Customer Segmentation Models: 5 Best Ideas for Your Campaign

Customer segmentation allows you to send emails that will hit exactly the target. In this article, you’ll learn about the top 5 customer segmentation models that will help you make the most of communication with clients. 

Customer Segmentation And Why You Need It

What is Customer Segmentation?

Customer segmentation is the process of dividing the clients into categories according to certain characteristics, e.g. amount of purchases, geographical location, preferences, and so on.

Customer segmentation makes your work with a customer database effective and convenient. For example, you can offer special services to clients with kids or make discounts based on clients’ budgets. In other words, the more we know about the clients and their behavior, the more effective our communication is. 

Customer segmentation allows you to save money spent on marketing campaigns: personalized offers for various segments have a greater effect than general promotional emails for all customers.

6 Perks of Using Customer Segmentation

• Personalization. With customer segmentation, we can react to the client’s actions in the right way. We make relevant offers for each segment and send them to the customers in the right channel at the right time.  
• Prediction. Using the available data, we predict future purchases and learn how to stir up the client’s interest to increase sales.
• Resource saving. We think through the marketing campaign taking into account our abilities. Thus, we don’t waste money on the non-target audience. 
• Effectiveness. It’s much easier to evaluate the effectiveness of separate segments and adjust the campaigns if needed.
• Quality audience. We weed out those who are not interested in our brand and create our own community with high customer loyalty.
• Performance. Market segmentation analysis allows us to evaluate business performance in general. We see whether customer loyalty and the number of purchases increases or not, which segments grow in the quantitative ratio: “positive” or “negative” ones. Thus, we understand whether we achieved the goals or we should change the strategy.

What is a Customer Segmentation Model?

Customer segmentation can be done using various data that suits the needs of a marketing campaign. A customer segmentation model is a specific way of segmenting the audience using certain characteristics.

You can find numerous customer segmentation models, still, we’ve gathered the 5 best models that are both effective and easy to use. Choose any model you like, and if you want to get even more detailed results, think about conducting customer cohort analysis as well. 

The Top 5 Customer Segmentation Models

Types of Activity Segmentation Model

Segmentation according to the types of activity is based on the frequency of customers’ interactions with the brand. Active subscribers often read emails, click links, and buy products. Inactive ones either don’t show interest in your emails and ads or do it once in a blue moon.

The brand keeps interacting with active subscribers: prepares sales and special offers, sends emails, sets up advertising, and so on. The company also tries to reactivate inactive subscribers: sends emails, sets up retargeting, makes special offers, and gives discounts. If reactivation doesn’t help, the company deletes dead email subscribers from the database.

Ben Hunt’s Awareness Ladder

Ben Hunt’s customer segmentation model helps the company understand what stage their customer is at and how to interact with the client. If a person is at the first step, the company creates strategies that bring them to the last one and turn them into a customer.

Ben Hunt’s awareness ladder consists of 6 steps. It displays the development of relations between the brand and the client.

1. The first step. A client doesn’t understand why they should buy from a company. At this step, there’s no use to offer products because the client should feel the need first. To give the client a nudge in the right direction, the company uses advertisements and creates useful content. 
2. The second step. The client realizes their need for some product but doesn’t know how to satisfy it. The company offers a solution: makes checklists, posts courses on YouTube, and launches educational marathons. 
3. The third step. The client finds the solution and searches for the best option: surfs the internet, compares different options, and analyzes reviews and the content.
4. The fourth step. The client is ready to choose the product. At this step, the company shows what advantages the customer will get if they buy from this brand.
5. The fifth step. The client has chosen the product and now searches for a suitable offer. The company keeps motivating the customer to make them stay: offers discounts and gives some other perks.

RFM Analysis Customer Segmentation Model

RFM analysis segments the audience according to the three parameters describing customer activity:

• Recency — the time since the last purchase;
• Frequency — purchase frequency;
• Monetary — the sum of all the purchases for a certain period.

As a result, the company gets customer segments that interact with the brand with different frequencies and then works out separate strategies for communicating with these segments.

RFM analysis singles out the following segments:

1. VIP. Such customers buy your products regularly and their last purchase was made not long ago. VIP clients require favorable conditions for cooperation: private clubs and events, discounts, award systems, and cashback. 
2. Newbies. They’ve recently made one or two purchases. The company continues to introduce newbies to the brand, the variety of products, the loyalty program, the guarantees, and so on.
3. Developing. They’ve made several purchases and the last one was made not long ago. The company can offer them to join the loyalty program and show some related products to make them purchase again.
4. Loyal. Loyal customers buy lots of goods and their last purchase was made not long ago. The brand should make customers stay in this segment: conduct surveys to improve its work, maintain their interest in the company via the content, and show new products. 
5. Sleeping. They made a purchase not long ago but don’t return to buy more goods. The company tells the sleeping customers about the advantages of the brand, gives personal discounts, and motivates them to buy. 
6. Lost Loyal. They made lots of purchases but quite a while ago. To return their interest, the company sends them info about sales, special offers, and other perks.
7. Lost. Such customers bought from the company long ago. The lost customers can be returned using sales and special offers.
8. Hesitant. Customers from this segment made several purchases and were about to make another one but changed their minds. To gain their trust, the company makes special offers.

Kotler’s Customer Segmentation Model

Philip Kotler suggested dividing clients into segments based on various characteristics: geographic, demographic, psychographic, and behavioral.

The company segments its clients according to all or some of the characteristics. After that, it sets up promotional offers and email sequences, creates content, and chooses channels of communication.

Behavioral Customer Segmentation Model

Behavioral signs are quite helpful in getting additional characteristics of the target audience. For example, we can simultaneously capture leads and segment potential customers. Thus, we can change the styles of communication from one segment to another. We save time and money and segment those people who will bring the highest profit. 

Behavioral signs we use depend on our goal. The most popular ones are:

• place and frequency of purchases,
• frequency of consumption of goods,
• clients opinion on the products’ benefits (service, quality, speed, etc.),
• attitude to the product and customers’ expectations,
• reasons for purchasing,
• level of engagement.

Don’t limit yourself to these parameters: adjust them to your needs or add your own behavioral signs of market segmentation.

Some examples of behavioral segmentation are:

Customer experience

You can analyze the time when the customer purchases a product, how long it takes to decide, and what motivates them to buy. Using these details, you can organize your further communication with the clients. 

For example, the client entered their email on the website, they don’t know a lot about your brand but they got attracted by the lead magnet. What’s next? Send them a welcome email sequence and offer some perks for their first purchase. 

Don’t count the clients out if they add some products to their carts but abandon them. Use an additional way of motivating the customers: remind them of the abandoned carts, offer time-limited discounts, and so on.

Newsworthy events

When segmenting the audience, we can take into account holidays, sales like Cyber Monday or Black Friday, clients’ or brands’ birthdays, and so on. For example, a clothes shop can send their subscribers a list of items they could give their partners as gifts on Saint Valentine’s Day. 

Hawthorne send beautiful emails with gift ideas for Mother’s Day:

Summing up

1. Customer segmentation is a process of dividing clients into groups based on certain characteristics. They require different approaches to interaction. It influences sales, customers’ loyalty to the brand, and engagement.
2. Thanks to more targeted communication, customer segmentation helps to save resources. 
3. A customer segmentation model is a certain set of characteristics you can use to divide the clients into groups.
4. Customer segmentation is not a one-time process. You should keep abreast of any changes to make the best of customer communication and adjust the customer segmentation model if necessary. 
5. There are lots of characteristics you can use for segmentation. Don’t limit yourself to the basic ones, and choose customer segmentation models that better suit the needs of your campaign. 

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