5,044,748. That’s the number of new businesses that were started in 2022. I don’t know how you feel about the number, but I hope it makes you take your customers’ satisfaction more seriously because other businesses like yours (maybe better) are looking for any loophole to take your customers.
For many businesses (including yours), customer satisfaction is the difference between success and failure – so your customers must always think of your brand, smiling. This is where customer segmentation comes to play.
What is customer segmentation?
Customer Segmentation is about understanding your customers – who they are, what they do, and how they behave – and grouping them primarily based on shared characteristics. Segmenting your customers sheds light on their needs and gives you the insight to develop a marketing strategy tailored to them.
In other words, segmentation differentiates you from the 68.6% of companies that don’t understand how their customers think.
So how does customer segmentation help customer satisfaction?
What’s a successful business without happy customers?
Happy customers will more likely become ambassadors for your brand – leaving positive reviews and referring others to the business – increasing revenue and retention rates and improving your business’s reputation. Inversely, if you piss your customers off with your product/service, they will turn on you and hunt your business, which can harm your sales and reputation.
What does segmentation have to do with all this? With segmentation, you can introduce your audience to products/services that will most likely satisfy their needs. Let’s see how:
Analyzing customer feedback. NPS and similar customer feedback surveys are good methods for measuring customer satisfaction, but you can’t rely on them alone typically because only a fraction of customers participate.
The surveys alone are not enough to give tangible insight into what your customers feel. And, because the NPS lacks context – it doesn’t provide the complete picture of why a customer is a detractor and what you can do to improve it.
Collecting feedback from different customer segments makes it easier to identify common issues to make the necessary improvements and understand their true satisfaction at that given time – and this is because you already know your customers. Also, by segmenting your customers by satisfaction, you can decide on the best action for each segment and prioritize them by their potential business impact.
Personalized strategies. Tailoring marketing messages, products, and promotions to specific customer segments can help you create a unique experience that improves satisfaction, loyalty, and advocacy while optimizing resources and reducing costs.
For example, if you run a T-shirt business and one of your customer segments are female teenagers (probably a little more detailed than this), you can offer promotions on products that are popular with the demographic or develop a strategy that resonates with them.
Example of successful customer segmentation that increased customer satisfaction
Case Study: Real-life brands using customer segmentation to increase customer satisfaction and brand loyalty.
Apple’s Segmentation Strategy
In 2021, Apple was named the most valuable technology brand by far, beating Google and Microsoft, which ranked second and third place.
Ever asked yourself why they are so successful? No, it’s not about money. Apple’s success is about keeping customers satisfied to earn their trust and loyalty. But how does Apple achieve high customer satisfaction? Here we go…
Their segmentation strategy.
Apple targets a specific group of customers based on their demographics, interest, and behaviors. Their products are typically priced higher than their competitors in the market, but they’ve been able to attract a large and loyal customer base by targeting their products to people with high-income and posh lifestyles.
I won’t say I’m surprised that most Apple stores in the US are centralized in California and New York. They are there to attract customers willing to pay premium prices for quality and innovation. And they deliver.
Apple delivers top-quality products to its customers, which leads to satisfaction, causing unwavering loyalty from their customers. The company is successful because they know its customers and bring newness and innovation with each product.
Another segmentation strategy used extensively by the company is product-related segmentation. Every Apple device is targeted to different segments of consumers, and the features in the products are built around their needs – so are the marketing messages to emphasize the features most important to them. For instance, the MacBook Pro is marketed to creative professionals who need a powerful yet portable device for demanding tasks.
Apple also hires empathetic and customer-obsessed employees, which means that they take their time to study customers’ behaviors with different technologies so that they can deliver excellent services.
Amazon’s Personalization Strategy
We can’t discuss brands that nailed customer segmentation without mentioning Amazon’s personalized recommendation system. Amazon uses a sophisticated recommendation engine to show people items they are most likely to buy (based on past purchases, searches, and browsing history). This segmentation cum personalization strategy helps to increase customer engagement and sales because customers are more likely to purchase products if it’s relevant to their interests.
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Another thing Amazon does well is use segmentation to create a personal experience for their customers. Every time a customer lands on Amazon, they are welcomed with a homepage that is specially designed for them based on their previous behaviors. However, these personalized landing pages are not a one-time solution; they change with the customer’s real time-behavior on the platform.
By tailoring recommendations and landing pages to each customer’s interests and preferences, Amazon can create a personalized shopping experience that keeps users coming back for more because they feel heard.
Quick Note: if you want to learn the nitty-gritty of customer segmentation – the models, benefits, and real-life use cases – read this guide.
You can segment customers in multiple ways (think Apple) to drive revenue, identify bottlenecks in your customer experience, and gain unprecedented insights into your customers. When businesses leverage the insights they get from segmentation, their marketing strategies and decision making become stronger and more tailored.
To recap, some of the key benefits of customer segmentation for prioritizing customer satisfaction include:
- Improving the business’s reputation through positive reviews and referrals
- Developing personalized marketing strategies that resonate with customers
- Identifying bottlenecks and making necessary changes
- Improving overall customer engagement and satisfaction
- Increasing customer retention rates and revenue