How well do you know your customers? Many companies are focusing on achieving the full 360° customer view to understand their customers better. Data analysis and customer segmentation are crucial elements in this process. With the increase of different online touchpoints, collecting data from multiple interactions can be difficult and messy. But, as we can access and analyse data from various sources, it can help you interpret your customers’ needs and wants more accurately.
The goal of segmenting your customers is to provide tailored services or products so each customer feels confident and appreciated when interacting with your brand. When your customers feel you care to understand and meet their needs, they’ll continue to rely on your services or purchase your products. Learn as much as you can about your customers to be able to provide service that will keep them coming back to your services/products.
Segmentation implies breaking down your audience into smaller groups based on their common interests, motivations, tendencies, and previous behaviour patterns to better communicate with each one of these segment groups in the future. We achieve this by tracking purchasing habits and patterns, collected in transactional data, as well as measuring underlying motivations and needs through primary research. During the segmentation process, we divide customers and audiences into clusters that share similar characteristics.
Why is segmentation such an important part of marketing? When done correctly, segmentation will support you in maximising customer value. You will know exactly where to focus your marketing efforts and resources so can reach the relevant audience. In the long run, this will help you achieve business goals and reach your KPIs easily. Segmentation is also often used for product development. Having your customer in mind when developing new or modifying existing products can help you successfully launch new services or products.
Here are five benefits of customer segmentation that will strengthen the impact of your marketing:
When you segment your audience, it’s more likely you will attract people who are looking for the solutions that your services or products deliver. You’ll attract more ideal prospects who convert from potential customers into buyers, meaning your conversion rate will grow and the sales process will shorten.
If you know and understand what your customers want and need, you can deliver and communicate offers that will resonate with them. The value proposition that is well defined and clear messaging leads to stronger bonds between brands and customers.
By knowing well the audience you are targeting, you can determine the best initiatives and methods for finding and reaching them. When you use market segmentation to define your audience, you know the detailed characteristics that you can use to create more effective campaigns. You can also focus your attention on the specific platforms where you know your segmented groups are most active.
When it comes to product development, it’s crucial to create a product that will actually have value or significance to your audience. Segmentation is a great tool to test and optimize your product, as it helps you keep the focus on the needs and wants of your audience.
Instead of blending in with other brands, and risking your messages get lost in the noise, with segmentation, you can easily differentiate your brand. Focus on specific customer needs and characteristics, and show them exactly how your brand brings them value.
Each segmentation demands a unique consideration depending on the company, product/service, and the objectives. Here at boobook, we look at each segmentation process separately to define the best approach. There is no one-size-fits-all method, but the steps we take are similar to each project:
As for any business project, getting full alignment of all the stakeholders involved in the business objectives and the expectations is crucial. By stakeholders, we mean all managers who will be interacting with the customer segments as part of their daily processes or when creating strategic customers plans. Typically, we gather stakeholders from different departments, like marketing and communication, sales, product management, and customer insight. We engage with them in a couple of workshops to get their input and define a final set of business questions to be answered.
Usually, the segmentation includes running primary research with current or prospective customers. However, a lot can be learned from existing customer data, by analysing a part of CRM or other customer databases. This data can give us first insights on who the customers are and what they do, resulting in the first hypotheses regarding different customer audiences.
Though existing behavioural data will define the type of customers, it misses two important elements:
Behavioural data might give indicators of the why in primary research, however often is needed to get to this insight. Hence, we typically build segmentation models based on primary data, when possible, augmented with transactional data, to get a 360° degree view of the customer.
There is no single way of segmenting people or businesses. Together with our clients, we choose the most useful solution, from a set of valuable alternatives.
You might wonder: what’s the difference between a segment and a persona? They are practically the same, though persona is used to describe the actual personality behind the segment. We often call this “colouring the segment”, involving us to dive deeper into the habits, needs and demographic profile of each segment, naming them (that’s the fun bit!) and creating visuals for each “character”. This step is crucial for business stakeholders to increase engagement with their segments.
As mentioned above, one of the key purposes of customer segmentation is for targeted communication and marketing. The CRM database is often the starting point of communication initiatives, i.e. the contact details of the (prospect) customers to which direct marketing campaigns are sent. Instead of sending everyone the same mail or message, or tailoring the message to typical customers characteristics such as location, age, a past purchase, etc.; augmenting the CRM database with the customer segments opens a whole new playground for marketers. Tailored messaging that is based on underlying needs and emotions ultimately leads to much more powerful targeting. To enable this process, we create an algorithm that links the segments to the current customer information in the CRM database(s).
If you are interested in knowing more, feel free to reach out. We’ll be happy to get to know your customers better and help you understand their needs and expectations!