Customer segmentation is an extremely powerful tool as it allows marketers to identify and target different customer groups based on their value to the company as well as their needs, attitudes, opinions and behaviors. Customer segmentation can be a huge competitive advantage.
Segmentation is both a science (e.g. multivariate statistical modeling) and an art (e.g. finessing based on in depth knowledge of the brand) that involves using different variables, often in combination, to divide the “pie” of customers into pie slices. Each slice has specific characteristics that define them. Segmentation can be as simple as dividing the customer base into male customers and female customers. It can also be as complex as using many different variables such as demographics, psychographics, behaviors, attitudes, opinions, needs, consumption, and geography along with multivariate statistical modeling to separate the customer base.
TWO BROAD APPROACHES
Depending on the objectives of the segmentation, brands sometimes segment an entire market of consumers to identify those most likely to use and advocate for their brand, product or service. Alternatively, brands might segment their own customer base to understand which segments are the most important and which are the least important (nonetheless, still important as they are customers). The discussion herein focuses on segmentation of the customer base.
PERFORMING A SEGMENTATION IS JUST THE START
The value of customer segmentation is reflected in how the segmentation is leveraged. For the segmentation to positively impact return on investment (ROI), brands should use it in support of business and marketing strategy and tactics. Typically brands focus the most attention on the most valuable customer segments which are based on how valuable each segment is to the brand (e.g. in terms of frequency of usage and/or expenditure).
PERSONAS AND PERSONA INFOGRAPHICS
Personas developed based on the segments are a useful way to model, summarize and communicate the essence of each segment. Personas are customer or user archetypes. The best personas are developed in such a way that anyone in a company can read the persona and immediately understand who the customer is, what they care about, and how they behave, particularly in relation to their brand. Taking things a step further, Persona Infographics provide a snapshot of the Persona in a form that is readily understood by all employees in an organization from the customer facing staff to the C-suite. Personas and Persona Infographics allow everyone within an organization to focus on a manageable and memorable cast of characters, improving cognition and adoption of the segments.
CAPITALIZING ON YOUR CUSTOMER SEGMENTATION
A customer segmentation should be disseminated as widely as possible throughout the organization and with outside strategy and marketing companies that have non-disclosure agreements with the company. Disseminating the segmentation in Persona Infographic form is the easiest and most readily digestible way to share the segments. The key is not simply disseminating the customer segmentation but also encouraging all employees and key vendors to assimilate the customer segmentation, develop a sense of ownership, and suggest ways in which the asset can be leveraged.
Here are some approaches to leveraging a customer segmentation:
Start with the C-Suite
Present the C-suite with the customer segmentation in the form of Persona Infographics:
Ways to Engage Team Members
There are many ways to encourage company team members to assimilate and act on a customer segmentation. Examples include:
Database Marketing (Loyalty Programs)
Database marketing will be significantly enhanced by segmentation. A lasting benefit is deploying a small battery of questions derived from the segmentation to customers in the database either during onboarding or, for those already in the database, as part of a “research project” after joining the database. Participation is unlikely to reach 100%; however, populating the database with this additional information results in a more detailed and defined segmented database and ultimately better targeted marketing and sales offers.
Strategy and Marketing Vendors
The value of segmentation is the ability to have targeted strategy and tactics, and marketing and communications for each of the individual segments. As each segment is smaller than the whole customer base, advertising, promotion, media, digital, public relations, and communications tactics are easier to target, manage and evaluate with a bigger payoff in terms of response. Even selecting which media channels to use and the timing of the efforts becomes a simpler task.
If a third-party advertising firm is used, Persona Infographics are a critical piece of information to share to ensure success. With this information, message development will be significantly more on target and impactful.
Customer service (in person and call centers) can also benefit from having access to the customer segmentation. Understanding each of the customer segments may assist customer service representatives in tailoring responses to customers for the best possible outcome. Ideally, when segments are known for customers, segment assignments will appear in the customer record in the company’s Customer Relationship Management (CRM) system.
Using the small battery of questions derived from the segmentation in any post-segmentation research will allow a segment to be assigned to all respondents. Any post-segmentation qualitative research should also consider the segments when designing the sampling to ensure representation from all.
A WORD OF CAUTION
As segmentations are highly proprietary, they should never be made available to the public nor competitors. It is important that all employees be advised on this. For example, it is remarkable how many times specific details of proprietary customer segmentations end up as part of a presentation at a conference.
Customer segmentation is a powerful tool used to guide brand and marketing strategy and tactics. Exploiting customer segmentations to the greatest extent possible allows brands to fully reap the benefits and develop strong relationships with customers over the long term. Encouraging management and staff to develop creative ways to use the segmentation is also key.
Kirsty Nunez is President and Chief Research Strategist at Q2 Insights, a research and innovation consulting firm with offices in San Diego and New Orleans. She can be reached at (760) 230-2950 ext. 1 or firstname.lastname@example.org.
This entry was posted in Value of Research and tagged on January 26, 2017 by Q2 Insights