Table of Contents:
1. What is Micro-Segmentation marketing?
2. The Different Types of Customer Micro-Segmentations
3. How do you create Micro-Segments in marketing?
4. How does Micro-Segmentation work in marketing campaigns?
5. What Are the Advantages of Using Micro-Segmentation?
6. Using Micro-Segmentation in Cross-Channel Marketing
7. Future of Micro-Segmentation
Micro-Segmentation
In general business segmentation, customers are broken down and clubbed together into groups on the basis of certain recurring characteristics. These groups come to be known as segments. Now, micro-segmentation in marketing is a progression of general segmentation that helps modern marketers take a knife-edge approach to marketing.
Customers are divided further into much smaller niche groups based on several specific characteristics, including behavioral attributes. It helps marketers focus on a unique, targeted persona that might be limited to a handful of individuals. This becomes a micro-segment, and marketers can carry out predictive analysis with high accuracy to create hyper-focussed campaigns that satisfy very specific needs.
What is Micro-Segmentation marketing?
Micro-segmentation is the process of dividing markets and customer pools into smaller, more specific groups with common characteristics. This form of micro market segmentation allows businesses to target their marketing efforts more precisely by identifying and grouping customers based on detailed factors such as demographics, geography, behavior, or lifestyle—and then segmenting each group even more.
Geography, for example, could be broken down into regions, then states, then cities, then neighborhoods. Behavior could mean frequent purchases, seasonal-only purchases, coupon-only purchases or “window shoppers.” Lifestyle could be an adventurer, fashionista, world traveler and tech savvy.
Micro-segmention marketing strategy combines multiple variables from the above categories with certain demographics, such as age, sex, life cycles, job, and income, to create a target persona.
While a high-end RV dealership might target a wealthy, retired male over age 60 who enjoys travel, a sporting goods store would likely market to single, college-educated, employed males between 21 and 35 who identify as adventurous, fit and eco-conscious.
It’s easy to see why niche segment marketing could significantly help make marketing more effective. Just imagine how a 62-year-old man feels every time he gets an email advertising a company’s new diaper bag or lipstick.
There’s probably not a strong sense of importance or feeling of connectedness to the company sending him emails.
And when it comes to building loyalty, feeling a sense of “belongingness” and importance can increase profits. Based on McKinsey’s findings, 76% of consumers are more inclined to buy from brands that offer personalized experiences. Business.com reports that after shopping with a company for 30 months, returning customers spend 67% more than their initial purchase.
In addition to strengthening customer relations through more targeted emails, micro segmentation in marketing can help companies track how customers move among segments over time. In the long term, this could mean tracking how a 25-year-old woman’s spending changes from grad school to married life to buying goods and services for a family of five.
In the short term, it could simply mean tracking her seasonal purchases and spending.
The value of tracking this movement is priceless, as it can help companies optimize their marketing actions to increase revenue from existing customers—or potential customers on whom they’ve collected data. In addition to increasing conversion rates immediately, micro-segmenting can help businesses identify a customer’s lifetime value—the predicted total of all future profits that the customer will generate for the company.
Micro segmentation marketing strategy is both responsive and predictive marketing, and probably as close as a company can come to a crystal ball when it comes to customer behavior.
The Different Types of Customer Micro-Segmentations
As discussed before, there are various types of customer micro-segmentations. These micro-segmentations are specialized approaches to dividing a customer base into smaller, more precise groups based on specific criteria. This allows businesses to tailor their marketing efforts more effectively. Here are some of the key types:
1. Demographic Segmentation: This involves segmenting customers based on demographic factors such as age, gender, income, education, and occupation. It helps in targeting products and services that are more relevant to specific demographic groups.
2. Geographic Segmentation: Geographic segmentation divides customers based on their location, such as country, state, city, or even neighborhood. This type is crucial for businesses whose products or services vary in relevance and popularity across different regions.
3. Behavioral Segmentation: Behavioral segmentation is based on customer behaviors, including purchasing habits, spending patterns, brand interactions, and product usage. This type is key for understanding and predicting future buying behaviors and preferences.
4. Lifestyle Segmentation: This type segments customers based on their lifestyle choices and habits. It considers factors like activities, interests, opinions, and overall way of living, such as an adventurer, fashionista, world traveler, and tech-savvy.
5. Occasion-Based Segmentation: This type segments customers based on certain events or occasions, such as holidays, birthdays, or anniversaries. It’s useful for timing marketing efforts to coincide with these occasions for maximum impact.
How do you create Micro-Segments in marketing?
A lot factors into how businesses categorize customers into micro-segments: the size of its database, what information has been collected, the types of customers it serves, and if the business is local, regional, national or worldwide, to name a few.
Although there are complex algorithms, sales analysis and data mining involved in serious micro segmentation, small businesses can do the initial legwork themselves just by evaluating their customers’ traits and behaviors, and looking for patterns in clicks, abandoned carts, purchases, and returns.
The idea is to start broad and then narrow the category down to the lowest common denominator. For example, a jewelry company might segment customers like this:
Looking at this example, a company can take inspiration for campaign on the basis of micro segmentation examples. Perhaps a week before Mother’s Day, the jewelry business could launch a campaign advertising its “sterling silver charm bracelet for Mom”—geared to daughters who shop for their mother at the last minute.
How does Micro-Segmentation work in marketing
campaigns?
Micro-segmentation can be used in marketing campaigns to enhance the effectiveness of your marketing campaigns by making them super-targeted. When a marketer creates a micro-segment, they have a highly accurate portrait of their customer based on their personal and behavioural attributes. Powered by this insight, marketers try to create value in the user’s life with highly contextual communication that promises to engage with the micro-segment.
For example:
You wish to promote a premium tech brand’s bluetooth headphones that feature the latest in noise cancelling technology. Now, this particular item is compatible only with the iPhone X. To start off, the marketer will make a list of all the users who have recently purchased an iPhone X on the platform. Secondly, you will try to narrow down your search to the age group of 21-35, as the headphones are quite flashy and quirky. Secondly, you try to find out the number of iPhone X purchasers who also searched for headphones on the same platform in the past 3-6 months. Finally, you will try to find the number of users who had responded to a cashback offer doled out by the platform in the past for Electronics items.
Out of 1000 people, you might end up narrowing down your segment to only 30 people. This then is a powerful micro-segment with a high probability of purchasing the aforementioned headphones. “using-micro-segmentation-in-cross-channel-marketing”
Benefits of micro-segmentation
- Fewer users, Better Control
- Easy to carry out predictive analysis
- Easy to understand campaign effectiveness
- Reduces time taken to finalize right approach
- Cost Effective
- Drives up Brand Loyalty
Finally, how do you implement micro-segmentation strategy?
Part of micro segmentation marketing is understanding the best way to reach the group that’s been chosen to target, including how and when they shop and how they prefer to be contacted.
In the profile above, an analysis of collected data might show that this customer segment tends to shop on their tablet at 9 p.m., or that they check emails on their smartphones between 3 p.m. and 4 p.m. while waiting to pick up their kids at school.
Businesses can use the information about customer behavior patterns to not only create a micro-segmented target persona but also determine how best to reach them. Here are some automation features to consider, including examples of how they might work with a particular niche segment.
1. In-app messages
For companies with their own apps, in-app messaging can be highly effective when combined with micro segmentation marketing strategy. Because the customer has to be in the app at the time the message is sent, this works best for businesses with heavy app use. Music app Beats does a good job of micro segmentation of its customers based on their listening habits then uses its in-app messaging to create a “Just for You” playlist.
Just imagine how target markets on the basis of behavioral segmentation on its ultra-successful Cartwheel app! Think first-time moms who buy organic and sustainable products as often as they can, looking for maternity clothes, comfortable shoes, and cute pink items to add to their baby registry. Bullseye.
2. Push notifications
Unlike in-app messages, which require the user to be in the app at the time of receipt, push notifications only require that customers be opted in. According to Kahuna, there’s an 85% opt-in rate for Android users, likely because it’s the default setting. This is more of a challenge for companies with iPhone users, who only have a 50 percent opt-in rate, likely because they have to opt in for every app individually.
behavioral segmentation can help maximize marketing efforts on these more limited contact methods and cut down on irrelevant messages that may come across as intrusive. Common push notifications using customer segmentation models include software upgrade notifications, new microbrews on tap and alerts for events or sales.
Thanks to geo-location services and social media check-ins on Foursquare and Facebook, businesses can now set up push notifications triggered when a specific target persona gets near a brick-and-mortar store like Starbucks does when espresso-drinkers are within walking distance.
Just like in real estate, location matters. In a 2014 survey, Infosys found that 91% of consumers would be more likely to purchase from a retailer again if they were offered incentives based on location.
Micro-segmentation marketing based on location makes particularly good sense for the on-site consumption food and beverage industry. And while other traits like gender, age, income, and lifestyle obviously play a role, the location may be the biggest contributor to food and beverage mobile app push notifications getting a 25% click-through rate.
Boost your mobile engagement with WebEngage’s powerful Push Notification tools!
3. Text messages
A recent study revealed that 51% of consumers respond to a text message within 1-2 minutes, more than half check their text messages at least 11 times daily, and 70% choose to receive text messages from businesses. That’s good news for businesses because niche market strategy can increase the chance of reaching the right people via their favorite contact method—even on a limited marketing budget.
Consider how nail salons, massage therapists, hair stylists and other similar service-related businesses could fill slow times by sending out text messages to female clients with disposable income who live within a certain radius and are retired, non-working without young children at home, or who own a home-based business and therefore have some flexibility in their schedules.
4. Emails
Email marketing still offers the best return on investment when compared to other forms of marketing, according to Campaign Monitor. It’s also a very shareable form of marketing, which can increase a business’ reach—and results—exponentially.
Take this email from Postmates, a 24/7 on-demand delivery service. Besides the perfect timing—the email was sent at 11:55 a.m.—the customer segmentation software created a precise target market that was just ripe for a lunch-related promotion. Think busy worker bees in San Francisco with eclectic tastes and a nonexistent lunch hour.
Here’s another example: a business seeking to boost juicer sales during the holidays could target the middle-class, panicked husbands of health-conscious women who struggle to come up with a great Christmas gift idea for their wives. The email campaign includes a direct link to the juicer, guest checkout and free gift wrap. That’s a simple approach to garner the appreciation of a grateful micro customer segment.
5. Web messages
Website visitors can be filtered and targeted based on customer segmentation models. Marketers can write short notifications that are only shown to certain groups of visitors, such as repeat visitors or traffic coming from Google searches. The Web messages can also be used to create surveys—again, given only to the chosen micro-segmented audience.
Lytics, a company providing intelligent user engagement for the Web, recognizes new visitors and greets them with the message below. The site displays different options based on micro-segmenting of inbound traffic.
Web messages can serve multiple purposes, helping businesses gather emails and data from surveys while personalizing the experience for the visitor. A makeup store’s e-commerce site could learn more about how its customers are finding the website, what they’re looking to buy, how old they are, where they live and what their skin tone is.
For example, a 60-year-old African American woman living in Washington state is most likely going to look for different foundation than a 22-year-old Caucasian woman living in Maine. With that information in hand, the company can better meet each woman’s needs and customize the messaging on the website each time she returns.
Let’s say the makeup company has a potential customer who lives in Colorado, loves to ski and has two kids in college. The micro-segment she’s in is dealing with a very dry climate, a lot of sun exposure and probably some early signs of aging skin. If she visits a website in January, a pop-up message asking, “Would you like to check out our line of moisturizers with sunscreen before your next ski trip?” would make perfect sense.
If you’ve collected information about your customers, now is the time to put that extra effort to good use—with micro-segmentation marketing. Micro marketing campaigns may take a little more legwork on the front end, but once businesses understand micro-segmenting, there’s little need for mass email blasts.
Maximize customer connections across all channels with WebEngage’s Omnichannel solutions.
What Are the Advantages of Using Micro-Segmentation?
Micro-segmentation in marketing offers numerous advantages that can significantly enhance the effectiveness and efficiency of marketing campaigns.
Here are some key benefits:
1. Enhanced Personalization
Micro-segmentation allows marketers to tailor their messaging and offers to specific groups based on their unique characteristics and preferences. This level of personalization leads to more relevant and engaging marketing communications, which can improve customer experience and increase conversion rates.
2. Improved Customer Insights
Businesses gain deeper insights into their customer base by analyzing the behaviors and preferences of smaller, more defined groups. This detailed understanding helps in crafting strategies that resonate more effectively with each segment.
3. Increased Marketing Efficiency
Micro-segmentation ensures that marketing efforts concentrate on the most receptive audiences, optimizing the return on investment.
4. Customized, High-Quality Digital Experiences
Micro-segmentation allows for the creation of personalized experiences tailored to customers’ exact demands and requirements. This level of customization increases customer engagement and loyalty, as clients are more likely to return to a service that meets their specific needs.
5. Better Response Rates
Since micro-segmentation involves communicating with customers based on their specific interests and needs, it typically results in higher response rates. Customers are more likely to engage with content that feels personally relevant.
6. Competitive Advantage
Employing micro-segmentation can provide a competitive edge. By understanding and addressing the needs of niche markets, businesses can differentiate themselves and appeal to customers whom competitors might not reach.
7. Building Strong Customer Relationships
By providing targeted offers and communications, micro-segmentation helps build a sense of importance and belonging among
customers, which is crucial for customer loyalty and repeat purchases.
Using Micro-Segmentation in Cross-Channel Marketing
Leveraging Customer Micro-Segmentation in a cross-channel marketing strategy will maximize the engagement and conversion potential of your campaigns. Each micro-segment that you maintain consists of modern day users that maintain a strong digital footprint on a multitude of devices. You can track the engagement statistics of your micro-segments across multiple communication channels. This will help you identify:
- Which channel had the best engagement
- What was the best time for sending a particular campaign
- Which channel had the maximum conversions
Co-relate this data with individual micro-segments, and this will help you identify certain to-do’s that will dictate future campaigns. Let us find out how you can create a cross-channel marketing strategy with micro-segmentation.
Future of Micro-Segmentation
Brands are hard pressed to justify their marketing spends, and they are finding it hard to influence consumers at the right point of time. Consumers have become massively mobile, with the average user using up to 3.5 devices for online activities. With a fall in the average attention span to around 8 seconds, marketers are fighting it hard to grab the lion’s share of “Attention”. And the hardest part with mobile specifically, is that most marketers don’t know what app metrics they should be tracking to measure the success of their mobile marketing efforts.
Micro-segmentation is on the rise, because it grants a hyper-targeted vision to each marketing campaign and doubles the possibility of a conversion. Users are looking for experiences that add value to their lives, and context is going to be key in this aspect. Micro-segmentation can help brands create highly contextual experiences that are actually relevant to users, and extrapolate learnings from these activities to carry out predictive analysis that aims to retain these users over an extended period of time.
Leverage micro-segmentation and hyper personalize your marketing with WebEngage. Book a demo today!
FAQs
What is micro-segmentation marketing?
Micro-segmentation marketing is an advanced approach to customer segmentation that divides a market or customer base into extremely small and distinct groups. These groups, also known as microsegments, are formed based on shared characteristics among customers.
The purpose of this segmentation is to allow businesses to target their products and services more effectively to specific consumers who are more likely to be interested in what they offer. This method enhances the precision of marketing messages, making them more relevant and tailored to the needs of each microsegment.
What is an example of a micro-segment in marketing?
Let’s take an example of an online clothing retailer specializing in sports apparel. Here, the primary objective of the retailer will be to segment customers with a high repeat purchase rate. So it’ll be people who are interested in sports and active either by playing games, hitting the gym, doing yoga, or just jogging.
Further, the retailer can categorize customers based on their location, such as those living in coastal cities known for their active, outdoor lifestyles, such as swimming. The retailer can then examine demographic characteristics. For instance, they might focus on women aged 25-35 with a mid-to-high income range who are professionals in fields like tech and hit the gym regularly.
However, micro-segmentation in B2B can take a different turn. Instead of targeting individual consumers, the focus shifts to businesses or decision-makers within those businesses.
In B2B, our sports apparel retailer might target gyms, sports clubs, or corporate wellness programs. The segmentation could be based on the organization’s size (small local gyms vs. large fitness chains), the type of sports activities they specialize in (yoga studios vs. CrossFit gyms), or even their geographical location and demographic of their clientele.
Why is micro-segmentation important?
Micro-segmentation is a vital component in modern marketing strategies, offering numerous benefits that enhance the effectiveness of marketing campaigns. It enables businesses to understand each customer segment’s specific needs and preferences, allowing for the creation of highly targeted marketing campaigns. This leads to increased conversion rates and a higher return on investment. Personalized marketing efforts are more likely to result in customer loyalty and advocacy, as customers feel their unique needs are being met and valued.
A deeper understanding of customer segments through micro-segmentation aids in creating targeted upsell and cross-sell campaigns. These campaigns are specifically designed to sell complementary products and services to customers, which helps increase the Customer Lifetime Value. Knowing the interests and preferences of each segment allows for the creation of offers that are more likely to be accepted, thus enhancing LTV.
What is the micro vs macro segment?
Macro Segmentation is a type of segmentation that is more general and broad. It involves dividing the market based on high-level characteristics such as the size of an organization, its location, and the industry it belongs to. Macro segmentation is about understanding the larger market segments in which a business operates. It provides an overview of the market and helps identify the general groups within it. This level of segmentation is useful for businesses that need to understand the broader market landscape in which they operate.
In contrast, micro-segmentation focuses on more specific, detailed aspects of the market. It involves breaking down the market into much smaller segments based on more precise and individual characteristics. Micro-segmentation is about understanding the finer details of consumer behavior and preferences within these smaller groups. It enables businesses to tailor their marketing strategies and offerings to meet the specific needs of a narrowly defined segment of customers.
What are the 4 characteristics of segmentation?
The four key characteristics of micro-segmentation are:
1. Demographic Segmentation: This involves dividing the market based on demographic factors like age, gender, income, education, and family size. Demographic segmentation helps in understanding who the customers are, enabling marketers to create messages that resonate with different demographic groups.
2. Product Use Segmentation: This segmentation focuses on how customers use a product or service. It involves categorizing customers based on their usage rate, loyalty, and attitude towards the product. This information helps identify potential up-sell or cross-sell opportunities and develop product improvements or new products to meet the specific needs of different user groups.
3. Buying Behavior Segmentation: This type of segmentation delves into the customer’s journey and purchasing habits. It looks at patterns such as purchase frequency, brand loyalty, and the benefits sought in products. Understanding buying behavior assists in creating more effective marketing messages and offers that are aligned with how customers make purchasing decisions.
4. Situational Factors Segmentation: This involves segmenting customers based on the specific situations or contexts in which they interact with a product or service. This can include factors like location, the occasion of use (e.g., holidays, events), and even the time of day. By understanding these situational factors, marketers can tailor their strategies to be more relevant and timely for each customer segment.
Sharath Byloli
Surya Panicker
Diksha Dwivedi
