Nexa Lab Blog – Customer segmentation is the process of dividing your customer base into distinct groups. Each group has shared traits, like demographics, purchase history, or how they interact with your brand.
But why bother doing this as a business? The answer is simple.
When you understand your customers better, you can personalise your marketing messages. You can send targeted communication. All of that will ultimately increase your customer engagement and eventually make them buy your products.
Luckily, gone are the days of manually sorting customer data. Nowadays, everything can be done with software. For customer segmentation, you can do it in customer relationship management (CRM) software.
Today, we’ll go over this sales and marketing approach in further detail, as well as how to implement it using CRM software. Let’s get to it!
What is Customer Segmentation?
Customer segmentation is a strategic approach to dividing your customer base into distinct groups based on specific criteria.
These criteria can include demographic information, purchasing behaviour, psychographic characteristics, or any other relevant factors that help you understand and categorise your customers more effectively.
The primary goal of customer segmentation is to identify and group customers with similar needs, preferences, or behaviours, allowing you to tailor your marketing efforts, products, and services to each segment’s unique requirements.
Implementing customer segmentation can help you gain a deeper understanding of your customers and each of their needs. With that, you can create more targeted marketing campaigns, develop products that better meet customer expectations, and provide personalised customer experiences.
As a result, you can improve customer satisfaction, increase customer loyalty, and ultimately drive business growth.
Customer segmentation can be based on various factors, depending on your business goals and the nature of your customer base.
Some common segmentation criteria include age, gender, income level, location, purchase history, customer lifetime value, and engagement with your brand. You can more effectively address each group’s unique needs and preferences by breaking each down into meaningful segments that you can create by analysing these factors.
One of the key benefits of customer segmentation is that it allows you to allocate your resources more efficiently.
Instead of using a one-size-fits-all approach, you can focus your efforts on the most valuable customer segments or those with the highest growth potential. This targeted approach can lead to an improved return on investment (ROI) for your marketing efforts and help you optimize your overall business strategy.
More on Nexalab’s blog: What is Predictive Analytics and How to Do It in CRM Software
CRM Features to Help Customer Segmentation
Customer Relationship Management (CRM) systems offer a wide range of features that can significantly enhance your customer segmentation efforts.
These tools provide you with the necessary capabilities to collect, analyse, and utilise customer data effectively. You can increase marketing efficacy and customer satisfaction by using these CRM features to create more precise and insightful customer segments.
One of the most valuable CRM features for customer segmentation is data collection and centralisation.
CRM systems allow you to gather and store a wide range of customer information in a single, centralised database. This data can include contact details, purchase history, communication preferences, and interactions with your company across various channels.
Another essential CRM feature for customer segmentation is advanced analytics and reporting capabilities.
These tools enable you to analyse your customer data in depth, uncovering insights that may not be immediately apparent. You can use these analytics to identify common characteristics among groups of customers, track customer behaviour over time, and measure the effectiveness of your segmentation strategies.
Many CRM systems also offer customisable dashboards and reports, allowing you to visualise your customer data in a way that best suits your needs.
CRM systems often include segmentation tools that allow you to create and manage customer segments based on various criteria.
These tools typically offer a user-friendly interface where you can define segmentation rules and automatically group customers accordingly. Some advanced CRM platforms even use artificial intelligence and machine learning algorithms to suggest optimal segmentation strategies based on your data.
Integration capabilities are another crucial CRM feature that supports effective customer segmentation.
Many CRM systems can integrate with other business tools, such as marketing automation platforms, e-commerce systems, or even professional service automation (PSA) software.
Integrations allow you to pull in additional data points and create more comprehensive customer profiles, leading to more accurate and nuanced segmentation.
While this integration is not a plug-and-play feature, most CRM software will provide an API to users that allows for custom integration. Connecting CRM with other software using APIs might require coding skills, but you can always depend on experts like Nexalabs.
Working with an integration expert will help you streamline the process and ensure that all systems are properly connected and functioning efficiently.
How to Implement Customer Segmentation with CRM Software
While the steps might be just clicking a button, however, you need a strategic approach when you want to do the customer segmentation using your CRM software. That structured process will help you make sure that your segmentation efforts are effective and aligned with your business goals.
So how do I do that?
Here’s a step-by-step guide to help you implement customer segmentation using your CRM system.
- Define the Segments: Determine the criteria for segmenting your customers. Some examples of segmentation are:
- Behavioural: Purchase history, browsing behavior, and other actions taken by customers.
- Demographic: Age, gender, occupation, education, and income.
- Economic: Spending patterns, loyalty, and satisfaction.
- Industry/Vertical: Industry, job function, and company size.
- Psychographic: Values, attitudes, interests, and lifestyles.
- Collect and Analyse Data: Use your CRM to collect and analyse customer data, including purchase history, browsing behaviour, and other relevant metrics.
- Segment Customers: Use the analysed data to segment your customers into groups based on the defined criteria.
- Create Targeted Marketing Campaigns: Use the segmented customer groups to create targeted marketing campaigns that resonate with each group.
- Monitor and Adjust: Continuously monitor the performance of your marketing campaigns and adjust your segmentation criteria as needed.
Remember that those guidelines are just general practices in doing the segmentation process. Each CRM software offering has its own flow and unique features that may require different approaches to customer segmentation.
Some of the CRM software that has those features you can consider are Pipeline CRM, Zendesk, and HubSpot.
Pipeline CRM offers a comprehensive customer segmentation guide and use cases to help sales teams segment their customer base.
Zendesk provides a customer segmentation tool that integrates with its CRM platform, allowing for the creation of custom organisational fields and the monitoring of key performance indicators (KPIs).
HubSpot offers a CRM system that allows for segmentation based on demographics, behaviour, and other criteria, and provides tools for creating targeted marketing campaigns.
More on Nexalab’s blog: What Is Customer Insights and How to Gather That With CRM Software
Conclusion
Customer segmentation is a powerful strategy that can significantly enhance your business performance and customer relationships. You can use the CRM feature to implement effective customer segmentation. With that, you can understand your customers better, tailor your offerings to their needs, and ultimately drive business growth.
Investing in CRM software is a smart move for any business looking to improve sales, marketing, and customer service. But to get the most out of your CRM, it needs to work with your other tools.
Nexalab’s App Integration Services can help you connect your CRM with other essential platforms, like PSA software, for example. This means you get a complete view of your customer data, automate repetitive tasks, and personalise your customer interactions. It’s a solution that helps you get the most out of your CRM investment. Contact Nexalab today to explore how App Fusion can drive your business forward.
