Getting More Out of Your Business With Customer Segmentation

"Well, that depends." Isn't that a wonderfully ambiguous statement? When you're looking for information, "it depends" can seem like a non-answer. For businesses, however, “that depends” is sometimes the only answer that really works.

As business owners invest time, effort, and resources into marketing products and services, they inevitably ask, “How can I get the message across that my business is worth their time?”

Well, that depends on the preferences of your customers.

When you try to use a one-size-fits-all approach to marketing, even the best strategy is going to have mixed results. Some customers will respond well to one campaign. Others may not. No matter how effective your marketing efforts are for some, or even most, of your customer base, they could fall flat with others — or even cause them to unsubscribe or block you.

By following a customer segmentation strategy, on the other hand, you divide customers into subgroups with similar attributes. You can then customize your marketing plans around those subgroups. Customer segmentation is a way of personalizing your marketing messages to better communicate with different groups of customers.

In order to develop more effective marketing tactics, businesses will employ customer segmentation techniques. Then, using specialized software tools to gather and analyze data based upon those subgroups, they develop several different strategies designed to deliver the best results for each segment. Given that segmented marketing campaigns have been shown to generate an average a 760% increase in revenue, its effectiveness has already been proven.

Of course, any insights you gain will rely on how reliable and relevant your data is. Likewise, the quality of your data will depend largely on the tools you put in place to gather, organize, and analyze it. As you decide which customer segmentation software to use, take note of the following factors:

Integration

Your customer segmentation tools should be able to integrate data from a variety of sources. The CRM solutions you use, the data you receive from website and retail purchases, and the tools that track user behavior on your company website all provide a wealth of data. If your customer segmentation tools are unable to understand that data, however, either you will have to find another way to convert that data. This will create additional expenses, or may cost you valuable opportunities to analyze that information and develop effective marketing strategies.

Data collection and analytical tools

What features do the tools you are considering offer? How easy is it for your team to access the data in your customer segmentation system once it’s been gathered? Is the system able to present that data in an easy-to-understand format, and can you export it into formats that other software can read? The answers to these questions will help you determine approximately how effective a potential customer-segmentation solution may be.

Flexibility and scalability

Your business is likely to grow and shift over time. When you split your customer base into different segments, you need to be able to analyze the data from each of those segments and use that data to develop applicable strategies for each one. Look for a solution that is flexible enough to not only be a good fit for your business now, but also to also be a good fit five years from now.

Cost

Developing and following your customer segmentation methodology is an investment, and you’ll need to consider cost. Some tools are more expensive than others, and the added cost isn’t always justifiable. Keep in mind, though, that some of the cheaper options available may be less robust. Determine what the value of the tools you are considering can represent to your business. Consider checking out tools that offer a free trial period, so that you know what you’re getting before you make any commitments.

The customer-segmentation definition describes a particular technique for classifying clients and potential clients. The technique can be used in conjunction with a variety of tasks. As such, knowing how to do customer segmentation depends heavily upon understanding how it can be used. Here are some areas that commonly benefit from customer segmentation:

Marketing

Marketing is usually the first area to benefit from customer segmentation, particularly when it comes to tracking. As you gather information, there are several factors to pay attention to in each segment.

• ROI
  Keep an eye on how much you are investing on your various marketing initiatives in comparison to the sales and actionable leads you are generating. As mentioned earlier, different initiatives are more effective in some segments than others. If you see a higher ROI for a particular push in one segment, you can focus more of your resources on that initiative within that segment. The good news is that 77% of ROI comes from segmented, targeted, and triggered campaigns, meaning that your effort will probably pay off.

• User Engagement
  You might segment your customers into groups based on their level of engagement. Some customers are more active on your website than others. Some don’t click through on emails. Some are active on your social media pages and others are not. If certain customers are not engaging with your marketing, then you may want to try a different approach. As a customer segmentation example, consider that some customers strongly dislike receiving marketing emails, so based on their click-through rates, you may decrease the number of emails you send them and increase other types of outreach.

• Customer Behavior
  As customers view products on your website, you can gradually develop a picture of the types of products they are interested. By segmenting your customers based on the items they have purchased, you can develop predictions for products that might result in cross-sell.

If a customer creates a shopping cart, but then closes the window, you might have your system automatically send them a reminder email in an attempt to re-engage them. However, if a customer shows a pattern of coming back and completing the purchase later, you may not need to do this. This will help you determine the correct number of reminder emails you should send.

Targeting

Segmented data can also inform your more active, targeted campaigns — the ads that show up on each customer’s browser, the emails they receive announcing new products, etc. Rather than sending out one massive, impersonal email to all of your customers, you can send out targeted messages to appeal to each segment. Remember, you don’t want people to get in the habit of just deleting messages from you. An effective customer segmentation approach is to try to make each communication you send relevant to the customer.

Forecasting

Finally, use the data you gather to prepare for future trends. You can use your customers’ past behavior to predict their future behavior and response to new campaigns. You can determine what sorts of marketing practices alienate customers and adjust future campaigns to optimize them for retention, up-selling, and other benefits.