Written By: eyos Marketing | Last Updated: February 2023
Retail segmentation enables brands to dramatically improve the success rates of marketing strategies simply by ensuring the relevance of each and every interaction.
Using powerful data gathered via several different channels, companies can start to analyse the information they hold on customers. Retail segmentation can then be used to optimise the customer experience according to customer preferences and other factors.
In this article, we’ll explain how customer segmentation works in marketing strategies and explore some of the most common ways of using segmentation to improve the ROI of campaigns.
What is Customer Segmentation in Retail?
Customer segmentation refers to a brilliantly intelligent way of using data to optimise the experience of every customer.
In retail segmentation, companies analyse existing customer data, segmenting it into many groups. Data can be split in many different ways. How teams decide to segment data depends on the industry they’re working in and the specific targets they have in mind for upcoming campaigns.
Typically, customer data will fall into clear segments depending on the requirements of different groups or how they might use the product or service being marketed.
The Benefits of Customer Segmentation in Retail
Customer segmentation provides unparalleled benefits in terms of marketing.
Using segmentation, teams can create uniquely engaging and inspiring campaigns that are guaranteed to pique the interest of the customers they’ve been designed to target. And they do so because they’ve been written with those customers’ specific interests, preferences, frustrations and pain points in mind.
Take a look at some of the main benefits of using customer segmentation in retail below.
Improved Customer Satisfaction
Customers who receive communication that they feel is relevant will always feel more valued by a business. This is particularly important for brands looking to nurture loyalty and retain existing customers.
Brands can rapidly improve customer satisfaction levels simply by segmenting data to create a range of campaigns designed to meet the needs of different demographics.
Higher Conversion Rate
The more relevant a campaign is to those receiving it, the more likely it is to be acted upon.
Retail segmentation, therefore, provides the means for brands to ramp up the conversion rates of every campaign. Of course, this is great news in terms of ROI. It also allows companies to cut down on waste by ensuring campaigns are not sent to customers who are unlikely to act upon them.
Better Engagement Rate
By focusing on tailored, personalised communications, brands can significantly improve the engagement rate of everything from marketing emails to paid advertisements.
Segmented data provides new opportunities for companies to talk directly to the customer groups they have in mind, allowing them to maximise the engagement rate of every piece of content shared.
Retail Segmentation Examples
There’s no one size fits all guide to retail segmentation because the best way to segment data really depends on how data is going to be used.
Some of the most common ways of using segmentation in marketing use location, gender, age and profession. Device types and seasonal factors such as weather can also be used in segmentation strategies.
Location is one of the most common ways of splitting data, and it’s also one of the most important. By splitting customer data according to location, brands can ensure that customers receive information, promotions and offers that apply to those in their geographical area.
Brands often use gender as a way of segmenting data. This is particularly prevalent amongst fashion companies, where a person’s gender tends to have more of an influence over the type of products they might be searching for.
Different demographics shop in completely different ways, which is why age is another crucial factor in customer segmentation. Brands often split data according to customers’ ages to ensure that groups of customers receive the marketing campaigns they’re most likely to respond well to.
Seasonal factors should never be overlooked in the planning of marketing campaigns. Some brands, such as food and beverage companies or outdoor event planners, see huge changes in customer demand as a result of external factors such as the weather. In such cases, campaigns might be planned and launched according to upcoming forecasts.
Some customer segmentation strategies are far more complex than others. Intricate strategies sometimes include factors such as customers’ professions to split data according to the products and services that could be of interest.
This is common amongst B2B brands, where the profession of those receiving marketing communications will have a greater impact on their typical buying journey.
To ensure the best possible experience, it’s well worth segmenting data according to device type. Doing so means that customers are more likely to receive campaigns in a format that suits their chosen device.
We always recommend that brands consider how a campaign might work across multiple channels, as consumers may switch between devices as they consider a purchase.
How to Create Retail Segmentation Strategies
There are many ways to create retail segmentation strategies. Consider what you hope to get from a campaign and what your specific targets are to decide which strategy might work best for you.
A concentration strategy allows brands to focus their attention on a single group of customers. When a group of customers has been identified as being most likely to engage with a campaign and ultimately convert, concentration strategies are used to maximise the potential of specific campaigns.
If a product or service is suitable for several different customer segments, a multi-segment strategy might be employed. In such cases, communication is carefully tweaked and tailored in accordance with the known preferences of different segments. This makes it more likely that individuals will respond favourably to the campaigns they’ve been sent.
Get Advice from eyos retail
Retail segmentation provides exciting opportunities for brands in all industries, but its success relies on the quality of the data behind it.
At eyos, we provide retail software solutions that enable brands to identify in-store customers through digital receipts, connecting 100% of in-store transactions to any platform they use in real-time.
To find out more about how you can collect and analyse data gathered through both in-store and online interactions, talk to the team at eyos retail.