You see it in office lunchrooms, at high school dances, and on social media: humans love belonging to groups.
If you’re looking to connect with members of a certain group, the best approach is to work off what they have in common – whether that’s a geographic location, career, or hobby. The same theory applies to your customers. To build relationships with them, customise your support for specific customer groups.
90% of consumers will spend more with companies that personalise the service they offer them.
Customers reward businesses that invest in personalisation. According to the Zendesk Customer Experience Trends Report 2022, 90 percent of consumers will spend more on companies that personalise the service they offer them.
But before you can start tailoring your customer support, you need to know which groups you’re targeting. Customer segmentation allows you to organise shoppers by shared traits so you can know how to personalise your interactions for each group.
Customer segmentation vs. market segmentation
The main difference between market segmentation and customer segmentation is the goal behind each process.
Market segmentation is used to gain new customers and develop new markets. It also encompasses the entire market – not only your current customers but also your competitors and potential customers.
Customer segmentation, on the other hand, is more specific and provides a detailed view of your existing buyers. You can use this data to attract new customers, but it’s also helpful when you’re trying to retain customers and foster customer loyalty.
Why is customer segmentation important for support teams?
Our Customer Experience Trends Report found that 68 percent of consumers expect all their service interactions with a brand to be personalised. Customer segmentation is the key to offering those customised experiences.
Customer segmentation allows you to tailor your support experiences to the needs of certain groups. This shows buyers that you care about them and understand them – leading to increased satisfaction and engagement.
Companies that use advanced personalisation see a return on investment of 20:1.
“Treating customers differently based on their needs is one of the most important ways to have a meaningful relationship that builds growth and loyalty” Collet says.
According to a Liveclicker report, companies that use advanced personalisation see a return on investment of 20:1. This ROI isn’t surprising when you consider how customer segmentation enables brands to improve their support and marketing efforts.
By segmenting customers, companies can achieve the following:
Offer hyper-relevant solutions
There’s often not a one-size-fits-all fix. Different customer segments require different solutions.
“Imagine offering a small-business customer the solutions you have available for enterprise customers” Collet says. “It would be overwhelming to hear that you should create your own integrations with developers you don’t have and professional services you can’t afford.”
On the flip side, if your support team only catered to small businesses, it would cause big problems for enterprise customers.
Collet adds “what if the only way to get help as an enterprise customer is through self-service? Time is ticking for your deadlines, and you have production-impacting needs that demand urgent and customised subject-matter expertise.”
Segmentation fixes such issues. Grouping your customers by business size, for instance, gives the support agent a guideline to follow when offering solutions. If it’s a small business, the agent will focus on simple solutions the client can handle on their own. If it’s an enterprise, the agent will provide thorough, high-touch resolutions to match their complex needs.
Provide faster support
Segmentation streamlines the support experience, too, allowing agents to resolve issues faster.
When a segmented customer makes contact, the agent already has the information they need to immediately tackle the problem. If you use customer service software, the platform can automatically capture details from the customer’s initial query and compare it to similar issues reported by other customers in the same segment. This can help the agent find a solution faster.
Customer segmentation can also ensure you connect the customer with the right agent the first time around. “It’s the worst customer experience to be told ‘oh, sorry, I need to get you to another team’” Collet says.
Minimise multiple transfers by assigning agents to certain customers based on their segment. For instance, agents focused on one product line or customer type are familiar with the issues commonly encountered in that group, so they can answer questions quickly and thoroughly.
Boost marketing efforts
Using segmentation in customer service can positively impact other teams as well. For example, customer segmentation may be used to increase the relevance of your brand messaging and marketing campaigns.
Say you identify a sizable group of customers that left a competitor because they wanted a particular product feature that only you offer. This type of information is gold for your marketing team. It allows them to get incredibly specific with both their messaging and their recipient list.
5 types of customer segmentation
There are various ways to group your customers, and you need to pick the right one for your company and business goals.
“There’s not a universal segmentation prescription that is equally meaningful for all businesses” Collet says. “You have to look at the data and see which customer segmentation model makes sense for your customers, agents, and the business.”
Not sure how to segment customers? Many businesses sort their audience based on five segmentation models.
Demographic segmentation means splitting customers by gender, age, income, education, marital status, or geographic location.
Marketing teams often use demographic data gained from market research. They’ll personalise their messaging for customers in a particular age group or a certain region.
Support teams can use it, too. Age segmentation can give your support agents a heads-up on communication preferences. Younger customers will likely prefer chat or social media support, while older generations will appreciate an email or a phone call.
Age segmentation can also help your reps adopt the right tone for communicating with different customer groups. If you’re conversing with a Gen Z shopper on social media, break out the emojis. If you’re sending a Baby Boomer an email, you’ll likely use full sentences and a formal tone.
Customer segmentation example
In times of crisis, you might decide to group customers by region to offer specialised support. This segmentation model enables agents to quickly reach out to affected groups and provide extra help if needed.
Behavioural segmentation is the process of dividing customers according to how they interact with your brand.
Recognising buying patterns and identifying how your product or service is being used will give you powerful customer segmentation data. Leverage this information to enhance your offerings and your customer service.
For instance, if a large group of customers is contacting your support agents with similar questions, you can create a help desk resource that addresses those issues. This will not only improve your customer support experience but also make life easier for your agents.
Support interactions can even provide data on the customers who may be open to an upsell or cross-sell. When you know which customers are more likely to make repeat purchases from you or to upgrade their plan, you can focus your cross-selling and upselling efforts on those segments.
Segment customers based on the lifetime value they provide to your business so you can allocate support resources where they’re needed most. If a certain type of customer isn’t generating a lot of revenue, you may want to rethink the level of support you’re offering them.
“Let’s say a small business is calling your support team two or three times a month” Collet says. “Maybe you know the cost per unit for a phone call is $45, and those small businesses pay only $15 for the product. You might want to take a closer look at phones as an unlimited channel for that customer segment.”
The best approach isn’t necessarily cutting down on those services. Instead, try to find cost-saving alternatives – such as self-service options – for lower-revenue-generating customers so your agents can spend more time helping higher-value customers. These clients are also far more likely to have complicated support issues that a help center or chatbot can’t solve.
Customer segmentation example
Your support team identifies the questions asked most often on phone calls and creates ways to address those issues outside of a phone call. Perhaps you can offer the answers on an FAQ page or community forum. Or, you may find that you can make a product improvement that deems the common questions unnecessary.
Technographic data tells you how familiar and comfortable customers are with technology. It also indicates what types of technology they prefer to use; the best way to gather this information is through customer surveys.
Technographic segmentation is particularly useful for software as a service (SaaS) companies that develop new products that can work well with other solutions. Say you want to build integrations for your company’s content management system. You could survey your customers to learn what apps they currently use and would like to integrate with your product.
Or, imagine your company wants to create a mobile application but only has the resources to build it on one platform. Knowing whether the majority of your customers are iOS or Android users could make that decision easy for you.
5. Lifecycle stage
This segmentation model involves grouping customers based on where they are in the customer journey. It highlights how customers’ support needs change as they move through different stages of their lifecycle.
“Instead of having basic questions on how to use your product, veteran users will ask questions to help them maximise your product’s efficiency” Collet explains. “As their business grows in complexity over time, their support needs are likely to grow in complexity as well.”
Lifecycle segmentation is especially important with long-term B2B customers. These clients are likely to continue growing the longer they stay with your company, which means their support needs will change, too. B2B customers tend to heavily rely on support to help their businesses expand.
“As a customer, as my business succeeds and my needs grow in complexity and urgency, support treatments grow with me” Collet says. “This is an important element of trust – that across my lifecycle as a customer, I will always have a partner who is in lockstep with me.”
Customer segmentation example
Customers often need a lot of support during the onboarding process. In this stage, they’re getting used to using your product and likely experiencing issues on a regular basis. In response, your agents might plan to check in regularly with customers while they’re onboarding and then gradually reduce their support after a couple of months.
Steps to building a customer segmentation strategy
Your customer segmentation strategy is your roadmap to how and why you’re organising your audience. This plan should describe the reasons you’re using segmentation, the model you’re choosing, and the ways in which you’ll measure success.
Step 1: Know your goals
Before you define your customer groups, think about how segmentation is serving the bigger picture – your business and your customers.
Start with identifying your company-wide goals. Reviewing these objectives will help you determine which segments best complement the company’s larger customer experience strategy.
“If the company strategy is to focus on cost efficiency, it may make sense to focus a segment on self-service and bot-powered experiences” Collet says.
Consider your customers’ goals, too. If clients report that onboarding takes too long, you might use segmentation to allocate more agents to early-stage customers.
“Asking ‘how can I best divide up segments to maximize the quality of support in alignment with customer needs?’ is a primary way of creating a segmentation strategy,” according to Collet.
Step 2: Identify the best way to segment your customers
With your goals in mind, decide which segmentation model makes the most sense for your customer groups.
Begin with segments that already exist within your company. If other departments are using customer segmentation, try their models first. When all the teams in your business segment the same way, you gain a common framework for discussing customer needs.
“If your sales team or success team is using a segmentation strategy, try on those definitions for yourself” Collet advises. “You might be surprised at how meaningful they are to you. It may power up your partnerships with those teams so you can build support treatments in concert.”
If other team segments don’t work for support, create your own support-specific segments that closely align with your goals. Say your support team isn’t scaling solutions well based on customer business size; you could segment by company size to offer more tailored treatment.
Step 3: Revisit your strategy regularly
For support teams, the whole point of segmentation is to provide personalised customer service. Delivering tailored experiences should streamline your problem-solving process and increase customer satisfaction and loyalty. Segmentation should also help agents understand your audience better and reach solutions faster.
If you’re not seeing these outcomes, you’ve probably segmented your customers by the wrong traits – and that’s okay. You may not choose the right segments the first time around. What matters is taking action and adjusting your segmentation strategy when your tactics aren’t working.
Be prepared to revisit your strategy regularly and make changes as needed. It might take some time to find the groupings that work best – don’t give up.
Pick the right customer segmentation software
Not sure how to start segmenting your customers? Instead of doing it manually, you can use reporting and analytics tools that automate groupings and present customer information in a clear way.
Look for a customer service solution that has:
- Robust filtering options to drill down on the right customer segments
- Sleek dashboards and charts to show segmentation data
- Sharing and collaboration options to share key insights with stakeholders
With instant access to customer insights, you can fine-tune your support experience and provide the personalisation your audience wants and expects.