Customer micro-segmentation marketing: Benefits & best practices

Are you looking to get a better handle on who your customers really are? Micro-segmentation, the practice of breaking down your customer base into smaller hyper-specific groups, is the answer. Micro-segments identify and target customers who share similar preferences and characteristics, enabling you to hone your marketing messages to better suit their particular needs. If you’re looking to maximize both engagement and sales, micro-segments are the key that unlock that kingdom.But first, it’s important to understand precisely what it is and how it’s done. Check out our comprehensive guide — complete with examples — below.

What is micro-segmentation?

Micro-segmentation is a form of customer segmentation that focuses on breaking down a customer base into homogeneous subgroups that are hyper-specific. These subgroups share similar demographics and buying behaviors, allowing for more targeted and tailored marketing messages. By using micro-segments, marketers target specific types of customers to create more effective and efficient marketing campaigns — whether it’s email marketing, a targeted omnichannel campaign on several social media channels, or otherwise.

What is the difference between macro-segmentation and micro-segmentation?

The primary difference between macro- and micro-segmentation is the level of detail in the groups of customers you create. Macro-segmentation focuses on larger, wide-reaching demographics such as age, gender and location, while micro segmentation focuses on smaller, more precise segments such as individual interests, preferences, and buying habits. Micro-segmentation allows marketers to build more detailed and personalized campaigns that target specific types of audiences.

Creating micro-segments starts with your usual macro-segmentation approach, which usually involves more broad identifiers like geographic location or age. From there, taking your segmentation efforts a bit further and creating micro-segments takes creating groups based on more nuanced identifiers, like customer attitudes, beliefs, and behaviors.

The history of segmentation

So, micro-segmentation is a superior technique to macro-segmentation, right? It depends. However, micro-segmentation wasn’t even an option before data tools became more sophisticated.

For example, in the pre-internet days, marketers would have to manually sift through data to reach out to former customers, lapsed subscribers, and geographically targeted audiences. The marketing campaigns they used to reach their segments might be snail mail asking former customers to resubscribe to a magazine, billboards targeting a specific geo, and TV ads on channels targeting a particular age demographic.

Nowadays, data collection and segmentation can be as simply as a few clicks in the right analysis tools. With the internet becoming a hub for everyone, digital marketers demanded better methods for personalizing campaigns, so now you can create personalized ads and campaigns with the sky as the limit.

Why is micro-segmentation important?

Micro-segmentation allows marketers to create campaigns that are tailored with more precision around the likes and dislikes of a target customer. By understanding their customers better and having deeper insight into their motivations, marketers are able to create more personalized content that eventually leads to higher conversion rates through new and repeat sales.

Micro-segments help marketers to focus their efforts and resources on the people that are most likely to purchase a product or service. Micro-segmentation also increases the chances of having a successful marketing campaign as it enables marketers to target potential customers at the right time with more hyper-specific messaging.

Types of micro-segmentation marketing

There are dozens of use cases for micro-segmentation because there are different ways to segment your audience. Let’s go over the main categories of micro-segmentation:

• Geographic Micro-Segmentation: This type of micro-segmentation focuses on targeting customers according to their geographical location. Marketers target people living in specific areas, regions, or countries. Geographic segmentation creates localized campaigns that are tailored to the specific audience in that area.
• Demographic Micro-Segmentation: This type of micro-segmentation focuses on targeting customers based on characteristics such as age, gender, income level, occupation, family size, and so on.
• Behavioral Micro-Segmentation: Behavioral segmentation focuses on targeting customers based on data points like purchase history, the types of interactions and touch points they’ve had with your brand, or even purchase intent. Marketers use data around past purchases, website visits, content interactions, and more to create messages that are tailored to customers’ interests and desires.
• Psychographic Micro-Segmentation: This type of micro-segmentation focuses on targeting customers based on their interests and lifestyle. Marketers use data around leisure activities, music preferences, or political views to create personalized and compelling messages for their audience.

Benefits of micro-segment marketing

There are plenty of benefits to glean from micro-segmentation, including:

Improved customer targeting

‍With micro-segmentation, you identify and target very specific customer segments and create more personalized messages for an elevated customer experience. Customers prefer, and these days, demand, more personalization in ads. The better your ad speaks to an ideal customer, the more likely they are to buy.

Reduced marketing costs

‍Targeting small, specific customer segments can reduce the amount of money you have to spend on advertising and marketing campaigns.

Increased engagement

‍By targeting specific customer segments, you can create more effective messages that are tailored to those customers’ preferences and interests. This can lead to higher levels of engagement, which can translate into more sales.

Better insights into customer behavior

‍Micro-segmentation can help you gain deeper insights into customer behavior, which can help you identify trends and develop strategies that are customized for each customer group.

Improved customer satisfaction

By creating more personalized experiences for customers, micro-segmentation can lead to increased customer satisfaction and loyalty. This can help your business in the long run because customers that closely align with a brand’s messaging are more likely to keep coming back.

These are just a few of the benefits of micro-segmentation marketing. By taking the time to create targeted campaigns that reach the right customer segments, you can improve the efficiency and effectiveness of your marketing efforts.

Examples of micro-segments

The more niche and specific your micro-segments, the better. Here are a few examples.

• Busy professionals: This micro-segment includes customers who are busy yet very focused and have a high disposable income over $100k. Their needs may include convenience, saving time, and fast service.
• Young mothers: This micro-segment includes young mothers between the ages of 20 and 35 who need products and services that are safe, practical, affordable yet of good quality.
• Home office workers: This micro-segment includes customers who work from home and may be looking for health-conscious products and services that make setting up and managing their home offices easier.
• Online shoppers: This micro-segment includes customers who are comfortable shopping online, are well versed in how ecommerce works, constantly use discount codes, and that may be looking for specific types of products and services they may not be able to purchase in person.

As you can see, your campaigns can be hyper-specific with micro-segmentation. For instance, you can serve home office workers ads for ergonomic office chairs or standing desk equipment. This reduces ad spend serving ads to unqualified leads or uninterested shoppers.

How to get started with micro-segmentation

1. Identify your target audience

The first step in micro-segmentation is to identify the different types of customers your business wants to target. This will help you understand how you can create personalized messages and campaigns that are aligned with each customer’s needs and desires.This takes customer data, which you can get through first-party means or purchase from third-parties.

2. Aggregate the data you already have

You probably already have some essential customer data. This can come in the form of customer lists, prospect data from form fills, and stats from your marketing platforms. Using a tool like a data storage warehouse, you can collect all this data into one place, saving you hundreds of hours of time manually looking for this information.

3. Collect customer data

The next step is to collect data about your customers for a more complete customer view. This can include demographic information, past purchases, website visits, and more. Collecting new customer data is a whole process with its own category. While it isn’t an easy task, it’s made easier with a customer data platform that harnesses automation and segmentation tools that make the process easier.

For example, Simon CDP automates the process of data management so that when you go to create your micro-segments, a lot of the heavy lifting has been done for you. With a CDP in place, testing micro-segments against each other to see which one gets you the most ROI for your efforts is easily doable within one platform. With one source of truth where you can manage both your data and your workflows, you spend less time setting up campaigns and more time executing.

4. Create micro-segments from that data

The next step is to create micro-segments from the data you’ve collected. You should look for similarities among your customers and create segments based on those similarities. And yes, often those similarities will overlap. Rather than trying to create micro-segments that are clearly defined from each other, it’s more about finding the mix of data segments that lead to the most ROI.

Remember, we’re aiming for as much precision as possible when creating these segments. This means the criteria you use to create these micro-segments can’t be too broad — otherwise it beats the purpose.Creating your micro segments will naturally depend on who you’re marketing to, what you’re selling, and what your campaign goals are. However, to get start creating micro-segments, consider that you can create them by a ton of different criteria, including:

• Location
• Demographics
• Interests and hobbies
• Job titles
• Purchasing behavior
• Behavioral data
• Psychographic data
• Social network data
• Attitudinal data

5. Create targeted campaigns

Once you have identified the types of customers you want to target and created micro-segments for them, you can start crafting personalized messages and campaigns for each segment. There are all kinds of campaigns—including cross-channel marketing—you use to get your messaging out there and ensure you’re creating key touch points with the customers within your micro-segments.At this stage, you’ll likely have to do a lot of testing as well as tracking your metrics, including A/B tests, to arrive at a micro-segment and marketing campaign combo that’s optimized for results.

6. Measure your campaign performance

Like all things marketing, if you can’t measure performance, you can’t improve the campaign. Perform regular check-ins on your campaigns and see what you can fine tune. Perhaps you can even get more specific with your messaging once you determine who’s interested in your campaigns — micro-micro-segmentation!

The tools that make micro-segmentation tick‍

Data Storage Warehouses (DSWs) and Customer Data Platforms (CDPs)

A cloud data platform like Snowflake will store data for disparate sources into one place. This means you won’t be bouncing between CRM spreadsheets, ad platforms, site data, and so on and aggregating them manually.

Instead, you can use a CDP that pairs with a DSW to activate that aggregated data in real-time, making micro-segmentation a cinch. Did a customer abandon a high-priced item in their cart? Micro-segmentation would help you create a push email that activates when a customer does this. Are you targeting customers who come back to your site over and over but never buy? A CDP could help you discover this audience segment and serve them ads that build urgency.

Machine learning and AI

We mentioned that advancements in technology made micro-segmentation possible. Further advancements are making micro-segmentation even better.

With AI, we can use predictive analysis to identify customers who are likely to follow the behavioral patterns of users who have come before, enabling us to create hyper-specific campaigns that ensure our success with audience segments. Simon Predict is a good example of predictive analysis at work for real-time segmentation.

Create effective micro-segments with Simon CDP

Micro-segmentation is an important and effective marketing tool that can help businesses get more targeted and personalized messages to the right people. With Simon CDP, businesses can collect, analyze and refine customer data to create powerful and effective micro-segments.

By having a better understanding of their customers, businesses can create tailored campaigns that will result in higher engagement and improved customer satisfaction. With the right data and insights, businesses can create more effective micro-segments and campaigns that will drive more sales and success.

‍Try Simon CDP here to learn how to take your micro-segment efforts to the next level.