Why Use Customer Segmentation Models to Improve Loyalty Marketing Campaigns?
- Posted on December 17, 2022 by Robert
- Reading time about 5 minutes
Loyalty is more important than ever for every business, irrespective of which industry they belong to. With thriving competition in the business era, it is essential to understand that every customer is unique. When it comes to the creation of a loyalty marketing strategy, the business should be aware that customers have unique needs, preferences, communication channels & behaviors. This leads to the need for segmentation for your customers.
In this blog, we will learn about customer segmentation, its significance for customer loyalty campaign management, and the type of segmentation models that must be considered.
Customer Segmentation & Its Significance
Customer segmentation is the approach where marketing professionals divide their customer base into specific groups to help them deliver more effective communication along with a personalized experience. These customer segments are based on different aspects such as demographics, psychographics, preferences, or even behavior.
For instance, customers can be segmented based on demographics such as age, gender, or location –and these aspects can be combined with preferences like how customers like to be contacted, and the number of transactions. Segments can be as simple, detailed, and granular as per the preference of business needs.
To define the right customer segmentation strategy, your business needs to understand who your audience is, their specific needs, and behavioral tendencies. Doing this enables businesses to make use of the right budget and resources to provide more personalized communication that helps to make your business grow faster.
Top Benefits of Customer Segmentation
Defining an effective customer segmentation strategy offers a huge range of benefits to any business. Here are some of the best ways that show how customer segmentation helps businesses-
– Better Communication
By knowing your customers deeply, your brand knows the channel they love to communicate through and makes use of relevant rewards with a personalized experience, increasing higher response rates.
– Increase in Marketing ROI
This helps to determine which customer segment is profitable and which one is not, helping brands decide the one they need to focus on more. Eventually, revenue will grow to stabilize the customer base.
– Higher Customer Lifetime Value
As you know your customer better, you can improve customer experience with custom offers tailored to the preferences of specific customer groups.
– Products/Services Enhancements
If you know what encourages your customers to buy from your brand, you can tailor products or services that suit their needs more effectively, increasing customer satisfaction.
– Gain a Competitive Advantage
Preparing a well-defined customer segmentation strategy helps in enhancing brands to clear distinctions from competitors and even prepare bands to adapt to any market changes and stay ahead of the curve.
Types of Customer Segmentation Models- To Help You Choose Better
Customer segmentation enables businesses to divide their customers into different segments, which can be used to target customized loyalty campaigns at the right time. With many customer touch points that must be considered, here are the most relevant ones-
In this aspect of demographic segmentation, customers are divided by their social characteristics such as age, location, gender, age, etc.
Another one is psychographic segmentation where customers are divided as per their personality, attitude, interests, values, etc. For the fashion industry, the audience can be based on their size, favorite store, or product.
Depending on the industry type, data points will be different as every business has its unique needs.
One of the most important attributes while building customer segments is behavior, which enables brands to get information on customer trends, habits, and product usage. E.g. amount spent on transactions, number of transactions, data of purchase, redemption rate, etc.
With the evolution of AI, ML, etc., and the best business loyalty program, companies can create segments based on Customer Lifetime Value (CLV) Trends. This enables them to focus on targeting the best customers with personalized promotions and communications.
– Campaign Responses
This type of customer segmentation decides the way customers wish to receive communication, which is email, SMS, push notifications, etc., the channel they want to use for enrolling in a loyalty program- mobile app or website, number of referrals.
The response generated through this method helps to award customers based on different recognition tiers, which can be another aspect of segmentation.
– Different Conditions
The last type is segmentation based on multiple characteristics simultaneously. For example, members can be targeted based on membership type only or membership along with location & purchase of a specific product.
The good customer segment is narrow, specific & often contains small groups as it helps to personalize the campaign at its best level.
For effective customer segmentation, understanding customers’ needs and behavior is the first step a business must focus on. To prepare for all segmentation possibilities, businesses must define goals, resources, and unique selling points & crucial data points. This not only enables brands to target the right customers with more profitable opportunities at the right time but also helps in the retention of loyal customers & higher sales and revenue in long run.
If you want to scale your business with the right loyalty program followed by a customer segmentation strategy, the renowned rewards program platform, Novus Loyalty can help you attain your business goals faster and more effectively. To know more about the most preferred customer segmentation model and build the most effective loyalty marketing strategy, book a demo with our experts and see how Novus can help in personalizing loyalty marketing campaigns.