You Need Smarter Customer Segmentation

The ripple effect of inflation and other economic forces have been felt throughout the retail industry. Consumer spending power is diminishing, and retailers face heightened competition for every consumer dollar. In June 2024, consumer sentiment in Germany came to a standstill with a continued decrease in the willingness to buy.

In this new environment marketing strategies that worked in the past are no longer effective. To craft a new strategy that harnesses consumer changes for brand advantage, retailers require a more detailed understanding of not only their own customer base but also their potential customers, achieved through strategic customer segmentation.

Gaining a more intricate understanding of consumers begins with dividing the people into distinct groups based on the factors that drive their choices, such as demographics, values, or shopping behaviors. By identifying distinct customer segments with unique motivations and behaviors, retailers can develop targeted strategies to maximize customer value and brand loyalty. By focusing on commonalities between consumer segments, retailers can appeal to a broad customer base for expansion potential.

Start by Knowing Your Customer

Beyond demographics, understanding the underlying motivations that drive purchase decisions is essential. Every customer segment is influenced by unique “shopping triggers” that spark the buying action. These triggers can vary significantly across segments; for example:

• Millennial shoppers might be more susceptible to social media trends, leading to impulse purchases of the latest fashion items.  
• A value-conscious segment might prioritize a product’s sustainability credentials, making them more likely to choose eco-friendly options.

This deeper understanding of how consumer needs and behaviors differ depending on context, and what drives choices within specific moments of consumption, will help retailers optimize their product range. By understanding the “why” behind purchase decisions, retailers can tailor their messaging and product offerings to create a more compelling and personalized customer experience.

Align your strategy with Customer Values

Consumer values are playing an increasingly significant role in purchasing decisions. Studies indicate that a staggering 40% of global consumers prioritize brands that align with their values. This trend presents a strategic opportunity for retailers who can effectively leverage customer segmentation.

Segmentation allows retailers to tap into this value-driven consumer landscape; for example:

• An environmentally conscious customer segment might be particularly drawn to a brand’s commitment to ethical sourcing and sustainable practices.
• A segment that prioritizes convenience might value a retailer’s user-friendly mobile app experience and efficient delivery options.

NIQ helps retailers identify these value-driven segments and craft targeted campaigns that resonate with their priorities. This enables retailers to build stronger customer relationships and drive growth through an approach that is both personalized and values-aligned.

Optimize the Customer Journey with Data-Driven Insights

Discovering how customers within each segment research and purchase across different channels is crucial for optimizing the overall customer journey. Segmentation allows you to tailor the customer experience based on these preferences; for example: 

• A segment that researches online but prefers to finalize purchases in-store would benefit significantly from click-and-collect options.  
• A segment that heavily relies on mobile apps for shopping requires a seamless, user-friendly mobile experience. 

No matter where they buy, brands and retailers must ensure target consumers can find, learn about, and purchase their products of choice effortlessly — when, where, and how they want it, at a price they can afford. As a result, accessibility also plays a vital role in influencing customer decisions. Catering to the accessibility needs of each segment ensures a more inclusive shopping experience, leading to greater customer loyalty and brand advocacy.

This need to be accessible is reflected in our retail brand management research, which shows a strong relationship between accessibility and consumers’ reported share of wallet and retailer brand choice. While being accessible is important, it is not enough to win consumers over.

NIQ solutions and service teams provide data-driven insights on the importance of accessibility and other factors which drive retailer’s choice within each segment, empowering retailers to focus on the decision drivers and remove barriers and create a more welcoming environment for all customers. 

From Insights to Action for Retailers

Customer segmentation, powered by NIQ’s data-driven insights, provides actionable intelligence that seamlessly translates into impactful strategies with the support of NIQ. Retailers can leverage these insights to:

• Develop targeted marketing campaigns that resonate with the specific needs and values of each customer segment.
• Optimize product assortments based on the buying preferences and priorities of each segment.
• Improve accessibility across channels for each segment to ensure a smooth and inclusive shopping experience for all customers.

By understanding the distinct “whys” behind customer behavior within each diverse consumer group, retailers can unlock a deeper level of customer-centricity. This approach, fueled by NIQ’s powerful solutions and consultancy, equips retailers to navigate the evolving retail landscape, craft a transformative customer-centric strategy to achieve marketing effectiveness and sustainable growth.