Segmentation helps brands divide their customer base into various categories and target them effectively. However, it has been observed that businesses often need help in defining segments in terms of industries such as finance, healthcare, technology, etc. To boost sales, businesses need to adopt a more granular approach to market segmentation, known as micro-segmentation.
In this article, we will learn what microsegmentation is, its role in the B2B industry, implementation strategies and advantages, along with some examples.
What is microsegmentation?
Microsegmentation refers to the process of dividing customers or markets into smaller groups mobile number list . These groups or segments share common characteristics and are typically created based on criteria such as demographics, priorities, needs, and purchasing preferences.
Similar to macro-segmentation, micro-segmentation starts with the traditionally defined groups that companies create for marketing purposes. However, micro-segmentation goes a step further to identify opportunities to retain potential and existing customers within those segments. This helps companies learn more about the products or services customers prefer, their purchasing history, and how often they buy from the brand, therefore improving customer service , and return on investment. Understanding target customers in this way can also help companies expand into physical locations where their customers are likely to live. For example, if through micro-segmentation a brand discovers that its products are most popular among young, highly educated women, decision-makers can prioritize expansion into areas with high populations of women working in STEM fields to capitalize on existing markets.
Typically, groups created through microsegmentation consist of a handful of customers, which helps brands with highly personalized predictive analytics and marketing optimization. As a result, it becomes easier to forecast the effectiveness of sales and marketing strategies across different microsegments or customers.
Microsegmentation variables
Microsegmentation variables refer to the different categories by which customers are divided into small groups. This includes segmentation based on demographics, product usage, purchasing behavior, and situational factors. Let’s understand what these variables mean.
#1. Demographic segmentation
Demographic segmentation involves segmenting your customer base based on demographics such as location, age, gender, job profile, income, etc. If you are a B2B organization, you can segment your customers based on parameters such as industry, company size, and geographic location.
The reason behind segmenting consumers based on demographics is that customers are naturally inclined to purchase goods and services based on their demographic characteristics. Dividing your customer base based on demographics also allows your marketing teams to create strategies that are tailored to the areas you need to serve. For example, if most of your customers reside in New York City, your marketing strategies should be designed to focus on expansion in New York City.
#2. Product usage segmentation
Product usage segmentation refers to segmenting your customers based on the products or services they use and their user or non-user status. For example, if you are a cosmetics brand, you can segment your clientele based on the type of products they purchase the most, such as skin care products, hair care products, makeup products, etc.
You can also segment your customers based on whether they are active or inactive customers. Accordingly, you can create and send marketing content to active customers and leads, or inactive customers.
#3. Segmentation of purchasing behavior
Purchasing or buying behavior is another way B2B companies segment their customers. In this category, segmentation is done based on customers’ purchasing frequency, whether they prefer monthly or annual plans, or whether they have a centralized or decentralized purchasing approach.
#4. Segmentation of situational factors
Customer segmentation based on situational factors includes segregating your customers based on variables such as urgency of purchase, order size, product use cases, etc. In such cases, segmentation further divides buyers into smaller groups, due to the fact that each customer’s situation is unique.
Macrosegmentation vs. Microsegmentation
Both macro-segmentation and micro-segmentation strategies divide your customers into small groups based on certain characteristics. So, what's the difference?
In B2B marketing terms, macrosegmentation refers to dividing an organization’s customer base or market into smaller segments. These segments are created based on the company’s organizational characteristics, such as location, industry, and size.
Microsegmentation, on the other hand, goes a step further and classifies customers based on their purchasing behavior. Classification can be done on the basis of demographic data including age, gender, education level, income, job profile, lifestyle, purchase frequency, product usage, and situational factors.
In short, while macro-segmentation focuses on categorizing customers at a broader level (based on their location and company size), micro-segmentation further breaks down these segments into smaller groups based on buyer personas. This helps businesses better understand their target audience, helping them define their unique characteristics and design marketing strategies accordingly.
Types of customer microsegmentation
The micro-segmentation process segregates customers based on categories such as behavioral, geographic, demographic, and psychographic. Let us understand each of them in detail.
#1. Behavioral segmentation
Segmenting your customers based on their buyer persona is considered one of the most effective classification techniques. Under behavioral segmentation, businesses identify and place customers into categories based on their purchase history, purchase frequency, what products they buy the most, whether they prefer to shop online or in-store, purchase intent, etc.
#2. Geographic Segmentation
In geographic segmentation, customers are divided based on their location. This includes categories such as country, state or province, city, district, postal code, etc. Customers are further segmented based on whether they reside in an urban or rural area, whether it is a cold or tropical location, whether the store is freestanding or located in a mall or shopping complex, etc.
#3. Demographic segmentation
Here, buyers are categorized based on characteristics such as age, gender, religion, educational level, employment status, employer name, income, interests and preferences, etc. In simple words, demographic segmentation focuses more on the socio-economic and personal characteristics of the customers.
#4. Psychographic segmentation
In psychographic segmentation, consumers are divided into smaller groups based on their personality traits. For example, if you run a fashion brand, your customers can be categorized as individuals into ethnic fashion, sportswear, western wear, etc.
