Segmentation and Targeting for Customer Retention and Loyalty

Customer segmentation

Market segmentation is a natural result of the differences among people.”
Donald A Norman

Every customer has different motivations, needs, and desires. Treating every customer as a separate individual and marketing your loyalty program which aligns with their interest will strengthen their loyalty. However, it is practically not feasible to design a target loyalty program for each and every customer. The customers can be segmented as per their similar interests. The marketing message can be optimized for every segment of the audience which resonates with various groups.

For any business that wants to build deeper relationships with its customers, delivering the right marketing message is very important. Segmentation is about knowing what works best for a particular group of audience and keep experimenting with the marketing message. It is also possible that one marketing message may work brilliantly in one segment while getting lukewarm results in another. 

Let us dig deeper into why customer loyalty segmentation will be a key factor in retaining customers and growing your business.

Importance of Customer Segmentation for Loyalty

The grouping of customers on the basis of similar traits and common interests shared is known as customer segmentation. The segmentation helps to differentiate between different groups of customers to get the best returns for your business. There are many different methods to segregate and group customers depending on various data points including demographics based on gender, age, ethnicity, income, religion, nationality, and so on. The spending history and buying habits can also be an important factor in deciding customer segmentation.

As mentioned earlier, segmentation allows you to target the marketing messaging with accuracy and has greater chances of conversion. Also, customer service is handled in a more mature fashion as there is data available for the group. It enables you to interact with your customers with more freedom as you are much more informed about them. Segmentation is the answer to the ‘one-size-fits-all’ approach which can be very broad and generic, though not very deep. Instead, the approach should be ‘every shoe fits none.’

The brand loyalty segmentation programs can create customer loyalty far beyond transactional motivations, which is sustainable for the long term.

Using Customer Segmentation to Optimize Marketing

Customers today are bombarded with a plethora of marketing messages anywhere they go. Therefore, it is very challenging for a brand to cut through all the clutter and stick its marketing message in the minds of customers. About 70% of people say that they are not interested in marketing emails that flood their inboxes. However, email communication is still very effective if the message reaches the right inbox. Segmentation of customers helps you avoid being looked at as a spammer. A good brand knows its target customer well. Even if the customer doesn’t convert at that point, the message would offer value to the customer by enriching their knowledge about the brand.

With effective customer segmentation, you get better returns out of your marketing dollars spent. When you have a large section of the audience, segmenting the customers helps you to target a particular group that is more likely to convert. A good loyalty segmentation example is targeting through Facebook advertisements. When placing an ad on Facebook, there are options to segment your target audience depending on several factors including age, gender, location, interests, likes, and also browsing behavior. The ads are visible to customers with a dynamic algorithm that offers the best possible conversion. Once you have mastered customer segmentation, you can create personalized messages for each target group which resonates with the customer on a deeper level.

Just one message does not resonate with all your customers. If you have to say the same message for everyone without targeting, it is likely to fizzle out without making much impact. Create different headlines, messages, and marketing copies for different sets of groups. Use different messages with the AB testing, and keep collecting the data for every experiment performed. After several rounds of testing through different segments of audiences, you will find the right message to target for the right group. Once you find the right combination, invest your marketing dollars to scale it up exponentially. Most of the marketing is about finding the right segment of the audience and targeting them with the right message. This helps you identify your repeat customers. By providing relevant content to your right segment, you strengthen the brand connect and enhance loyalty.

How is Customer Segmentation and Loyalty Related?

Loyalty is interlinked with customer segmentation. The reward programs designed by loyalty companies are thoroughly researched after ‘segmenting’ your customers. In fact, the basic tenet of loyalty is the exclusivity that is offered to the most loyal customers. Again, customer segmentation is used to differentiate a group of select customers from others. Loyalty can be measured tangibly through Customer Lifetime Value and its consequent reward programs. However, loyalty is more than a business deal.

Intangibly, loyalty can be defined as a feeling of belonging to the brand. Loyalty can be earned through personalized messaging, which makes them feel the brand cares about them. It wishes them on their birthdays, congratulates them on their special days, and remembers their milestone moments. This is only possible through customer segmentation. The message sent is “for them” and not meaningless spam which is of no use to them. Designing a customer loyalty program by segmentation hits the right spot which helps boost customer loyalty.

Forming Clusters Using Modern Technologies

The clusters of customers can be formed by navigating through swathes of customer data. Based on customer segmentation, modern techniques such as Big Data and Machine Learning are used to design loyalty reward strategies. Marketing campaigns can be run targeting every customer as per their common interest. For example, an apparel brand has launched a line of Superman T-Shirts for young males. Based on data, the segmentation that may work best:

Gender: Male

Age: 18-25

Education: College

Interests: DC universe merchandise

Browsing history: Shops frequently

The segmentation can even be deeper and narrower with more customer data. However, a marketing message can be tailored in such a way that appeals to the demographics. This way your messages will have greater resonance with the group and eventually better impact.

Major Takeaways in Segmentation and Targeting:

  • Increased rates of customer retention
  • Builds a distinct brand identity
  • Improves efficiency of the marketing message
  • Provides a competitive edge
  • Facilitates relationships with customers
  • Better distribution through different channels

Designing a Loyalty Program through Segmentation

The segmentation strategy allows you to identify the pulse of your customer which helps you to optimize your marketing communication better. It also offers you crucial business insights that can assist you in building better models for customer retention and loyalty. If you exactly know what your customer wants, you can offer products and services that would be hard to resist by your customers. Any signs of churn can help you identify the pain points and strategically design solutions to troubleshoot those problems.

If you are looking to put a customer segmentation strategy in place and design a loyalty program? Annex Cloud helps you refine your marketing strategy by segmenting customer groups to bring more business. Connect with our loyalty experts.

 
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