In general terms, we all know segmentation is the process where customers are grouped on the basis of certain recurring characteristics. These groups are known to be “segments”.
What is micro-segmentation then?
Micro-segmentation is an evolution of general segmentation that helps modern marketers take a sharp-edge approach towards marketing.
Customers are further divided into much granular, niche groups on the basis of several specific characteristics, including behavioral attributes and other factors. It helps marketers focus on a very unique, targeted customer persona that might be limited to a handful of individuals. This is what you call a micro-segment. Marketers carry out predictive analysis with a high degree of accuracy to create campaigns that extremely need centric.
It is like a company’s defined space of customer base that is selected using the vast amount of data that a company has of its users, for the purpose of sending them highly relevant and personalized marketing data
What is micro-segmentation marketing all about?
The practice includes dividing customers into four general segments on the basis of – demographics, geography, behavior, and lifestyle then further divide each group by drilling down more. Geography, for example, could be broken down into regions, then states, then cities, then neighborhoods. Behavior is the customers purchasing behavior which could mean frequent purchases, seasonal-only purchases or their purchasing history. And lifestyle simply could be – adventurer, fashionista, world traveler and tech-savvy. Put in simple words, Micro-segment marketing is simply a way to personalize all campaigns sent to a micro-segment.
Micro-segmentation Marketing Vs Traditional Marketing
You cannot get through micro-segmentation without digging into its space alongside classic market segmentation.
Traditional market segmentation is what companies adapt in order to establish their ideal customer base so they can focus their marketing spend on the users that are most likely to convert. Traditional segments are a very generic part of your users, selected on the basis of four distinct parameters of data:
- Demographics: by age, gender, income, education
- Behavioral data: by app usage, brand preferences, purchase patterns
- Geolocation: by location, typically country, region, or city
- Psychographics: by lifestyle, values, social class, preferences
Micro-segmentation, on the other hand, can be as granular as: – “unmarried females aged 18-32, located inTexas, who have abandoned their cart in the last 60 days, who have purchased Victoria Secrets, and who are highly likely to convert when given a free shipping discount.”
A micro-segment, therefore, takes from the general bucket of a traditional segment and trim it down further, using a machine and AI-enhanced tools and algorithms such as RFM Analysis, and Intent-Based Segmentation. But like any other tool, having just a little piece is not enough of course. In order to make optimum use of a micro-segment, you need a solid micro-segmentation strategy in place.
In order to make better use of a micro-segment, you should be able to recognize where a user is in your customer lifecycle. Some questions that RFM answers:
- When was the last time the user launched the app? (Recency)
- How often does the user return to the app? (Frequency)
- Has the user purchased anything? (Monetary value)
Basis these questions, you can personalize your campaigns even more. This way, you will just need to update your frequent buyer with the latest updates/offer in your catalog. Meanwhile, a new user might need a better explanation of the app’s benefits and features so they return to it more often.
Intent-Based Segmentation is a feature that makes use of AI-enhanced predictive capabilities to calculate the probability that users will achieve a defined goal. For instance, you identify a general demographics segment for “users living in Dubai” and create a goal to “Eminem concert tickets by March 30.” You can use Intent-Based Segments to show how many of your Dubai-based users are likely to buy tickets.
How do you create Micro segments in marketing?
A lot of factors decide about how business categorizes its customers into micro-segments: the size of the database, information collected, types of customers, and if the business serves local, regionally, nationally or worldwide, etc. Although there are complicated algorithms and data analysis involved in serious micro-segmentation; However, small businesses can do the initial legwork themselves just by evaluating their customers’ behaviors and looking for patterns in clicks, abandoned carts, purchase history, and returns. The idea is to start broad and then narrow the category down to the lowest common denominator.
How does micro-segmentation work in marketing campaigns?
Micro-segmentation can be used in marketing campaigns to amplify the effectiveness of your marketing campaigns by making them hyper-targeted. When a marketer creates a micro-segment, they have an accurate portrait of their customer based on their personal and behavioral attributes. Powered by this insight, marketers try to infuse value in the user’s life with highly contextual and personalized communication that promises to engage with the micro-segment.
Here are some automation features to consider:
1. In-app messages
For companies with their own apps, “in-app messaging” can be highly effective when incorporated with a micro-segmentation marketing strategy. Because the customer has to be using the app at the time the message is sent, this works best for businesses with heavy usage of their app. Music apps like Spotify & youtube do a good job of micro-segmentation of its customers based on their listening habits then use its in-app messaging to create a “Recommended for You” playlist.
2. Push Notifications
Unlike in the app-messages, which require the user to be logged in the app at the time of receiving the messages, push notifications on the other hand just require the user to have opted in. the challenge arises with brands that have more iPhone users since they only have a 50% opt-in rate and apple has separate opt-in for every single app.
In this case, behavioral segmentation helps shooting up the marketing efforts on the contact methods that are limited and also helps cutting down the irrelevancy of texts that may seem intrusive to the customer. Push notifications that show software upgradations or say alerts for events, usually follow the segmented customer base model. Also, thanks to the geolocation feature and check-in feature on social media like Facebook, businesses can easily set up a trigger notification when the person is in that specific location or near a particular cafe/restaurant/shop.
In a 2014 survey, Infosys found that 71% of consumers would be more likely to purchase from a retailer again if they were offered incentives based on location.
Location-based micro-segmentation marketing works a better business catalyst for the food & beverage company particularly since its all location-based, the recommendations especially. However, factors like – gender, age, income, lifestyle contribute as well; location being the highest contributor.
3. Text Messages
The Pew Research Center reports that the top use of cell phones is texting, with calls scoring the 6th position. With more than 80% of adults in the U.S. using texting as the prime mode of communication, that’s a piece of good news for businesses because a niche market strategy can maximize the chance of reaching the targeted customer base via their favorite contact method, even when they have a limited marketing budget.
Consider how beauty & hair salons, massage parlors, and other similar service-related businesses could fill in the gaps by sending out text messages to only female clients with disposable income who live within a certain radius and are retired, non-working without young children at home, or who own a home-based business and therefore have some flexibility in their schedules.
Email marketing has been and still offers the best ROI in comparison to other marketing channels. It is very shareable and convenient when it comes to marketing, which can increase a business’s reach and results drastically if optimized and customized accurately.
5. Web Messages
Web messages are the fresh, interesting and persisting form of marketing. The visitors on the website can be filtered and targeted based on the customer segmentation model. Marketers write short notifications for only certain groups of visitors – repeat visitors or traffic coming from Google searches. The Web messages can be helpful for the purpose of taking surveys, from the micro-segmented audience created via the customer segmentation model mentioned above.
Web messages can be used for multiple reasons, helping businesses gather emails and data from surveys they created in order to personalize the experience for the visitors. For instance, a shoe store’s e-commerce site could learn more about how and what features the customers like on the website, what they’re looking to buy, how old they are, what is their location and what their foot size is.
Future of Micro-segmentation
Brands need to justify their marketing spends, while it is hard for them to convince the consumers at the right point of time. With consumers actively becoming mobile. Considering average users using up to 3.5 devices for online activities and a fall in the average attention span to around 8 seconds, marketers are fighting it hard to grab the customer’s “Attention” at all times. And the hardest part of mobile marketing is that most marketers aren’t aware of the metrics that are needed to track the success of their mobile marketing efforts.
Micro-segmentation is the key and therefore is a rising practice because it provides a hyper-targeted vision to each marketing campaign and hence, doubles the possibility of a conversion. Since users are looking for experiences that add value to their lives, so context should be the propaganda in this aspect. Micro-segmentation can help brands create highly contextual data that is actually relevant to users, and estimate learnings from these activities to carry out predictive analysis with an aim to retain the customers over a certain period of time.
Benefits of using micro-segmentation:
- 70% of consumers say they prefer personalized ad content and videos.
- Email campaigns that are customized for the customer are 26% more likely to be clicked and opened.
- Personalized experiences result in an increase in sales.
- Fewer users, Better Control
- Easy to carry out predictive analysis
- Easy to understand
- Brand Loyalty
Micro-segmentation without a doubt is a clever way to increase the effectiveness of mobile marketing campaigns since the experience is more personalized and caters the need of each of the hyper-targeted customer w/o wasting much of your time.