“What does a customer want?” For most businesses, this seemingly simple question is becoming hard to answer, as they face increasingly diverse consumers with ever-evolving preferences in a crowded marketplace teeming with choices and shifting trends.
In search of answers, they are diving headlong into unearthing consumer behaviors and preferences and creating largely watertight customer categories with specific personas in mind. In this, audience segmentation is emerging as their go-to option. The most obvious reason is: the more segmented a customer base is, the easier it is to narrow down on their likes and dislikes and create products and services that find assured takers.
Now, many companies are going beyond regular segmentation into hyper-personalization, i.e., creating highly narrowed-down consumer personas. This is why quite a lot of them are finding themselves left with impractical customer categories that make little sense when developing a product, a service, or even a marketing campaign.
This is when businesses need to immediately stop and reassess their customer segmentation strategies. While they cannot simply eliminate segmentation, it is becoming imperative they ask themselves: are these categorizations serving our broader business goals?
Why Going Overboard with Segmentation is a Growing Problem
On the surface, it’s easy to see why businesses are opting for over-segmentation. Today’s consumers are demanding more and more personalized experiences.
Businesses are also complying accordingly, making good use of the explosion of data, advanced analytics, and AI-driven marketing tools that are making it easier than ever to dissect customer bases into minuscule segments based on everything from shopping habits to personal interests. From apparel stores keeping separate sections for kids, teens, and adults to restaurants offering vegetarian, vegan, and gluten-free food options, they are keen on reaping the advantages of segmentation.
However, when put into practice, businesses are realizing that too much segmentation often leads to diminishing returns. As they shift their focus on ever-smaller segments, they’re no longer able to create coherent strategies that appeal to each. This is also putting them at further risk of losing sight of the big picture by failing to connect with broader, more valuable audiences.
This is when the alarm bells start ringing for businesses, signaling that segmentation is starting to become unmanageable. It’s a sign that they must course-correct to ensure their segmentation strategies remain effective, practical, and aligned with their overall goals. But how?
Purpose-Driven Segmentation: The Need of the Hour
The good news is that many businesses are waking up to the pitfalls of over-segmentation and are taking corrective and even preventative measures with in-depth audience segmentation analysis.
Realizing how one of the most significant challenges of over-segmentation is the lack of clarity about its purpose, they are creating defined goals—whether it’s improving product development, guiding media strategy, or informing the creative process—to inform their marketing and business strategies.
They are also taking into consideration the frequent changes in consumer behaviors based on specific occasions, time of day, or the type of purchase they’re making. This is why many brands are opting for occasion-based segmentation, which is proving to be effective, especially for catering to customer categories where moods and needs are often in flux.
Dynamic segmentation, which does away with rigid, static segments that don’t evolve over time, is another way businesses are responding better to changing customer behaviors, preferences, and trends. This is enabling them to adjust their strategy based on real-time data.
In other words, keeping segmentation goals in line with operational and business capabilities is becoming—and should be—a priority for businesses.
Going Beyond Data to Unearth Distinct Customer Motivations
While most businesses find it tempting to rely solely on quantitative data such as demographics, shopping behaviors, and transaction history while performing audience segmentation analysis, many are going deeper into creating insightful customer profiles that take into account their personality traits, motivations, needs, wants, and values.
This is where qualitative insights are playing an increasingly important role in helping businesses grasp what drives their customers’ decisions: are they motivated by status, convenience, or sustainability? What emotional triggers are most likely to resonate with them? Answers to these questions are enabling them to create segments that make more sense from a business as well as a human point of view.
Our online community and loyalty management platform helps businesses get answers to all these questions and more. Our AI and ML-enabled platform helps brands build and manage digital customer communities, conduct market research, and generate real-time insights for crucial business decisions. While it empowers businesses to manage their entire online community lifecycle, its advanced features, such as facial recognition, emotion tracking, APIs, and custom community creation help them glean crucial insights from qualitative customer data.
As an added advantage, our platform enables businesses to eliminate needless customer categorizations by aiding in tasks like creating landing pages for recruiting niche audiences and customizing interfaces for launching a variety of research methodologies targeting specific customer profiles. This is helping them gain better insights into segmented customer bases and earning the long-term loyalty of their customers.
Drawing the Line Between Segmentation and Personalization
Amid rising competition, personalization is becoming an immensely essential aspect of creating winning strategies that are transforming everything from product development to marketing campaigns. This means businesses cannot afford to do away with customer categories. Instead, they need to find the fine line between personalization and segmentation overload—creating segments that are detailed enough to be effective but not so detailed that they become impossible to manage.
Before diving headfirst into creating the next ultra-specific segment, businesses should first take a step back. They need to ask themselves whether the segmentation strategy they’re developing aligns with their overall goals, whether it’s manageable, and whether it allows them to connect with their audience better.
Businesses designing their segmentation strategies with their end goal in mind are finding it a lot easier to avoid the challenges that come with hyper-personalization and extremely reductive categories. It’s time more companies join their league and rethink their customer segmentation strategies. It is only when they start modifying their categorization approach to align more with their overall business objectives that they will witness segmentation transforming from a potential hurdle into a powerful tool that drives market success.
