Data is the New Money: Using Marketing Segmentation to Drive Digital Growth

Ever filled out a survey and found yourself puzzled by some questions, wondering if that might really be how you’d behave? The truth is that your data often knows you better than you know yourself. Modern technology has become so advanced that it can reveal insights about you that even you weren’t aware of. And marketers – those savvy, profit-driven experts – are quick to capitalize on that.

We live in the age of big brother where our every move is being tracked and it’s more than likely that we ourselves have given consent for that. Our shopping pathways are tracked, our likes and clicks are tracked, our abandoned carts are tracked and that is just scratching the surface of how quantified our activities truly are. And all of this data is used to show you the perfect advertisements that align with what you actually need and due to this the digital marketing industry growth is skyrocketing.

If you have ever found yourself thinking, ‘I was just considering this product yesterday, and now it’s on my feed’? Rest assured, you’re not being spied on—it’s data at work, understanding you better than you might realize

So, how is it done? It’s this new-fangled thing called Customer Segmentation.

Understanding Customer Segmentation

As the name suggests, customers are divided into groups based on various factors. This approach helps a digital marketing strategist understand the unique needs and challenges of each group and allows them to create a consumer persona out of these groups and define their customer journey.

Hence, when marketers are creating campaigns for their products or services, they have the ability to ensure that these campaigns are tailored, well-crafted and accurately targeted to their audiences.

Marketing Analyst employe several different ways which are the bases for segmentation in business:

1. Demographic Segmentation: This type of segmentation divides the market based on demographic factors such as age, gender, income, education level, occupation, and family size.
2. Geographic Segmentation: Geographic segmentation involves dividing the market based on location, such as country, region, city, or neighborhood.
3. Psychographic Segmentation: This included psychological traits and how opinions drive buying behavior. This helps to understand the motivation behind consumer behavior and create an emotional connection with them.
4. Behavior Segmentation: This type of segmentation quantifies the behavior of the customer such as buying patterns, brand loyalty, product usage.
5. Technographic Segmentation: Technographic segmentation categorizes consumers based on their technology usage and adoption. An example of this are early adopters or laggards.
6. Firmographic Segmentation: This is the type of segmentation used mainly in B2B marketing where it divides businesses based on characteristics such as industry, company size, revenue, and location.

Types of Data Used in Segmentation

A typical digital marketing analyst is aware that there are three ways to procure data to divide consumers into segments.

1. First-party data: This is the data that is mostly collected from your own assets such as your website, social media channels or mobile apps. It provides insights into your customers’ behaviors, preferences, and interactions with your brand.
2. Second-party data: This data is acquired through partnerships with other firms. It involves sharing data between companies with complementary customer bases, allowing for deeper insights without the limitations of only using your own data.
3. Third-party data: This data is sourced from external companies that specialize in collecting and aggregating consumer information from various sources. It helps to enhance your understanding of broader market trends and reach new audiences beyond your existing customer base.

Why use Segmentation?

The divergence of most businesses and organizations towards segmentation is that it allows for such precise targeting in the digital marketing realm that was not previously imagined. The right advertising finds the right person without rarely missing the mark. This practice allows for conserving those precious dollars keeping the marketing budget from inflating on trial-and-error hunches. This targeted spending allows the digital marketing strategist to look good in a meeting where they can proudly claim that they were responsible for boosting the company’s ROI.

Case Studies

There are several examples of how companies use segmentation in the B2B sector and one of those is Microsoft Azure. Microsoft segments its customers based on the technology stack they use and their cloud adoption maturity. This allows them to cater to the need of their consumers in the sense that they can sell services such as advanced analytics to companies that are heavily invested in their cloud technology.

Microsoft has the ability to market their services to the relevant companies, upsell opportunities and create highly targeted sales strategies. This assists them in increasing revenue from existing customer base and further increase customer retention for them.

In contrast to this IBM, which also provides cloud services, segments in customers on the basis of firmographic segmentation. IBM offers different cloud solutions tailored to the unique needs of industries like finance, healthcare, and retail. Another variable for them is the stage of digital transformation journey of their customers. This approach has helped IBM better align its products and services with the specific needs of each segment.

Challenges and Considerations

Data gathering has the potential to intrude on the personal life of the any person especially if explicit consent is not taken. Hence, with the rise of stringent data privacy regulations such as the General Data Protection Regulation (GDPR) in Europe and the California Consumer Privacy Act (CCPA) in the United States, businesses face increasing scrutiny over how they collect, store, and use consumer data. Due to this, companies need to invest in building data governance policies and regulations and build data anonymization techniques.

It is imperative that organizations and digital marketing strategists focus on gathering data but implement measures of transparency between them and their customers to cement trust.

Furthermore, challenges present themselves in the increasing need of upgrading technology to have more real time data with the need for increased accuracy. And as consumer behavior and industry behavior fluctuates so does the segment. Consequently, businesses need to regularly review and adjust their segmentation criteria to reflect changes in consumer behavior and market trends.