Customer segmentation aims to divide a large customer base into smaller subgroups that share similar needs and characteristics. Some of the normal criteria for subgroup classification are age, gender, purchasing behavior, financial situation, and occupation. Conventional customer segmentation methods, however, are undergoing change due to an increasing number of customers experimenting with their style and budget. Given below are some examples of segmentation styles that help companies enhance their assessment of their customers so they can offer products and services designed to appeal to the targeted audience.
1) Demographic segmentation – This is one of the most widely used methods of classification. The most commonly used factors here are gender, occupation, income, age and socio-economic status. Although these factors are important, they cannot be considered in isolation. For instance, men spend less on fashion than women. This may not always be the case. Male consumers can be extremely fashion conscious and spend a sizable portion of their disposable income on clothing or branded accessories.
2) Consumer generation – A form of demographic segmentation classifies consumers by generation. Generational traits influence the way consumers shop, how they spend money, and their allegiance to certain brands. The key consumer generations are baby boomers, Generation X, Generation Y or Millennials, Generation Z and the Alpha generation.
3) Geographic segmentation – Geographic segmentation classifies customers by location so that businesses can better serve customers in a particular area. This type of information is becoming increasingly important to consider as fashion markets become global. It is also crucial to consider whether someone lives in a city or countryside, as this will affect the types of physical shopping experiences accessible to the customer. A clothing retailer can present online customers with different products on the basis of the weather of the region they reside in. A customer in Los Angeles will require different kinds of winter wear than one living in New York.
4) Geo-demographic – This type of segmentation combines geographic and demographic analysis. Geo-demographic segmentation divides a country up and then analyses each geographic subdivision demographically. According to a survey, consumers can show strong attachment to their local area, and carry out shopping or leisure activities close to their home or place of work.
5) Psychographic and behavioral segmentation – This type of segmentation classifies customers based on their lifestyle and personality. People can have similar demographic profiles but totally different attitudes towards clothing and appearance. This kind of segmentation aims to gain further insights into how consumer attitudes, opinions, and interests can influence a person’s fashion needs, desires, and purchasing choices.
Segmentation variables – Consumer segmentation is undergoing dramatic changes. Consumers are now intent on blurring the lines defining cultural binaries, and hence segmentation by gender or budget seems irrelevant. Some customers prefer to use thrifted clothing and high fashion brands together, hence preconceived notions of budget do not apply either. More and more fashion brands are seeking the help of artificial intelligence to elevate consumer behavior knowledge and to create precise customer profiles.
Ronn Torossian is CEO of 5WPR, a leading NY PR agency.