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When you plan to buy a cell phone you consider a lot of factors – Is the mobile within my budget? Would the battery last longer? How is the camera? Does it come in other colors? Is it Bluetooth enabled? While your focus is on the mobile phone, marketers apply the same focus on customers.
Micro-segmentation is a marketer’s way of clubbing customers who share similar characteristics and behavior into the same micro-segment. A single male in his 30’s who is interested in the latest tech and often buys gadgets online– is a customer who belongs to a niche.
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Let’s first address segmentation. Customer segmentation refers to the subdivision of the customers into distinct groups based on shared characteristics. Companies use their knowledge about these segmented groups to personalize their offerings and boost revenue.
Micro-segmentation involves refining the broad categories into smaller and more niche-based groups. As Craig Teich, from Connexity, Inc. explains, micro-segmentation is the process of layering numerous data points to identify and cluster individuals in a granular level.
Customer segmentation in practice includes four categories in general – Geography, Demographic, Psychographic, and Behavioral. When you further segment each group you are micro-segmenting the market.
Micro-segmentation involves combining different attributes from the four categories mentioned above to build a more targeted buyer persona. For example, a female between the age of 25 and 35 who likes to travel and makes seasonal-purchase at a sports store. Such will be the micro-segment targeted by a shop selling sporting items.
Micro-segmentation helps a brand deliver a more personalized and better digital experience. Identifying customers at a niche level helps marketers get a clear picture of their needs, values, intent, behavior, and many more variables that impact their purchase decision. You can use cross-channel insights and data from all sources (internal and external) to refine and restructure your audience. This enables you to offer a highly personalized experience.
Micro-segmentation also helps marketers to monitor and observe how customers shift among the segments. For example, you can see a man changing his shopping behavior from when he is a bachelor to married. The man shifts from being a luxury spender to buying goods for the family.
Tracking micro-segmentation can also help you to optimize your marketing efforts. It can help you identify a customer’s lifetime value, predicting the profit the customer may generate for your brand in the future. You can determine the highly profitable customer segment of your business. This will enable you to create targeted marketing efforts to increase revenue from those customers.
According to Infosys, 78% of customers claim that they are more likely to purchase from a company that provides them with more targeted offers.
By micro-segmenting customers based on personal and behavioral data, marketers can strategize specific marketing efforts to maximize their effectiveness on customers. You can recommend products that resonate with a small, targeted group of customers specifically. With detailed information on your prospects and existing customers, you will learn what kind of content will have more impact on them.
There is a 26% increase in open rates for email campaigns that are personalized to the customers.
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The basic concept of micro-segmenting the market is to start from the broad categories of segmentations, and then narrow it down from thereon. It is done using a combination of technology like algorithms, data mining, and AI.
To create a more targeted persona of your customers these technologies assist to monitor and evaluate their shopping behavior, pattern in the purchase, returns, abandoned carts, re-purchase, and more.
For example, you own an e-commerce site and want to promote new anime-character-themed sneakers. You will begin by making a list of customers who have purchased from similar product categories (anime) before from your website. Then you will segment the customers based on age, say, 20 to 30. Then you will further narrow down your list into people who have recently searched for character-themed shoes in the past 4 to 6 months.
In the end, you will have a small list of customers who qualify for your micro-segment. This way you can target them with personalized content.
We have mentioned some more ways you can segment your customers for effective and targeted marketing efforts.
Social media is where most people are. And, almost every social media platform allows you to divide your network into separate groups. From Google+ circles to Twitter, Facebook, even Instagram lets you create a list of close friends.
As a brand, you can use social media segmentation to define people based on demographics and lifestyle as they share on their accounts. You can monitor patterns in how and what they post to narrow them down into niche segments. This way you will understand what type of customers you are observing. As a result, you can develop more targeted marketing messages that reflect the differences in the customer’s personality and thus increase the relevancy of the message.
As you begin to gather data on your audience you will see a pattern based on an attribute that is value. Creating marketing efforts that target the value which the customer demonstrates can increase the effectiveness and impact of the effort.
For example, weather although is a geographic segmentation is also a value-based micro-segmentation. A brand that sells clothing or essential items for specific weather can adjust it’s messaging based on the location and its season.
Not all your subscribers will engage equally with your emails. While some will open and click on every single link you send on your message, others won’t open your emails even after months.
You can target your audience better when you look into the engagement pattern of individual subscribers. You can create a message that is relevant to a specific type of subscriber.
For example, if you send a newsletter every month you can identify who opens your email and goes through each of the content. You can use this knowledge to specifically target them for upsell or product recommendations. Or, you can send emails that target those who don’t open or click on your email or content with incentives and offers to lure them to engage with your content.
Here are some additional tips to ease the process of micro-segmentation of your market.
Micro-segmentation is a simple and direct way to show your customers you care about their preferences and you know them as a friend. It allows for hyper-personalized and targeted marketing campaigns and increases conversion as well. Customers only care for those experiences which are relevant and add value to their lives.
Micro-segmentation allows brands to create an experience that resonates with their customers by increasing the use of relevant data.