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Why segment customers?

Here, we look at the benefits of segmentation and the difference they will make to your marketing message and wider business.
A formiul aof success with symbols of a graph chart, cogs and lightbulbs
© ULAW Business School

Here, we look at the benefits of segmentation and the difference they will make to your marketing message and wider business.

The benefits of segmentation

The benefits of grouping potential customers can be summarised as:

Ability to better tailor your message – segmentation allows you to leave behind a one-size-fits-all mentality in your messaging to potential customers. One product or service may be used differently by different groups and your message can reflect that knowledge.

Improve customer experience – great customer experience cannot be designed and delivered without segmenting your customers first. Understanding what each segment is looking for will be your blueprint for designing a great experience.

Reducing churn – happy customers that feel understood and cared for are less likely to leave and look for alternatives in the market. Targeted communication and personalised recommendations will go a long way towards keeping your customers feel valued.

Improved revenue – happy customers are more likely to stay with you longer, spend more, are more likely to try new products and recommend your product and brand through word-of-mouth.

Price optimisation – using segmentation will show you which group of people are most likely to bring larger revenues if promoted at the right price for that segment. By offering two product packages to two different segments, you can keep more customers satisfied and both groups coming back for repeat purchases.

Differentiate your brand from competitors – being more specific about what value you offer customers, i.e. the company’s value proposition, also allows you to stand out from your competition and appeal to a more specific and maybe even niche group of customers.

Identify the most effective marketing tactics – there are many marketing strategies available for a marketer to test out. With a deeper understanding of the segments, the selection of the right tactic becomes an informed choice, rather than a stab in the dark.

© ULAW Business School
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Strategic Marketing: Segmentation, Targeting, Positioning

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