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 segmentation. Brands 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.