To start, let’s define Customer Segmentation
noun - The practice of dividing a company’s customer or prospect base into groups of individuals that are of similar types in specific ways relevant to marketing, such as age, gender, interests, spending habits, and media preferences, in order to plan how to sell to each type more effectively
Creating a custom customer segmentation strategy is beneficial to your marketing department in numerous ways, here are three:
Talk to your customers the way they want to be talked to.
When properly done, a customer segmentation strategy lends itself very easily to effectiveness measurements (aka ROI).
It’s the basis for sustaining competitive advantage.
Now let's expand on those.
1. Treating every customer the same means that you’re overlooking opportunities to capture disproportionate share in your target audience.
For restaurants a lunch crowd consisting mostly of business people prefer speed of service. An evening crowd consisting of families wants something to keep the kids occupied. Two very different audiences.
In the retail world a customer who shops your multiple channels – your outlet locations, online and traditional stores - would appreciate being recognized and given personal recommendations on your website because they know they’re a loyal core customer.
Aligning your sales and product delivery process with a customers’ buying and consumption process makes it easy to choose you once they’re ready to buy. Custom segmentation provides the insights into consumer’s needs and preferences across a wide range of dimensions that allow you to evaluate the fit between how you serve your customers and how they want to be served.
2. Looking at metrics, customer segments are relatively stable overtime. Because they’re stable it makes it easy to measure such things as sales per customer, profit per customer, cost to acquire.
Why does custom segmentation make it easier to track ROI? Transactional-based segmentation allows for customers to jump from segment to segment. If you’re in the hardware business, when you buy a new home, you’re in the growing segment. Then once you get everything done you’re in the declining segment. The base is always changing.
3. Because custom segmentation is attitudinal, it’s hard to put into practice. Senior Executives seem to deem it interesting, but not valuable. If you’re able to execute and maintain a strategy that includes attitudes, demo, lifestage, financial indicators, you’re likely to outperform any competitor that doesn’t have those insights.
Does your company have customer segmentation?