Customer segmentation is a powerful strategy that enables businesses to better understand their customers, tailor marketing efforts, and boost sales, but it must be implemented and monitored effectively.
Customer segmentation is the process of dividing your customer base into distinct groups based on shared characteristics. The ultimate goal is to understand the needs, preferences, and pain points of each group, making it easier to target them with relevant products and services.
Enhanced customer understanding
Segmenting customers offers several key benefits. When like-for-like sales drop or overall revenue declines, segmentation can help to identify why. By grouping customers by their profession (e.g., plumbers, roofers, housebuilders – typically the most effective way to segment them) and analysing their purchasing behaviour, businesses can spot great opportunities to sell more products.
With better customer insights, your marketing campaigns can be personalised and made more relevant to each group, increasing engagement and response rates. In turn, this allows a merchant to offer a stronger service and more tailored product recommendations, fostering ongoing trust and loyalty.
How to segment your customers
Although customer segmentation might sound straightforward, it can be challenging in practice – especially when customers interact through multiple channels like trade counters, phone orders, or online platforms.
A simple approach involves working with your branch team to identify each customer segment. This exercise also often reveals inactive or low-spend accounts, providing an opportunity to re-engage those customers. Once segmented, updating your CRM or ERP system with this data enables more accurate reporting and easier analysis of different customer behaviours.
What to do with the data
Once you’ve segmented your customers, you can take action in two impactful ways:
- Increase sales from existing customers: By summarising the products each customer segment should be buying, you can identify gaps in their purchasing patterns. For example, bricklayers might need bricks, cement, insulation and lintels. Using tools like ERP systems or data warehouses, you can quickly see what they aren’t buying from you and start conversations to address those gaps and encourage increased purchasing.
- Create more effective marketing campaigns: Knowing your customer segments allows you to craft targeted marketing campaigns that address their specific needs and interests. By segmenting data in your CRM or ERP system you can automate these campaigns, saving time and reducing costs.
Monitor and measure success
To ensure your segmentation efforts pay off, it’s important to set clear goals – such as increasing average transaction value or product category sales – and monitor progress regularly. Comparing performance across your different customer segments highlights areas for improvement and will help inform your ongoing business strategy.
Understanding your customers better will not only drive sales but also build stronger, more loyal relationships, laying the foundation for sustained business growth.
If you’d like to know more about how customer segmentation can help you grow your business, watch the Merchant Healthcheck Webinar below. Or you can contact Moorgate Management’s CEO Chris Maityard on cmaityard@moorgatemanagement.com or 07767 291 379 for more information.