July 6, 2021

The importance of customer micro-segmentation

Customer micro-segmentation is the method of dividing brands customers into groups sharing the same interest or behaviour. Micro-Segmentation is an advanced segmentation method that classifies small numbers of customers, based on various factors, including behavioural predictions. Then, marketers can execute dedicated marketing actions to each micro-segment for maximising the effectiveness of every touchpoint.

What is the difference between micro and macro segmentation?

There are two main segmentation strategies; micro and macro segmentation. While macro segmentation centres on high-level customer data like location, channel or language, micro-segmentation centres on specific customer data like preferred items, history and time since last purchase.

Micro-segmentation vs traditional market segmentation

You cannot get into a micro-segmentation without delving into its place alongside traditional market segmentationBrands practice traditional market segmentation to identify their ideal customer group to focus on marketing spend and most likely convert users. 

      • Demographics: age, gender
      • Behavioural: channel usage, brand preferences, purchase history
      • Geolocation: country, region, or city

On the other hand, Micro-segmentation can be as granular as Single males aged 25-35, located in London, who didn’t purchase in the last 90 days, who have purchased shoes prior, and are extremely likely to convert when given a discount coupon on shoe brands.

Therefore, micro-segment records from a traditional segment’s raw data model it down further using machine learning tools and AI capabilities.

Micro-Segmentation Using RFM Analysis

To better use a micro-segment, you should identify users’ life cycle. Some questions that RFM answers:

      • When was the last time the user purchased? (Recency)
      • How often does purchasing? (Frequency)
      • What is the total spent? (Monetary value)

Based on the answers to the questions above, you can deep personalise your campaigns. For example, a frequent shopper may want to be updated about the new arrivals. Simultaneously, a shopper who has only purchased once needs to get an incentive to purchase again.

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