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Top 4 challenges faced in Customer Segmentation

Customers and marketers cherish having a stable, fruitful relationship with each other. Quite often, customer segmentation acts as the bridge between the desired target group and the marketing activities intended for them. Yet, there have been countless examples of targeted marketing activities failing to provide the desired results.

Many times, a large database does not produce expected results because your team may fail to realize the key drivers that make customers alter their buying decisions. It is important for this reason to have the right segmentation strategy and ensure targeting with the right message, customized for different audiences.

Here are 4 most common challenges faced during customer segmentation, and talk about ways to overcome them.

1st Challenge: Why are you segmenting?

A root cause analysis will help you identify different drivers. Some of these include,

  • Marketing budgets shaped to generate higher revenues which shifts target audiences

  • Certain customer segments showing more willingness to buy a product

  • Increasing quantity of long-term customers by focusing on customer satisfaction

Each reason concurred will lead to different segments that will help your team to say, “let’s send group A offer 1 and group B offer 3”. These filters and variables can be divided into four broader groups that are well know to marketers; demographic, geographic, behavioral and psychographic. Lets further discuss these groups with an example.

Suppose you are looking to target male young adults, within the GTA area, who are part of the working economy and are passionate about sports, let’s say a particular sport like basketball and seem to indicate from their purchase history that they buy team sports memorabilia. Then the age, gender and socioeconomic status mentioned becomes the demographic segmentation. The location GTA is the geographic segmentation, while the purchase history is a form of behavioral segmentation as they look to purchase premium products. Lastly, their love for basketball can be used as a psychographic segmentation that indicates their lifestyle preferences and personality.

2nd Challenge: Segmentation using marketing channels

Its important to identify which channels can be used for marketing, cross-selling and up-selling activities. While you may have put in a lot of effort in identifying the right audience, it is important to let the audience guide you to their preferred marketing channel. Age becomes an important factor to consider for your segments as much too often, every generation shifts its preferred marketing or social channel. Also, do not reach out to customers with marketing materials if they are already expecting some information from your company. It does not always favor to sell at each seemingly viable opportunity. Find a time and place for the right message, and use the right channel.

3rd Challenge: One-time customers

Organizations often come up with their views on who’s a one-time buyer. For example, someone who does not exist in your database places an order, at the same time another customer places an order after 2 years. Now for many, they may both qualify as one-time customers, and this may not be the best approach. Every little differentiating factor may have a larger, deeper rooted factor involved. Therefore, you should treat these customers with two different approaches.

4th Challenge: Maintaining your segments

Segments represent actual customers, who with time, grow, evolve and change buying patterns. Even seasons can have visible impacts on segments, hence it’s important to have frequent updates and periodic checks on your segments. Analyzing segments, its growth or churn will provide insights on how people are reacting to your products. Looking at the need to review segments over a period of time will indicate performance capabilities and help shape your future campaigns.

Databases can lead down a path of unique challenges, and we just discussed some of the most obvious but vital ones. One of the best ways of customer segmentation is through the Marketing Cloud and Einstein Analytics.

Winobell is an experienced player in helping out companies on Customer Segmentation leading to high jump in their ROIs. Reach us out to improve you ROIs significantly with Customer Segmentation.

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