Customer segmentation is the process that involves dividing customers into groups. The goals of segmenting customers is to help the company decide how to relate to customers in each segment in order to maximize the value of each customer to their business.
Benefits of Customer Segmentation
Understand the customer
You can only be able to provide quality service to your customers if you understand them. Customer segmentation allows you to develop profiles of many different type of customer groups who buys your product. You will be able to understand and know what each customer wants. You will also be able to provide customized services that caters for each customer’s individual needs if you are able to understand them.
Customer segmentation is a very valuable to a company because it helps the company to develop strategies to attend to each customers needs in a more personal approach. With customer broken up into different groups of similar choice and preference, the company can easily identify all the needs and concrete specific to individual area of the customer.
For example through customer segmentation, a telecommunication company can be able to learn that is actually has some clients who are mainly concerned with getting cheap basic phones while other may be concerned in getting a phone with some additional features and those who are very stable many not be concerned with the cost but a reliable service. In this scenario, when you try to address the concerns of the customer in a collective manner, you will not be able to meet the individual concerns of each customers. As a result some customers will be happy when the company make a certain move while others will not be happy with that decision at all. However, with customer segmentation, your company will be able to attend to specific needs of each customer meaning that each customer will be happy.
Help to maximize product potential
Segmenting your customers will help you know how your company products are being used by various customer groups. It will actually enable you to come up with alternative use for the product that is not well utilized by a certain class of customers. By segmenting your customers, you will be able to know the individual need of each customer. As a result, you will be able to design the product that suit individual needs of each segment helping you to maximize your product potential.
Helps to attract new customers
A company can only grow if it is able to attain and attract new customers. The best way to attract new customer within a very short period of time is through customer segmentation. By providing customized services your current client will be able refer other customers into your company thus expend your customer base. The more the customers are satisfied with your services the more they are bale to refer others to your company. Customer segmentation can also enable your company to strategically target a certain customer base because you clearly know what they want and what you can do to maintain them.
It helps to improve your services
By dividing your customers into relevant groups relevant to a particular business, you will be able to know what they really want and how they want you to serve them. You will be able to identify the needs of each group and as a result your will be able to improve the services of your company so that customers get what they really want. You will easily identify the gaps that need to be filled to ensure that all customers’ needs are met. Since your goal is to maximize profit from each customer, it is critical to know in advance what kind of service the customer is expecting from you.
Helps to determine product pricing
By segmenting your customers, you will be able to determine the best price that suit each customer group. As said earlier, to maximize profit you must be able to have a lot of customers who are using your product or service. In order to maintain them you must be able to segment them and come up with a price that best suit each member of the segment. For instance a mobile manufacturing company must design mobile phones that each member of the group can afford. The company must ensure that they design different mobile phone with different pricing so that those who have the financial power to buy the mot expensive phone should not be denied their right to owning one. Similarly those with average income should also be allowed to own a phone. By properly segmenting your customers, you will be able to come up with the correct price for your product or service based on the financial capability of each customer.
- Helps to design an optimal distribution strategy
Customer segmentation helps companies to develop a more efficient distribution network. By carefully studying the buyer behavior or various target consumer groups, you can be able to determine the way customers prefer to buy your product. For instance if a customer want to buy online then you will know that you should actually focus on online marketing and reduce the resource that you usually put on newspaper and TV advertisement. In addition, customer segmentation also helps you to identify the geographical location where your customers are located or the area where your products or services are popular.
- Helps to choose specific product features
Customer segmentation helps you to choose specific product features that caters for your customer’s needs. If you are able to understand your customers want, then you will be able to come up with product features that best address their needs. The feature can differ deepening on the group that the customer fall.
In conclusions, customer segmentation is actually a very important activity to any company that want to expand and reach out to many customers. It enable companies to know that customers actually fall in different categories that cannot be grouped together. By finding those individual categories and separating them, you will be able to serve your customers more effectively thus maximizing profit and increasing your overall market share.