Customer Micro-Segmentation: Benefits, Ideas, Strategies.

Whatever you might think, there are only two types of companies on this planet:

1. Product-Centric companies
2. And Customer-Centric companies

Product-Centric companies are all about their products. They use the price point as a differentiator and define their success based on revenue and margin.

Customer-Centric companies, on the other hand, are obsessed with their customers. They understand that customer demand is the only thing keeping them afloat. Their departments are orchestrating customer journeys with almost military precision.

And they understand, segment, monitor, and nurture their customers using the latest technology.

Guess which of the two survives the test of time and doesn't sink, no matter how the economic conditions change?

You guessed it - customer-centric companies can count on their customers to always return and keep them afloat in times of need.

If you're going to become a customer-centric company, the first step is understanding that each customer is different. The next is creating unique experiences for them.

So, welcome to micro-segmentation: the granular hyper-segmentation you can apply to your customer base to truly understand your customer base and deliver precisely what they need.

Read on and see how to turn your customer data into a strategic asset that will generate a better approach to marketing, loyalty, and customer care.

What is Micro-Segmentation?

The entire purpose of micro-segmentation is to update your communication, marketing, and customer experience efforts and create highly relevant and personalized customer journeys.

What Is the Difference between Micro and Macro-Segmentation?

Before we move on, let's talk about the fundamental differentiator of micro-segmentation in the broader context of customer segmentation.

Segmentation strategies are always welcomed in eCommerce, where people expect hyper-personalized treatments.

However, traditional segmentation (or macro-segmentation) sometimes doesn't cut it. It only splits all existing customers into board segments:

• Demographic segments (age, gender, income, etc.)
• Behavioral features (brand preferences, purchase history, amounts spent, etc.)
• Geographical features (location, country, region, city, etc.)
• Psychographic segments (lifestyle, values, needs, etc.)

Instead, you go one step further with micro-segmentation and continue to divide your groups into even more specific segments.

With traditional macro-segmentation, you will end up with customer segments that look like this:

→ "female customers, aged 30+, located in NY."

On the other hand, customer micro-segmentation will deliver something along the lines of:

→ "single mothers, 33 years old, located in Brooklyn, orders baby wipes & diapers bi-monthly but stopped ordering 2 months ago."

A micro-segmentation strategy further narrows your previously segmented target audience. It uses AI & Machine Learning tools and advanced segmentation techniques like RFM analysis.

Benefits of Micro-Segmentation

Marketing has traditionally relied on the idea of creating customer segments and addressing them separately instead of treating all existing customers as one.

So, you come across a marketing tips article making the case for micro-segmentation, and you might find yourself wondering:

"What's all this hype with micro-segmentation? I'm already practicing audience segmentation. Isn't it enough?"

First and foremost, the argument for micro-segmentation doesn't remove the need for traditional macro-segmentation.

A strategy that started with micro-segmentation alone might lead you astray or even create a hazy vision of what your customer base represents.

Before identifying microsegments, you must first establish your macro-segments and use them as starting points. It's the difference between hyper-fixating on one piece of the puzzle instead of looking at the whole picture.

Both micro and macro-segmentation generate similar benefits. With micro-segments, you'll still reap the rewards of:

• delivering personalized customer experiences,
• prioritizing your efforts,
• and creating tailored marketing strategies.

However, these benefits will be amplified since micro-segments ultimately translate into a supercharged segmentation strategy.

1. Micro-segmentation creates hyper-personalized digital experiences.

Nowadays, we rely on our phones for everything: from calorie tracking to ordering clothes for the winter season.

We paid the price of convenience with our patience.

At the same time, having our fair share of options to pick from raised expectations over the tallest skyscrapers in the world.

Micro-segmentation allows you to anticipate website visitors' precise needs and objectives and increases your conversion rates.

Moreover, after you convert website visitors, you can deliver customized stellar customer experiences that encourage repeat purchases.

1. With micro-segmentation, you quickly identify any shift in customer behavior.

Suppose you micro-segment your customers based on their purchase history and set up patterns for every customer cluster. In that case, you'll quickly identify even the slightest change in customer behavior.

Consequently, you can alter your marketing strategies in response to shifting consumer demands.

For example, in RFM segmentation, your customers will buy at a particular frequency. When the frequency drops, customers also fall into a different RFM group.

This can trigger a counter-reaction on your part:

• Retention email campaigns.
• A call from a customer care representative.
• An incentive to bring the frequency back on track.

It's a better alternative than realizing a customer might churn when it's too late to change anything.

1. You hit the bull's eye with your marketing efforts.

When in doubt, many marketing professionals will throw out customer acquisition campaigns like they throw darts - as often as possible, hoping at least one of them sticks.

Instead, with micro-segmentation, you know precisely:

• which customer segments bring in the most revenue,
• how to trigger their motivation with personalized copy,
• and how to delight & retain them in the long run.

At the same time, applying metrics like Customer Lifetime Value on your micro-segments can also predict your future revenue and help you decide whether to make changes (if necessary).

1. Micro-segmentation increases your chances of striking gold with your data.

If you aren't yet treating your data as a gold mine, it's high time you started doing so; your first-party data gives you the clarity and vision you needed all along.

Micro-segmentation can help you uncover hidden gems inside your data.

You'll identify the most valuable customers, the best-selling products, and any possible hiccups that hurt your business in the long run.

1. Micro-segmentation enhances your email marketing results.

Email is one of the most powerful communication tools ever seen in marketing-kind. Unfortunately, email practices have stayed the same over the past few years.

While many people wrongly assume the email is all about the copy, they need to identify the other element crucial to a campaign's success: the timing.

It's no use sending 1k+ emails per day, using the "copyest copy" out there, if subscribers don't have any use for your products.

Instead of sending you on a wild (and blind) goose chase, micro-segmentation enables you to send emails effectively:

• with the right offer,
• for the right product,
• at precisely the right time.

For example, let's say you know your customers restock their products monthly, so they place monthly orders on your website.

You can trigger email campaigns anticipating their needs and offering an incentive to increase the AOV of their regular orders.

All in all, micro-segmentation executed correctly will return your initial investment and more.

Additionally, it accelerates your growth, increases profitability, and delivers the opportunity to outpace the fierce competition surrounding you.

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How Can You Create Micro-Segments?

1. Firstly, create your macro-segments.

Your macro-segments are your starting point in the micro-segmentation market strategy. These will serve as your base for creating micro-segments.

You can use elemental criteria to accomplish it, just as any other segmentation strategy would. Segment your customers by:

• Location - where the audience is from (city, state, country).
• Demographics - basic information (age bracket, job title, gender, etc.).
• Behavior - how they interact with your site (pages viewed, content downloaded, products added to cart, items added to a wishlist, etc.).
• Source - how they entered the funnel (social media, search engine, recommendation, etc.).
• Tech used - how they're browsing your website (desktop, mobile, iPad, etc.)
• Place in the Funnel - is it the first time this website has arrived on your website or is it a seasoned shopper? ‍
• Psychographics - use qualitative data on your customers - their interests, personality traits, values, etc.

1. Decide on the micro-segments.

Now that you have your basis, you can carry on with micro-segmentation.

Identify common attributes within your micro-segments, such as buying frequency, NPS score, or monetary value.

Ideally, your micro-segments will contain customers from multiple macro-segments. For example, you might find that your macro-segment is populated by a blend of customers in the behavior + funnel stage, source+ place in the funnel, location + demographics, etc.

*Note: you can even encourage your users to self-segment - as we did on the Omniconvert website with a short survey.

You can also create your micro-segments using the RFM Analysis. We've written about it on our blog since it's a very effective way of segmentation that proves itself profitable in the long term.

Here are (just) some of the questions the RFM segmentation can answer for you:

• When was the last time the customer purchased a product? (Recency)
• How often does the customer buy from you? (Frequency)
• How much does the customer spend on your shop? (Monetary value)

*Example of the RFM scoring, taken from the Reveal App.

Another interesting approach to micro-segmentation is the intent-based approach. Group your customers according to the probability of purchase.

Someone who just browsed your shop once probably has low intent.

On the other hand, someone who regularly visits your website, compares his options from the product suite, and adds products to the cart is probably decided on buying.

The more qualitative data you can gather about your customers, the more you can motivate them to return for repeat purchases.

1. Map your Customer Journey for each micro-segment.

Typically, your micro-segments will consist of small groups of customers. Use it in your favor to create highly individualized marketing strategies. At the same time, use predictive analytics to evaluate the success of each micro-segment.

Your job here is to use all the data (quantitative and qualitative) you have on your customers to create personalized journeys for each segment.

For instance, suppose you applied the RFM methodology and are ready to create the journey for each segment.

Those who scored high on the Recency aspect are frequent shoppers. They may only require an email campaign to showcase the latest offerings in your catalog.

On the other hand, a shopper who used to buy frequently, but suddenly stopped ordering, might need a reactivation campaign. This campaign might involve discounts, access to exclusive features, or unique products.

The same goes for intent-based micro-segments. People who are highly likely to buy will need only a final push - a particular discount or free shipping.

Those who are unlikely to buy need to get free content that convinces them of the value you're delivering.

The beauty of micro-segmentation is that it allows you to forecast the differing levels of success for your campaigns.

However, to predict the results, you must first evaluate and track carefully how various marketing actions affect the spending behavior of your micro-segments.

These customer journeys aren't only practical for your acquisition campaigns but also for building a solid community inside your customer base.

For example, let's say you know about the values shared by your customers. Prove you share their values with a marketing campaign to build customer loyalty.

You can offer to donate a percentage of customers' orders to a charity close to their hearts or invite them to decide on your next seasonal campaign.

Brainstorm ideas for customer engagement with your teams and tailor them according to your micro-segments.

Micro-Segmentation Strategy

When you think of market segmentation, you might be tempted to focus on the four key aspects: demographic, psychographic, geographic, and behavioral.

But the times when we would scramble for data and create an imaginary buyer persona are long gone.

Now you can improve your experience and create even better campaigns with the wealth of other data at your disposal.

And we don't mean third-party data. There's a scarcity of data since cookies are slowly dying out. We suggest the data you've been storing since you had your first customer: your zero and first-party data.

This is the only ammo you'll need to create multiple micro-segments and deliver personalized experiences to each of them.

1. Create Marketing assets for each micro-segment

You already know from the latter chapter that you must create customer journeys for each micro-segment.

Now it's time to create the marketing assets for these journeys. These include (but aren't limited to) emails, social media ads, discounts, exclusive products, etc.

You already have detailed information on your prospects and existing customers in the form of your data.

• Use this knowledge to learn which incentives will impact your customers the most.
• Push products that resonate with micro-segments specifically.
• Send your offers oh customers' preferred channels at the right time.

Creating marketing assets is easy - you've done it countless times before when you were all about acquisition.

However, now that you understand it is also about retention and loyalty, your marketing campaigns can become even more effective.

1. Measure, adapt, and optimize.

When done right, your marketing strategy based on micro-segments results in better engagement, improved conversions, and ROI on your marketing spend.

However, there are still some steps between rolling out the campaigns and repairing the benefits - the measuring and adapting phases.

Track the results of each campaign and optimize where needed. You mustn't "assume" the reasons behind your results. Better yet, talk to your customers.

Use your resources to interview or survey them to better understand their wants and needs.

Wrap-up

All in all, these are all strong arguments to persuade you to segment customers into granular micro-groups.

With micro segmentation, you'll understand your customers and their needs more in-depth. With this understanding comes your ability to offer your customers exactly what they want.

And this is the secret to winning their hearts (and their wallets).

Frequently Asked Questions about Micro-Segmentation

What is micro customer segmentation? Micro-Segmentation means breaking your entire customer base into tiny, granular sub-groups according to specific criteria.

Micro-Segmentation means breaking your entire customer base into tiny, granular sub-groups according to specific criteria.

What are the 4 types of customer segmentation? The main types of segmentation are: demographic (age bracket, job title, gender, etc.), psychographic (values, needs, challenges, etc.), behavioural (pages viewed, content downloaded, products added to cart, etc.) and geographic (location, country, city, etc.) segmentation.

The main types of segmentation are: demographic (age bracket, job title, gender, etc.), psychographic (values, needs, challenges, etc.), behavioural (pages viewed, content downloaded, products added to cart, etc.) and geographic (location, country, city, etc.) segmentation.

What is a micro segment strategy? A micro-segment strategy means orchestrating unique customer journeys and creating marketing assets for each segment. A micro-segment strategy helps you identify customers who will bring the most value and identify the marketing actions to take to best reach audiences that matter.

A micro-segment strategy means orchestrating unique customer journeys and creating marketing assets for each segment. A micro-segment strategy helps you identify customers who will bring the most value and identify the marketing actions to take to best reach audiences that matter.

Why is micro-segmentation important in marketing? Micro-segmentation helps you orchestrate more personalised and higher-quality phygital experiences. At the same time, it helps you acquire better customers, delight, and retain them on the long term.

Micro-segmentation helps you orchestrate more personalised and higher-quality phygital experiences. At the same time, it helps you acquire better customers, delight, and retain them on the long term.

What is an example of micro-segmentation? An example of micro-segmentation is the intent-based approach. Group your customers according to the probability of purchase.

An example of micro-segmentation is the intent-based approach. Group your customers according to the probability of purchase.