What is Customer Segmentation in Marketing? 

The concept of customer segmentation is dividing a company’s customer base into parts to target the right audience for marketing purposes in the right way with the right message. 

It also allows you to deliberately exclude from your marketing those customer groups who may not be interested in the message because they do not belong to the desired customer segment.

The Economic Research Institute aptly defines customer segmentation: “The objectives of strategic segmentation include identifying different customer groups with distinct needs and creating new business opportunities.”

Customer segmentation: what does it mean in practice?

In digital marketing, customers can be very precisely divided into desired customer segments (at least a pro-level digital advertising professional can make these very precise divisions, novices and amateurs may not be able to). 

Let’s take the example of a house factory that manufactures high-end villas and smaller and more affordable cottages and warehouses/carports. The example below shows how businesses can create different customer segments, for example, through digital or internet advertising.

Customer segment for high-value villas

• Customers with a higher upper-income bracket include CEOs, doctors, lawyers, and people living in prestigious areas. 
• In addition, one can define the things that these people might like according to social media, such as Financial Life, Financial News, Valuable Objects, Design, and as a final example, age 30-60 years. 
• Generally, the company already knows better than this example who its best customer is in these valuable villas. Almost all of that information can be used when defining a customer segment.

Customer segment for smaller and more affordable chalets

• Almost anyone employed could make the purchase, and the cost is probably shared between two people since the purchase is a joint purchase.
• The customer’s income level can be middle class, in which case the age range can be used as a cut-off point, for example, between 30 and 70 years.
• In addition, social media interest segments can be used, such as customers who have already visited the housebuilders’ offer based on their own history of page visits.
• Further, a company can use virtually all of the company’s information about these customers to create a customer segment.

Warehouse and garage customer segment

• The purchase can be made by practically anyone living in a detached house, provided that building rights are not considered.
• Probably, income levels do not matter in defining the target group, but working people are encouraged to apply.
• A lower age limit could be used, for example, 20 years.
• In social media, the sub-areas of interest could be, for example, those interested in construction and, in particular, those who have already visited a similar offer based on their site visits.
• A customer segment can also be created by considering that these customers live in single-family areas so that advertising can be targeted to these areas.

This will help create a precise customer segment for each key target group and ensure that the right customer is targeted with the right message when marketing. This ultimately means more page visitors to your business website and more contacts and sales from these.

Building the right customer segments is very crucial at this point. Advertising, as well as the media budget for advertising, can be very costly. Many of these funds will go to waste if the customer segments aren’t well defined. A well-built customer segment is, therefore, one of the most important aspects of advertising.

How is a customer segment created?

A customer segment can be created within a company in one of the ways mentioned above. This can be followed by an introduction to the different digital channels and the opportunities they bring.

In social media, for example, a customer segment can be created using these definitions:

• Age
• Gender
• Number of children
• Age of children
• Area of residence
• Job title
• Employer’s company size and sector of activity
• Areas of interest (media read, websites visited, etc.)

In Google, a customer segment can be created using, for example, these criteria:

• Sites visited (e.g., your competitors’ sites)
• Search history (what words and topics the customer has searched for on Google in the past)
• Areas of interest
• Demographics (age, gender, etc.)

As noted above, customer segmentation can be used more broadly with social media. Facebook, Instagram, and LinkedIn know precisely our online behavior and our gender and contact network, and much more about our interest segments.

B2B customer segment and B2C customer segment

In most of the examples above, the target groups are B2C. Marketing to consumers is more traditional and therefore easier, as there have been more ways to do this in the past. So you can find your B2C customers very precisely on virtually all social media channels, such as Facebook, Instagram, and LinkedIn.

Few digital marketers have extensive ways of finding B2B customers. In reality, you can also find your B2B customers with really precise criteria on all social media channels. However, this requires a very high level of expertise and often the use of expensive software or external databases that individual advertisers can rarely afford. 

At Kubla, for example, we invest significant sums each year in these third-party database licenses to guarantee our clients the best possible targeting for their customer segments.

For example, sell a valuable ERP system to a business, and your business-defined customer segment includes these criteria. Your customers will be discoverable on Facebook, Instagram, and LinkedIn.

• Turnover
• Result
• Industry
• Number of employees
• Location
• Does the company export
• Does the enterprise import
• Number of establishments of the enterprise
• And practically all the other data found in traditional business registers (Customer Information, LeadCloud/Profinder…)

In other words, your company’s customer segment can also be found very precisely on the B2B side, regardless of the social media channel. In addition to the above list, all the criteria mentioned above can also be used, which are also commonly used in B2C marketing.

What is the cost of reaching the desired customer segment?

Let’s make an example calculation for each channel, showing how much it costs to advertise on each channel.

Google Ads advertising is designed to direct buying customers directly to your website when they search on Google’s search engine. Generally, you get customers to your website by paying one dollar for each customer. 

However, there is a different price for each keyword on Google, and most commonly, the price of a page visitor is on either side of a dollar, so let’s use this as an example. However, in some industries, a page visitor can cost up to $10, but prices are generally around $1.

The aim of social media is usually to increase awareness and ultimately send traffic to the site. The example below shows how much you need to spend on paid advertising on Facebook, Instagram, and LinkedIn per media budget to find your 10,000 most potential customers.

• Facebook - $100 per 10,000 impressions
• Instagram - $100 per 10,000 impressions
• LinkedIn - $300 / 10 000 impressions

With professional advertising, your company can reach your customer segment effectively and ensure that every dollar goes directly to the best target group of your choice.

How do I proceed once the client segment is selected?

We will be happy to help you identify the most potential customer segment for your business. Our company uses information from your company to help you define your target customer segment, and we can also use this information to directly identify the most likely customer segment. We have also run thousands of campaigns, and some of these campaigns are probably also for companies with a similar customer segment.

So feel free to contact us to define a customer segment for digital channels as well. With Kubla’s expertise, you can get your advertising dollars where they pay off and drive traffic to your website!

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