Customer segmentation strategies can help create higher-value sales leads and more loyal customers. So why aren't you using them in your business? If your answer is because you're afraid of missing potential customers, consider looking at the approach from a different angle.
Imagine this: You've designed an infant car seat and just released it into the market. Your marketing budget is small and nowhere near the size of your competitor's, so you have to spend it wisely.
You did some preliminary research while creating your business plan and learned women make 90 percent of all car seat purchases, so you've flagged them as target customers.
Now you have two vendor opportunities coming up that could bring in leads: Conference A, a women's business conference expecting 10,000 participants or Conference B, a baby gear conference that is expecting a little over 1,000 participants. Both conferences get you in front of women and cost the same. But you only have the budget for one. Which conference do you choose?
Conference B, the baby gear conference.
Even though it's smaller and won't get you in front of as many women, Conference B is the better choice because it gives you the opportunity to get your product not just in front of women, but in front of women who are both in the market and of the mindset to buy what you're selling.
This example highlights one core factor behind customer segmentation strategies—that all customers are not created equal. Narrowing down your focus isn't as much about leaving customers on the table as it is putting your resources toward the customers who are most likely to buy.
Finding these customers means first identifying your highest-value sales leads, and customer segmentation strategies are one way to do that.
Getting Started With Customer Segmentation
Businesses of all shapes and sizes use customer segmentation strategies to direct their marketing budget, narrow their focus, influence their product and service development and help create personalized marketing campaigns.
Getting started is easy. Here are a few steps you can take to get going.
1. Identify your first (and top-tier) segment.
When you're getting started, it helps to see your target audience from a bird's eye view.
Are there any obvious connections between what you're selling and who'd be interested? You can use data that you collect from third-party research companies or industry research reports to help you get started.
For example, in the scenario above, because women made more than 90 percent of all baby gear purchases, they were flagged as the primary decision maker in the car seat market.
2. Look for similarities.
Next, create a list of questions and assumptions about the segment that can help you identify common characteristics.
In this case, an infant car seat is very specific, and there are certain life circumstances (like having a baby) that trigger people to need one. Identifying these triggers can then help you think through possible sub-groups. In my example, pregnant women are more likely to be interested in purchasing baby gear than women who are empty nesters.
Data analytic platforms are great to use at this stage as well. They offer a wealth of information that you can use to generate ideas. And in some cases, you can use them to actually create the segmentation for you.
Also, don't be afraid to do some market research. Evaluating secondary sources or engaging in some primary research methods—like sending out surveys or interviewing potential customers—can provide a lot of helpful information. They also can help you validate your assumptions.
3. Update your customer personas.
Once you've identified a few segments, the next step is to update your customer personas or create new personas that describe the different segments you've identified. These personas should then be shared across your team.
Using Customer Segmentation
Once you've created a set of customer segments, it's time to use them.
There are a variety of ways they can be useful. One beneficial way is at the beginning of the sales cycle to filter out unlikely sales leads. Take what you know about your target audience to position your product or service around that persona. You can do this by creating personalized marketing materials, such as campaigns, that will resonate with your target audience. Or you can create sales materials (e.g. training guides and scripts) that address your customers' needs as they travel through your sales cycle. These steps can help customers self-select into or out of your sales funnel.
The great thing about customer segmentation is it can be personalized—for you and your customers. When you try it, you may find that it leads you to more value than you expected.
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