Micro-segmentation is a marketing practice that groups customers into granular, defined segments based on data that a brand deems relevant. It helps brands to focus on a particular customer persona based on certain data points such as browsing patterns and interests, and create campaigns that appeal to that group.
The goal of micro-segmentation is to deliver more targeted, personalized marketing campaigns, which reflect a customer’s desires, behaviors, real-time intent, that can potentially lead to conversions.
Why It Matters
Shoppers encounter many ads and other marketing efforts in a day. When these campaigns are not relevant to them, they can experience fatigue and not engage with marketing messages at all. Dividing the population into micro-segments helps marketers deliver a more personalized experience in a cost-efficient way.
Customers value targeted and personalized customer experiences. Personalization lets them know that brands and retailers see and know them at a personal level. Micro-segmentation empowers brands to understand a group’s needs and wants, and provide them with relevant interactions.
When shoppers see ads and campaigns that resonate with them, they are more likely to engage. This, in turn, increases the likelihood of conversions and drives long-term revenue.
Micro-Segmentation vs. Traditional Market Segmentation
In the past, brands relied on traditional market segmentation to identify groups they can focus their efforts on. The division is based on general data, such as demographics (age, gender, education), behavioral data (browsing behavior, purchase patterns), geolocation (country, region, city), and psychographics (social class, lifestyle, etc.).
Traditional market segmentation, which can also be viewed as macro-segmentation, is effective in targeting customers. However, the emergence of more advanced technology has enabled companies to divide users into more granular segments; in short, employ micro-segmentation. Instead of general descriptors, you now have customers who are grouped according to marital status, recent purchases, abandoned carts, or response to shipping discounts. The data are gathered thanks to advances in artificial intelligence such as machine learning tools and algorithms.
Benefits of Micro-segmentation
Micro-segmentation enables brands to understand shoppers that they want to convert. They can tailor their marketing efforts based on the needs and desires of the micro-segments. They also have more control over these groups because there are fewer users to consider.
Because of the smaller divisions, companies have an easier time carrying out predictive analysis and weighing the effectiveness of their campaigns. Marketing efforts also become more cost-effective because micro-segmentation eliminates irrelevant details from consideration.
Done correctly, micro-segmentation can also drive up brand loyalty. When customers feel seen and understood, thanks to more tailored, personalized experiences, they are likely to purchase and return for more. Customers like brands that can deliver not only relevant but also valuable content.