Why Your Business Needs Marketing Segmentation

Marketing segmentation or customer groups is a view of different customer sub-groups in your entire customer list or data base. Customer sub-groups or smart segments can be organized based on specific critera.

Segmentation criteria can vary and is driven by a marketer’s goals or programs. In this guide, we will cover the benefits of marketing segmentation, types of segmentation criteria and how to use marketing segmentation in your customer engagement programs.

Benefits, Types and Uses Of Marketing Segmentation

This guide focuses on B2C marketing segmentation, specific for businesses and brands in the restaurant, coffee shop, taproom, craft brewery and retail industries.

What is marketing segmentation? It is the process in which a large data base or list of customers are divided into groups based on common criteria and characteristics. Marketing segmentation helps your business efficiently personalize, target and re-target audience and customers who have engaged and shown interest in your brand or business. 

Marketing segmentation empowers marketers with information on how to best position your brand, product, an offer, an event based on  interest, last visit, special occasions and more!  This is how it works.

1. It starts with understanding your data sources

Before diving into a marketing segmentation exercise, brands and businesses must first identify the different customer data sources and touch points. In today’s modern world, data and information no longer comes from one place. 

The classic brick-and-mortar model is 100% reliant on the POS system for information. With the growing popularity of delivery channels, online ordering and the opportunity to sell product and product subscriptions on line, restaurants, coffee shops, taprooms, craft breweries and retailers can no longer fully rely on one data source to gain a complete picture of their customer.

Data sources to consider before diving into marketing segmentation

  • Seamless access to customer data from your POS. Gaining a full name and email address should not be the beginning and end of your access to customer data. A comprehensive data export includes purchase history which would include last visit, location (if you’re a multi-location brand), products ordered, channel (in-store or online ordering). type (dine-in, take-out or delivery) and the total order ticket.
  • What are POS data exports? POS data exports are large data dumps of all your data. Dependent on your cloud POS system’s API capabilities, merchants and sellers can gain access to this information. Albeit not as easily as a click of a button. This is why you’ll need a customer engagement software platform like GoGoGuest, with the customer data management and seamless data sync capabilities to sift and organize your POS data.
  • WiFi marketing – Offering free guest WiFi to customers in exchange for personal information is a common practice by specialty coffeeshops, quick service retailers, craft breweries, taprooms and yes, full service restaurants are doing it too. 
  • eCommerce data – Similar to your POS system, eCommerce platforms like Woo Commerce, Shopify, Big Commerce, Weebly and Squarespace are collecting customer data on your behalf. A few of the platforms offer a level of marketing automation and segmentation tools, albeit you run into the same challenge by only seeing one side of your customer’s profile
  • Third-party applications – Reservation systems like Open Table, Event Brite and Ticket Web provide a wealth of information about reservations and ticket sales. Data that becomes more valuable when associated with your other data sources.

Bringing all these data sources to converge in one customer engagement platform gives your marketing and customer teams a complete picture of your customer groups and profiles. 

Once your data sources are streamlined, the next step is marketing segmentation. ⚡

"Convergence of our in-store and online customer data changed our customer engagement strategy. GoGoGuest all-in-one platform is brilliant!

Jiyoon Han, Owner and Digital Marketing Strategy Lead
Bean N Bean Coffee

2. The benefits of marketing segmentation

Marketing segmentation is about finding your brand’s biggest fans. At Bain & Company 81% of executives noted the importance of segmentation as a tool for growing profits. Bain also found that companies experience 10% higher profit margins compared to companies who did not use marketing segmentation as part of their strategy.

Other benefits of marketing segmentation include:

  • Stronger and specific marketing messages. Instead of sending campaigns to everyone in your list, personalizing your message to address a specific topic that a each segment cares about performs 50% better.
  • Targeted digital strategy advertising. Armed with behavioral, geographic and psychographic information about your segments, advertising budgets are spent with intent while messages are precise.
  • Launch programs that support your best customers. Remove the guesswork from your marketing strategy. Develop customer engagement and loyalty programs that attract your best fans (9 or 10). This is the group who are vocal and your best public advocates. Then there are the ok fans  (7 or 8) who are seasonal and show up once in blue moon. Last but not the least, there are people who are customers by name only (6 or less) who are constantly unhappy about anything and everything. Will likely leave a bad review just because this is how they pass their time. 
  • Attract the right customers. You’ll start to see patterns of engagement and common denominators across your best customers. Attract and find the same people, they’ll turn into your best fans too! 
  • Differentiate your brand from the competition. More specific messaging and content makes your brand accessible and relatable. 
  • Invest in channels that your best customers love. Marketing segmentation will bubble up customer groups who love to visit a specific location or prefer to shop online. Support those customers with a cross-channel experience that makes it super seamless.
  • Product development. Plan and launch customer programs, roll-out menus and experiences that are aligned with what your customer segments want and expect from your brand. 

Customers who are "promoters", as their segment tag suggests, are your customers who not only buy from you but also urge their friends, colleagues, and family to do the same. How do you find them?

See what is possible.

Talk to sales.

3. Different ways to marketing segmentation

There are different ways marketers and customer teams can segment customer data. For the purposes of this post, let’s focus on segmentations specific to B2C (Business To Consumer).

Demographic (B2C) Psychographic (B2C) Behavioral (B2C)
Individual attributes Aspirations, values and criteria Behaviors, products purchased, time of day
Geography, gender, income Lifestyle, personality traits Usage, frequency, purchase decision
You are a local business You want to target customers based on values and lifestyle You want to target customers based on values and purchase behaviors
With data-rich customer portraits brands are able to better define a marketing and engagement strategy by customer group

4. How to get started with marketing segmentation

Your data sources are in one place, now we’re ready to define your customer engagement goals and how that rolls up to your brand’s marketing strategy. 

Steps to getting started with marketing segmentation

  • Decide how you’d like to segment your customer data – demographic, psychographic, behavioral or a combination of two or all? You don’t have to pick one. It is best to mix a few attributes then test and iterate to see which segmentation approach works best.
  • Map out your customer journeys or marketing automations for each of the customer segments.
  • Create your customer segments
  • Start your customer journeys
  • Measure the performance and iterate. Iteration applies to your marketing automations, as well as, your customer segments.

5. Uses of marketing segmentation

Marketing segmentation can be applied across your customer engagement funnel and loyalty programs. Here are a few popular applications:

  •  Welcome automations. Warming up each new customer or subscriber who connects with your brand for the first time. 
  • Localized automations. Increase the frequency of visit and potential purchase of customers nearest to each location.
  • Cross-channel recommendations. Recommending online products and subscriptions to customer profiles who purchase by specific flavor palette with increased frequency.
  • Referral automations. Now you know the customers who really, really like you, it is time to ask for referrals and offer rewards
  • Birthday automations. Make your best customers feel super special with birthday treats and special offers for their special day.

Next Steps

Don’t take our word for it. We encourage you to dive in and dig deeper. Have you read The Customer Engagement Playbook? Produced by the GoGoGuest team, it offers actionable next steps and best practices on how to implement these actionable restaurant marketing tips from creating awareness, customer engagement to growing customer loyalty that drive value.

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