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Global trends are changing customer behavior at an increasingly high rate, here is what your business needs to do.
Gone are the days of mass marketing campaigns and bulk production aimed at winning over a large pool of so-called ‘average customers’. For a growing number of consumers today, the products they consume are not just meant to satisfy their needs but also serve as a channel to express their individuality. Numerous submarkets and niches exist in the current market that demand exclusive strategies. This has forced companies across the world to take another look at their customer segment, understand their needs and create products that cater to their unique needs.
The following trends in the technology and business landscape have influenced this change:
Could these trends pull your business down? Probably yes.
Should you be worried about it now? Absolutely yes.
It is clearly time to re-evaluate customer segments and recalibrate product offerings.
Customer segmentation refers to dividing markets into groups based on shared characteristics. Most commonly uses customer segmentation models for B2C businesses are:
Demographic segmentation: It is the most commonly used model of segmentation. Customers are divided into groups based on demographic characters such as gender, age, income, educational background, ethnicity or religion.
Psychographic segmentation :This model is based on the interests and personality traits of the customer such as lifestyles, skills, beliefs, values, etc. It is becoming more popular among companies and leading companies have invested heavily in data analytics to explore psychographic factors of customer behavior.
Geographical segmentation: This model uses the physical location of the customers to group them. The geographical limits can be based on countries, regions, states or even cities. It is suitable for small businesses with smaller marketing budgets to better judge their customers. It is also used by multinational companies to tackle cultural differences in different countries.
Behavioral segmentation: Customers are grouped on the basis of their behavioral patterns such as purchase frequency, brand loyalty, engagement, purchase occasion etc. This model has been extensively used by e-commerce platforms to create customer profiles and group them.
Though these models provide a basis of classification, customer segmentation can be more complex. Most companies employ a combination of these models to select profitable customer segments.
Focusing on delivering value to a particular customer segment can help in designing and delivering products that meet customer’s specific needs. This customer centric approach would result in higher customer satisfaction and product adoption rate.
It is rather simple. More focused you are on delivering customer- centric products, the more value you create for the customer. The more value you create , the more attractive you are to them. Providing products that cater to specific needs of a customer segment would help accumulate more market share as compared to subpar competitors.
Identifying the most and least profitable customers can save so much money and effort while conducting marketing campaigns. Prioritizing a high value customer segment can help in maintaining brand loyalty by constantly improving products and services. It can ensure higher profits and lower costs.
While concentrating on a new customer segment you may even discover areas with significant scope of growth. This could be an opportunity for your business to acquire market share in a niche market. In a market that has been saturated , creating a niche and serving customers in that particular segment can be a differentiating factor for any business.
Companies often target new customer segments by introduction of new products designed for that particular segment. However, it must lead to dilution of brand image. Many companies overcome this by introducing new brands designated for different segments of customers. Examples include Unilever which uses different brands to reach different markets or FedEx which uses different brands to provide different services.
Product life cycles are getting shorter. Once popular products are becoming obsolete quicker with faster technological advancement. For companies that are exploring new market possibilities to stay in the game, embracing a new customer segment can be the way to go. An interesting example is PepsiCo. Upon seeing that the market is shifting to healthier options, the multinational snack and beverage giant acquired health friendly brands like Quaker Oats and Tropicana.
No, the nature of customer segments are always changing. For example, the product consumption patterns or product preferences of a middle-class family today is very different from that of the previous decade. With exposure to global trends and increased availability of a wide range of products, the needs and wants of each customer segment is continuously changing. New niches markets may develop that would require highly customized products.
Different businesses have followed different methods to segment their market, some pretty complicated while others simpler alternatives. Given below are steps involved in identifying and targeting customer segments for SMEs.
A detailed market study is the most essential step to understanding your customers. It gives a clear picture of the market size, key competencies required, existing competitors, risks, and customer behavior. The data for the study can be collected from online resources or through field research. Expertise provided by business consultants and market research experts can also be valuable.
Based on the insights from the market study, a business needs to split its customers into segments. This could be demographic, behavioral, psychographic, geographical, or a combination of these. The segmentation needs to be clear and practical. A niche market can also be identified in this step.
In this step, the business needs to study the customer segment in detail by understanding the market size, recent trends, and expectations of service quality and value delivered. A clear idea of the competitor dynamics and expectations of the customer segment would help in developing an effective strategy and a successful business model.
All aspects of the product must be created to meet the specific needs of the consumer. Marketing campaigns must be carried out through appropriate channels to targeted customers.
Feedback must be collected regularly to track customer satisfaction and to assess their changing needs. Analyzing sales patterns, customer behavior, and feedback can help in identifying product shortcomings and introducing improvements in the product offering.
Staying relevant in the market and maintaining a competitive advantage can be challenging in a rapidly changing business environment. A customer-centric approach and targeted marketing activities would be essential in differentiating you from your competitors.
Every business, irrespective of how big or small it is, needs to be in tune with the expectations of the market to survive the implications of today’s rapidly changing business environment. Therefore, a customer-centric approach and targeted marketing strategy need to be developed to exploit the opportunities presented by the market.
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