What is benefit segmentation?
Benefit segmentation is a market segmentation strategy that categorizes your customer base by their perceived benefits of your product and/or services. This strategy classifies and categorizes customers depending on the benefits they want to get out of your offering.
For instance, hair care companies can use benefit segmentation to segment customers into several categories: curly, straight, combination, oily and dry hair care products based on the perceived benefit to their audience. In this example, someone with curly hair would choose the curly hair care product because it's designed specifically for their hair type and texture (the perceived benefit to them).
With benefit segmentation, marketers determine the key benefits of their products and services and group customers based on those perceived benefits, helping to identify various segments that may get the most value from their products.
Benefit segmentation can improve branding efforts, enabling marketers to create different customer personas depending on the customer segment. Additionally, companies can transform their businesses around how their customers benefit from their products, aligning their company values with the benefits their customers seek.
The types of perceived benefits vary by business. For instance, B2B companies can also use this type of segmentation. Therefore, a business that offers accounting software can segment its customers based on their perceived value. In this case, they might have segmentation benefits such as ease of use, taxes, invoicing, etc.
Benefit segmentation differs from other types of segmentation variables like demographic, geographic, and psychographic data. Instead of considering customers' ages, locations, interests, and hobbies, it focuses specifically on the product and the benefits it offers various types of customers.
In our earlier example of a hair care company, they might have customers of all ages, locations, and interests. However, one thing they have in common is their hair type. Curly-haired people all have curly hair regardless of their age.
By marketing to customers based solely on their perceived benefits of your product, you take potentially irrelevant data out of the equation. For example, it doesn't make sense for some companies to segment customers based on location or age, so they may turn to benefit segmentation that allows them to create more personalized marketing campaigns with customer data.
How benefit segmentation works
So how does benefit segmentation work? With benefit segmentation, you'll divide your audience into several categories based on its perceived benefits, which can include features, customer service, or your customers' exact needs or wants.
For benefit segmentation to be effective, you must consider both the product and your target audience. Here are a few steps to follow to effectively segment your customers:
Understand customer needs and wants
Benefit segmentation relies on your ability to determine customers' perceived value of using your product. You should have identified your target market's pain points or wants during product development. A shoe company might have found that customers are looking for shoes based on athletic performance or specific sports.
To understand your customers' needs and wants, you must engage in market research that allows them to tell you what they're looking for. For instance, our shoe company might design athletic shoes for every sport. However, their customers are looking for shoes designed for specific sports; they want basketball, tennis, gym, hiking, running, and so forth.
Only once this shoe company understands the perceived benefits of its shoes can it begin effectively marketing its products to the intended audience. Now, they can market tennis shoes to individuals who play tennis and hiking shoes to their more adventurous customers.
One way to best understand your customers' wants and needs is to simply ask them. You can interview them or send them email surveys to help you understand more about their perceived benefits, needs, and pain points. Your survey can ask them specifically why they purchased your products, what they use them for, and their favorite features or aspects of your products or brand.
Identify benefits sought by different customer groups
Now that you've used market research to discover your customers' wants and needs, you must determine the perceived benefits sought by different groups of customers. Again, market research may have uncovered some of this information for you, and other benefits may be more or less obvious.
There's a reason why brands develop products geared toward different individuals. For instance, athletic brands often group their product offerings by sport or need. However, not all companies consider perceived benefits when designing and producing their products.
Write down the potential perceived benefits of your product to help you understand why customers purchase it. For example, an energy drink company may include benefits like increased energy, vitamins, and improved performance.
Then, taking your perceived benefits, you can begin segmenting your customers. For instance, if one of the benefits of your product is improved performance, you should likely target athletes that may use your drink for an extra boost during a workout.
For the vitamin benefit segment, you might have health-conscious customers looking to supplement their diets. Finally, for increased energy, you have customers who purchase your energy drinks simply because they contain caffeine and can help them stay awake at work or school.
Be thorough when listing your product's perceived benefits to ensure you've thought of every potential customer segment.
Create customer segments based on benefits sought
With your list of perceived customer benefits that you've validated through market research and by learning more about your customers, you can begin to create market segments based on the benefits they seek. The idea here is to categorize and organize your customers into specific groups, which you can use to create more personalized marketing campaigns based on their needs.
Develop marketing strategies for each segment
After creating your customer segments, it's time to develop your marketing strategies for each segment. You can use the same strategies for various market segments, but what's most important is considering your target market for each. A hair care brand with products for curly and straight hair textures should create different marketing campaigns with different creative assets geared toward specific consumers.
Benefit segmentation can help you create more personalized campaigns that speak to a customer's needs. For instance, someone with curly hair has different needs than someone with straight hair because they're different textures, and the products contain different ingredients to support those needs.
You wouldn't want to email someone with an ad for straight hair if they have curly hair and vice versa. Instead, you must consider their needs to help you identify the best marketing opportunities.
Advantages of benefit segmentation
The most significant advantage of benefit segmentation is that it allows you to cater to a segment's unique needs. Your customers are all different, but some of them have similar needs.
For example, all basketball players need basketball shoes, regardless of their interests, age, or gender. With personalization, you can create more effective marketing campaigns that actually resonate with your customers.
Here are some of the other advantages of this type of market segmentation:
Increased customer satisfaction
Benefit segmentation can increase customer satisfaction by helping you develop products for each segment. Creating new products specifically for your segments can help them feel like you're listening to them and able to provide them with what they want. For instance, a small business needs an accounting solution designed to handle its financial tasks.
However, they don't need bloated or overly complicated accounting software for large enterprises. If you provide accounting software, you may have two different solutions for each segment, which can ensure both of them have all the features they need.
Additionally, benefit segmentation increases customer satisfaction by engaging customers better. By identifying your customers' benefits when using a product, you can create more effective sales and marketing materials and devise campaigns to help you stand out.
Improved marketing effectiveness
Benefit segmentation is ultimately a business and marketing strategy that can help you attract customers by providing personalized and more effective marketing campaigns. Segmenting your audience based on the perceived benefits of your product can help you target them much more effectively.
You might segment your customers based on the cost-effectiveness, quality, or performance of your product compared to your competitors. You could send all of these segments the same email marketing campaign, but should you?
Price-conscious customers probably won't respond to an e-blast about high-quality features that are more expensive. Similarly, someone looking for a higher-end solution may not respond well to an email blast that mentions cost savings because they're willing to pay more for quality.
Benefits segmentation ensures you effectively market your products to the right people with the right messages. Again, your customers are different and may perceive the value of your products differently. Identifying their benefits can help you effectively market the same product to multiple audiences.
Higher customer retention rates
Retaining customers has a higher return on investment (ROI) than seeking out new ones. Benefit segmentation can help you retain your customers by making them more loyal to your brand. When you segment markets based on the benefits they get from your products, you can properly engage customers, making them feel like your marketing campaigns are directed at them.
You have different groups of customers that enjoy your product, but they may use it for different reasons. For example, someone may purchase an electric vehicle to reduce their carbon footprint or because they enjoy technological advancements.
These are two very different types of customers, so promoting sustainability to both of them may not make your tech-savvy customers want to purchase your new hybrid vehicle. Instead, marketing directed towards those customers might be geared more toward all the car's high-tech features. In contrast, campaigns directed to your eco-conscious customers want to learn more about your vehicles' impact on the environment.
Increased revenue and profits
All the advantages of benefit segmentation can lead to increased revenue and profits, helping you grow and scale your business. In addition, benefit segmentation can help B2B salespeople easily convert leads into customers while targeting eCommerce or B2C customers based on the benefits of your product while increasing engagement and customer loyalty.
Simply put, when your marketing campaigns are personalized with benefit segmentation and customer data, you can attract customers most likely to purchase your product, making it easier to close deals and convert website visitors into customers.
Challenges of benefit segmentation
The advantages of benefit segmentation outweigh the challenges because they can help you make more effective marketing campaigns that increase your ROI while boosting customer loyalty. However, you should still be aware of the potential challenges you'll face when segmenting customers in this way, such as:
Market research is a crucial component of benefit segmentation. Without talking to your customers and learning about them, you won't be able to uncover the benefits they're looking for from your product.
Ultimately, market research is expensive if you hire a market research company. However, your small business may not have the internal resources to obtain enough information and data from your target market.
Identifying benefits sought by customers
Every customer is different and has different wants or needs, which can make identifying perceived benefits challenging. For example, inventory software designed for warehouses may offer several benefits, but you ultimately won't know how to segment your customers until you can identify the actual perceived benefits to your customers through market research.
Different segments require their own personalized campaigns. Unfortunately, creating different marketing campaigns for each customer segment can be costly.
For instance, if you want to send an e-blast, you'll have to create different creative assets and copy for each segment, which can increase the number of resources you need for production and the cost of your overall marketing campaign.
Tips for implementing benefit segmentation
Implementing benefit segmentation is a significant task because it requires additional resources like creative assets, inventory for each product type, and extensive market research. Here are a few tips to help you implement benefit segmentation in your business.
Understand your customers' needs and wants
Before you can begin segmenting your customers based on your product's benefits, you have to learn as much as possible about your customers' needs and wants. What you should learn about them varies by industry. B2B customers have different needs than B2C customers and various customers have different needs within those categories.
Conduct market research
The most effective way to determine your customer wants and needs is to conduct market research. Market research can tell you everything there is to know about your target markets, including their wants, needs, and pain points. Many companies invest in extensive market research to determine their products' viability.
However, some businesses don't, so it's crucial to verify that you know exactly what the perceived benefits of your products are by learning about your customers and talking to them directly.
Develop marketing campaigns that target different customer segments
Once you've identified the different types of benefit segments, you must begin developing marketing strategies for each one of them.
The whole point of benefit segmentation is personalizing your customers' experiences with your brand, especially through marketing. Therefore, your marketing campaigns will require variations in content and creative assets depending on the segment.
Measure and track results to optimize your segmentation strategy
Benefit segmentation can help you learn more about your customers and categorize them into groups that allow you to create more effective and personalized marketing campaigns. However, while you should have market research to guide you, it may take trial and error to determine the most effective way to segment your customers.
With Mailchimp email segmentation, you can segment customers and mature and track the results of your campaigns to optimize your marketing strategy. With our analytics, you can determine your most effective marketing campaigns, A/B test campaign variations and communicate more effectively with your customers. Sign up for Mailchimp today.