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Learn how these five market segmentation trends will help your business compete.
Even those who are true innovators at heart need to see how dynamically market segmentation can change. As we venture further into the future, there are constantly new factors at play: disruptive technologies, big data or ever-growing consumer demands.
Learning how to build your segmentation strategy around these factors is what defines the leaders of tomorrow — while the others are left behind. Learn below what will keep your business competitive in the current environment.
Here are the top seven market segmentation trends that will help your business stay ahead of the curve.
Artificial intelligence (AI) is perhaps the fastest-growing method for collecting data. However, it can’t replace people entirely. Instead, you should use AI to supplement your team’s existing processes.
If you implement an AI-powered market segmentation tool, you’ll automatically generate new customer data after each interaction. Some of these tools can also aid you in writing ad copy that directly targets your customers based on their data. These platforms may also help you reach customers via the best-fitting product, channel and timing to improve your chances of making a sale.
AI platforms also empower you to shift from static market segments to dynamic segments that update in real time based on new customer interactions and behaviors. This way, you target consumers based on their current needs rather than using outdated information. Even the best marketers can’t react as quickly to customer and behavior changes — and edit segments accordingly — as AI can.
Despite AI’s vast power, it can miss context or make incorrect assumptions. So, you should closely review your platform’s recommendations. Trust your gut if something feels off, and view AI recommendations as just that: recommendations, not requirements. Adjust and refine these suggestions as needed based on how well you know your customers and brand; your targeting will reach its peak.
Data is the oil of our time, and that’s even truer of data on consumers and client preferences. In fact, according to PwC’s Global CEO Survey, 42 percent of companies have changed how they create, provide and capture value based on changing customer preferences in the last five years. Similarly, 49 percent of companies expect this factor to change how they create, provide and capture value in the next three years.
Where to obtain data for market segmentation
Chatbots, forms, messengers, and website actions bring more inputs and thus more data. As companies race to extract as much valuable information as they can, the ways to go about it will change radically.
By utilizing social media, business owners can collect different sets of data, such as demographics and geographical information. Companies can then use this data to influence important business decisions relating to certain groups of customers or locations. Additionally, they can make frequent posts or contests for followers to enter and acquire more consumer data.
“Companies are using masses of customer data to inform their segmentation strategies,” said Jorge Argota, a self-employed digital marketing expert. “This data comes from social media, website interactions, purchase history and more. By analyzing this information, they can identify distinct customer segments based on demographics, behavior, preferences and needs.”
What’s next for market segmentation data
In the future, companies are likely to continue focusing on the untapped potential of Urchin Tracking Module (UTM) parameters — the simple tags added to a URL that allow for powerful customer tracking. Not only can these be leveraged to understand where a lead is directed from, but they can also be built into the customer profile. With a simple script on your website, you can identify the visitor. Once they fill out a form, they can be associated with their UTM parameters; this practice allows salespeople to see how exactly this person landed and provide a more personalized experience.
“Trends in data-driven segmentation include the use of UTM parameters,” Argota said. “Companies are using UTM tags to track the origin of leads and adding this information to customer profiles for more personalization. Companies are also leveraging third-party data by partnering to share second-party data and using third-party data to get more customer insight.”
We may also see companies reaping the benefits of cookies well beyond first-party data. Companies will continue sealing partnerships to share anonymized second-party data, but we are likely to see a flourishing of third-party inputs. When visiting an unrelated website, you can connect the customer’s activity there to your offer. For example, by using platforms like Salesforce Audience Studio, you can track a person who showed interest in traveling and use this information to offer them travel insurance.
Connecting customer activities to their profile within your data system generates “joined data.” Such data, which typically combines first- and third-party information, may become more insightful than big data. It shows you who a customer is and what their typical behaviors are; this pairing leads to stronger segmentation.
Regulations and ethical concerns to consider
Privacy regulations, such as the GPDR (General Data Protection Regulation), will maintain their importance. The right to erasure — aka the “right to be forgotten” — applied in European Union countries is one of the rules worthy of particular attention. It claims that customer data can’t be stored if there’s no legitimate reason for it. This means that, while companies may be sitting on a gold mine of data, if they aren’t using it to run campaigns, they might need to delete it after some time to comply with the law. You will need to navigate such regulations so your business’s databases remain valuable without breaching GDPR.
“With the amount of data growing and the introduction of GDPR, data management is key,” Argota said. “Strong processes for processing, monitoring, and maintaining customer databases are crucial to be compliant and to get the most out of the data.”
Such complexities will bring additional attention to data processing and management strategies. Automation will play a key role in maintaining databases. But, as forward-looking companies realize the importance of data, we will see new monitoring systems in place — including those complementing automation with human checkups. For example, when triggering the deletion of certain customer data given certain conditions are met, the automation can be set up to deliver reports that can be checked before the action is carried out.
With the boom of powerful platforms, marketers can track customer data across different channels and better understand their target audience’s behavior. For example, by tracking mentions of your company on social media, you can enhance customer records and use the information to create specific campaigns for high engagers. Curating specialized products for a segmented group of people can improve the efficiency and focus of your company and its goals.
According to Mark Beyer, founder of Mybey Ventures who has also served in chief marketing officer (CMO) roles, there’s a word for this approach: micro-segmentation. “This involves dividing the market into even smaller segments than traditional ones,” Beyer said. “The goal is to target ultra-specific niches, catering to the particular needs and desires of small, highly targeted groups, which can lead to better engagement and conversion rates.”
Personalization has been a trending topic in marketing for a long time — and yet, it’s largely misunderstood. You may feel like you’re doing personalization when using “Dear <First Name>,” but that’s not the case. Smart marketers know that this doesn’t matter much — it’s all about giving content relevant to customers’ interests.
“Personalization has been a marketing buzzword for years and many companies still struggle to make it work,” Argota said. “The key to successful personalization is to deliver content and experiences that are genuinely relevant to each customer’s interests and needs.”
Where to obtain data to power hyper-personalization
Companies are paying top dollar for their customers’ digital footprints. This includes online searches, content downloads and the websites they frequent. This data is real time, meaning companies can acquire consumer data almost immediately. However, it’s up to the business to understand the data trends and adapt accordingly to ensure success.
According to Kaveh Vahdat, founder and CEO at fractional CMO and SEO services firm RiseOpp, real-time data is broader than ever before. But, obtaining it requires only a minor amount of new technology.
“Market segmentation is moving beyond demographics into contextual segmentation, where real-time factors like customer mood, weather or even location shape targeting,” Vahdat said. “Brands that excel will prioritize micro-moment relevance, using predictive AI and behavioral cues to create hyper-specific, evolving customer profiles, ensuring more meaningful engagement at every interaction.”
That said, personalization can still involve familiar platforms. Let’s look at the example of one of the best promotional tools: email marketing. One of the approaches companies take is a behavioral-driven one, with specific messaging based on a lead’s past activity. This messaging can include brief newsletters with the aim of staying on top of leads’ minds over time.
What’s next for hyper-personalization
Companies will be abandoning the idea of excessive marketing pressure. You shouldn’t be sending out spam messages. But, if the email offers enough value, it’s more likely to succeed. According to a Sinch Mailgun study, roughly 25 percent of respondents want to receive weekly promotional emails, with 22.8 percent wanting daily promotional emails. But since there’s no magic number that tells you how many emails you should be sending, you should test it out to find your sweet spot.
Another increasingly popular approach to email personalization is focusing on content. Companies design email templates with columns and fields; they’re populated with personalized content based on a unique customer profile, such as product launches, seasonal offers, updates and recommendations. (AI segmentation, detailed earlier, significantly streamlines this approach.) For example, car owners can get maintenance reminders and discounts on accessories specific to their vehicles. By leveraging machine learning to optimize the content over time, the recommendations become highly accurate.
“With the rise of big data, companies are leveraging more granular data to create hyper-personalized segments,” Beyer said. “This trend is driven by consumer demand for tailored experiences. Brands are now segmenting markets not only by demographics or location but also by individual behaviors, preferences and real-time actions.”
A word of caution on hyper-personalization
Don’t go overboard when marketing to your audience. Not every member of your target audience will consent to data harvesting and tracking. Respecting user privacy is a concern for many people, including employees and customers. As market behavior changes, companies must adapt.
The sheer volume of data is constantly increasing, and data complexity is rising as well. Companies use dozens of apps for data collection, which often results in a very fragmented information technology (IT) landscape. In such cases, there’s a need to integrate various stand-alone databases, which is both a challenge and an opportunity.
How companies are streamlining data collection
Companies often are unable to scour through every single data point they collect — the process can be long and monotonous. It helps to break down your audience into groups, then review these groups’ data to solve business decisions efficiently.
“With the amount of marketing channels growing, marketers need to have a single view of the customer across all touchpoints,” Argota said. “Many are turning to customer data platforms (CDPs) to bring all the data together into 360-degree customer profiles.”
While various CDPs offer these 360-degree profiles, there’s still a lot of IT effort necessary to carry out the segmentation. You might need to integrate data using rules that you need to define. Such expensive, time-consuming, laborious tasks mean that, while a CDP is considered the Valhalla of data, it still requires data-savvy people to do the heavy lifting.
What’s next for streamlining data collection
A main challenge of CDP platforms is customer mapping. For example, if you already have a robust consumer profile and a form gets filled out with that person’s email address, there’s no certain way to verify it’s really them. It could easily be someone who is also using their email or someone who just misspelled their own address. So, getting one flawed piece of information could completely discredit the entire profile that you have been building.
That’s why an alternative has emerged. Some companies are realizing that the idea of creating a “unique customer record” is simply unattainable. Instead, they focus on the things they can do. CDP certainly has a lot of potential, but it may not be the golden bullet; it was this precise idea that prompted a new line of thinking that we are likely to see more of in the future.
After all, you may not always be able to match customer data to a specific individual. Relations between customers and brands may thus become more ephemeral: temporary, short and loose. Marketers who realize they don’t need the full picture to do effective marketing may be able to carry out more flexible campaigns without the complexities of a CDP.
In the future, marketers will also be looking at how to utilize the data they have in the most effective ways. It’s common for companies to have valuable information in their customer relationship management (CRM) platforms and separately from other important inputs, such as purchase histories. Learning how to connect these data points to get the full picture will continue to present a major advantage.
The challenge with marketers controlling segmentation data
In spite of the advanced business intelligence (BI) tools on the market, making insights actionable for marketers remains a challenge. The tools are often extremely complex and require solid knowledge — marketers need to create manual exports and transfer the data while matching data files together. Added to that, writing sequels, or structured query language (SQL), in itself is painstaking because of the need to constantly double-check and de-bug when necessary. But that’s only if you know how to write SQL in the first place — if not, you will create a lot of communication overhead with someone who does.
What’s next for how marketers control segmentation data
Simplifying BI-related processes will be the key to future success. There are already a few solutions emerging, including powerful add-ons or internal data warehouses. The latter work with “marketing partitions” that allow BI specialists to analyze the data and pass the relevant datasets on to marketing automation to be consumed for campaigns. Despite the hard IT work, this empowers marketers to make smarter choices. Various solutions on the market show that companies can access intuitive segmentation features that bring segmentation back into the hands of marketers.
Argota said that the goal of BI add-ons and marketing partitions is to “simplify the process of turning data into segments and campaigns so marketers can make data-driven decisions without needing technical expertise.”
Segmentation tells marketers which products to promote to which customers. It thus has value for product development teams: What if you discover a need that your offerings don’t yet address? You should then share market segmentation data with your product team — and that’s not all.
Finance teams may also benefit from segmentation data. Customer data can tell your finance department how much consumers are willing to spend on what you sell. Your team can advise you on pricing strategy accordingly. After all, your finance employees understand your budget and your revenue goals better than just about anyone else. They’re especially well-positioned to balance high-quality market segmentation data with your internal spending and earning data. Somewhere within that intersection is the price at which you should sell.
Market segmentation is often discussed in lofty terms and explained using tons of jargon. It only makes sense to implement segmentation if you understand why it matters. So, we’ve broken down why it’s important for your business:
Market segmentation has become a mainstream method of selecting a market audience. By splitting up the broad market into smaller, more focused pieces, companies can concentrate on their audience and more effectively cater to them. Whether the segmentation breaks down an audience by age, geographic location or behavior, companies can specialize products to adhere to their audience’s wants and needs.
Over the next many years, we will see new, exciting concepts shaking up the ways marketers approach segmentation, but don’t stick to passive observation. Look at how to incorporate these trends into your own operations. This way, you can ensure that your marketers are well-equipped to deliver strategies worthy of the upcoming decade.
Sean Peek and Anthony Lamot contributed to this article.