Some companies rely solely on demographic data for customer segmentation. Women 30-45 go in this bucket, men 25-40 go in this other bucket. Some companies lean heavily on generic personas based on who your marketing or operations team *think* would use your product.
It seems logical but relying on demographics or personas doesn’t get to the heart of why an actual living, breathing, group of customers picked your company instead of your competition. These methods don’t give you any insight into the reason why your customers might stay with your company and buy again. You know that all customers aren’t built the same and they display different behaviors – some convert faster, some spend more money and some naturally become fans.
Throwing out demographics and personas, where do you go, what do you do? This is where customer segmentation, based on real data and real customer behaviors, comes into play.
JUICY TIP 1: 3 CUSTOMER SEGMENTATION WORDS OF WISDOM
Before you begin any segmentation project there are a few things you should keep in mind:
Keep Customer Segments Simple.
It’s easy to drown in data, focus on customer behaviors that are easy to explain and group: marketing promotions, seasonal traffic and purchase spikes, product returns, etc. Aim for between 4-6 segments to begin. Once you have basic segments defined, you can focus on adding finer nuances to each big bucket of customers.
Segments Don’t Live in the Marketing Department.
It’s not a treasure trove of secret marketing data, your customers belong to everyone in the company. Even Joe in the shipping department has great ideas, understanding how customers are different allows for a holistic improvement in experience for your most valuable customers.
Bribe Your IT Team With Donuts and Energy Drinks.
You’ll want to bring in your IT team (especially your database administrator) early in the process. Explain what your end goal is and how you plan on using the segments to help the company. Guaranteed, they’ll know how to get your data faster, cheaper and have great suggestions on how to start collecting additional data for future projects. They’ll also appreciate being involved in early discussions instead of having another project thrown over the fence into their laps.
JUICY TIP 2: NAIL DOWN YOUR SEGMENTATION GOALS
If you don’t know where your company needs to go, you’ll never get there. Defining and agreeing to key goals for a project like this is vital to its success. Here are some sample goals for a segmentation project.
What is the Most Important Company Goal?
Pick one, only one. You’ll be tempted to pick more than one, don’t give in. Pointing in multiple directions will lead to chaos. Focus on one and you’ll find you’ll reach other, secondary goals along the way.
Find the Group of Customers Who Already Moves You to This Goal.
Sometimes you’ll find a natural, unspoken alliance with a customer group.
Discover Customer Channel Preferences.
Customers come from somewhere it’s your job to track down those channels. Find the channels (PPC, SEO, Affiliates, referrals, social media) they prefer and use on a regular basis.
Total Investment in Customer Groups.
How much cash did it take to get each group to purchase and what does the time to purchase looks like?
JUICY TIP 3: FIND YOUR RIGHT KIND OF CUSTOMER – THROWBACK TO JOURNALISM 101
That boring college class will actually come in handy. Who knew? More often than not the simple approach is the most effective approach. I give you the 5 “W” questions to help you on your path to finding the customer group who will help you reach your company goals:
Who are your current customers and how can you classify them?
This should be pretty simple, examples would include: new customers, returning customers, vendors who bring in new customers, distributors, etc.
What is each group buying and at what price point?
Answering this question will help determine lifetime value for your customers, and you should see a big shift in data that will muddy the initial customer groups from question 1. This is good, go with the flow.
When is each group buying?
Does your company have seasonal shifts, sales quotas that end at the beginning or end of the month, sales promotions, new product launches?
Where did the groups come from?
This is where you’ll want your DBA on hand to help you assess tracking data (or implement it if you’re not currently tracking it for attribution). Answering this question will allow you to see how much money you spent acquiring customer groups. You may find that the groups that spent the most with your company also took the most amount of cash to convert, which will lead to some hard targeting discussions in the future.
Why did they purchase?
Was it during a sale? A product launch? What kinds of marketing campaigns and channels drove the purchases. There’s also a value assessment about the product and I’ll get into that in my next blog post.
Is it a simple solution? Yes!
Will your segmentation process get more complex and fine-tuned as you move through the process? Definitely.
The key is to keep your segmentation as simple, and accurate, as possible. If it’s too complex it won’t be adopted and you’ll spend more time managing your segments than marketing to them.
You don’t have hundreds of thousands of dollars to throw at a big consulting conglomerate to sort through your mass of data. Sometimes you have to dig in and get it done! Get started TODAY on defining your ideal or RIGHT kind of customer.
Tell me in the comments: are you currently using segmentation to drive marketing and operations in your company? What are your biggest challenges with segmentation?