consumer generation group, etc. Ideally, generating a strategy that continues to attract and retain your most valuable customers today, as well as attracts an aspirational emerging customer group will be most beneficial for your business.

Calculate Customer Lifetime Value (CLV): This is the total net profit you expect from a customer over their entire relationship with your business. 📈💰 Consider Key Metrics: Take into account acquisition cost, retention rate, and average revenue for each segment. 💸🔄 Use the CLV Formula: CLV = Average revenue × Retention rate / (1 - Retention rate) - Acquisition cost. 📊📝 Rank Segments: Rank segments by their CLV to see which are most valuable. 🥇🥈🥉 Focus on High-Value Segments: Pay special attention to segments with the highest CLV, as they are the most profitable for your business. 💼💰 By identifying your most profitable customers, you can tailor your marketing efforts and provide better service to maximize your returns.

I agree but need to add that personas are subsets of each segment. In other words, you want to pick a particular segment to focus your marketing efforts on, and then within that customer segment, you have different buyer personas. Your personas within your target customer segment could be based on what motivates them to purchase, lifestyle, age group, etc. For example, if you have a product that offers health benefits you may have a customer segment who strongly values health and wellness. One persona buyer group within this segment may have a proactive health orientation and consume health products to maintain a healthy body; whereas another buyer group may have a reactive health orientation and consume health products for health issues.