Definition of Customer Segmentation

February 13, 2008 at 3:12 am 4 comments

Q: I hear a lot about customer segmentation. Can you please let me know what the term means and what it means to me as a direct marketer?

A: Ah, one of our favorite topics! Segmentation simply refers to the practice of isolating different groups of customer groups within your total customer list. Once the distinct customer segments are identified, you then have the ability to market to those groups with the message/offer/tone that best resonates with the niche group. Done right, this practice will increase response and boost overall results.

We all perform segmentation intuitively in our day-to-day lives. Imagine the conversations you have with your grandmother and think about how they very different in tone, context, topic, etc. than those you have with your friends. Well, segmentation works on the same premise. Customizing your conversation increases the effectiveness of your communication.

If you have segmented your customer group and separated your overall customers into distinct niches, you now have the opportunity to develop offer and pricing strategies for each group. You can vary your creative (i.e.: use photos or language that resonate with the segment). If done well, you should see increased performance. Remember to always use a control group to test the effectiveness of your segmentation and the new treatment (offer, price, creative).

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Entry filed under: Analytical Services, Uncategorized.

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4 Comments Add your own

  • […] 5, 2008 Q: I hear a lot about customer segmentation, but I’m not exactly sure how I could implement segmentation in my own marketing efforts. Can […]

    Reply
  • 2. Amir  |  May 6, 2008 at 3:58 am

    But, what is the different between customer segmentation and customer tagging?

    Reply
  • 3. Amir  |  May 6, 2008 at 4:00 am

    But, what is the different between customer segmentation and customer tagging? And how to tag customer where there are a lot of profile matrix to be considered?

    Reply
  • 4. Suzanne Obermire  |  May 6, 2008 at 2:52 pm

    Amir, nice to see you here 🙂
    I believe that you are using the term ‘customer tagging’ to mean the ability to uniquely identify a visitor to your site (usually accomplished through a log-in process, a customer ID or an Order ID). This type of customer identification is typically used in the online world to track offline behavior.

    The difference between customer tagging and customer segmentation is that in the segmentation process, we are looking for groups of customers that exhibit similar behaviors–groups within your overall customer base that share unique characteristics. When you’ve found these segments, you can now market to them with a slightly different message.

    Customer tagging is the process of understanding exactly which customer is performing exactly which transactions with you. Where are they visiting, what are they buying, on an individual level.

    Hopefully this answers your question, but keep ’em coming!
    Suzanne

    Reply

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