5 ways to segment your customers for targeted marketing programs

So, you've got this great product and/or service, alleviating pains and creating gains for your customers, and now you want to retain and grow revenue from both your existing customer base and new prospects. As I discussed previously, since some customers are worth a whole lot more than others, a brand can benefit from learning what the commonalities are of those that are spending more and those that are spending less. Segmenting your database into cohorts of similarities allows you to appropriately allocate your marketing spending, gain loyalty and retention, and avoid alienating customers with irrelevant messaging. Critical to a high performing business growth, is a strong database marketing and customer segmentation strategy. Some common segmentations include:

  1. Geographics/Location

  2. Demographics/Socioeconomics

  3. Psychographics

  4. Consumer Behavior/Usage

  5. Product Related

Geographics / Location

Geographics are segmentations that have the same location metrics such as:

  • City

  • State

  • Country

  • Zip Code

  • Area Code

  • Climate

  • Density

  • Market Size

Mass marketing your products or services to an entire country, population, or broad market is a risky strategy. Customers or prospects can be alienated due to potential differences in attitudes and lifestyles in different geographies. An example of a company that can highly benefit from segmenting their database is a matchmaking service with national or multiple market aspirations.

For example, Dating Ring, a matchmaking startup that I learned about while listening to Gimlet Media's Startup Podcast, launched their service in New York City. They tested the NYC market, captured and learned from the feedback they received from the market, and iterated their service according to that feedback, before launching in other major cities. A service like this captures not only the market location, but often detailed psychographics, demographics, and as the customer relationship progresses, consumer behavior. By segmenting your database by geography, you can learn what markets have similarities and where there are differences. Certainly, not every location will have the same results or feedback, and that is a good reason to segment your database accordingly.

If you are not in the business of selling people and capturing detailed personal information upfront, but rather selling a tangible product or service, there are numerous ways to collect this information. Executing promotions and giveaways in exchange for an ancillary product or service as an incentive are common growth hacks. For instance, encouraging golfers to drop their business card into a drawing in order to win a free round of golf at their preferred golf course. Alternatively, you can purchase lists of prospects based on different criteria, which can include address locations and contact names for varying costs.

Demographics / Socioeconomics Demographics are segments grouped by the following metrics:

  • Gender

  • Age

  • Income

  • Household Size

  • Occupation

  • Education

  • Family Lifecycle Stage

  • Nationality

  • Religion

  • Ethnicity

Marketing based on different demographics and socioeconomic status is necessary to delivering relevant messaging. Different ethnicities, communities, and populations might require different channels and different tones or styles of communication. For example, a film such as Star Wars: The Force Awakens, which has been released in about 85 countries, and in 4,134 theaters across North America (the widest December release), requires a different marketing strategy for viewers in the US vs. other countries, and even folks in the US with alternative native tongues. The U.S. Census Bureau released tables from American Community Survey data collected from 2009 to 2013, detailing hundreds of languages that U.S. residents speak at home, capturing 350 languages (vs. the 39 previously reported).

“While most of the U.S. population speaks only English at home or a handful of other languages like Spanish or Vietnamese, the American Community Survey reveals the wide-ranging language diversity of the United States,” Erik Vickstrom, a Census Bureau statistician.

Psychographics

A psychographic segmentation would be a market that has similar:

  • Attitudes

  • Values

  • Lifestyles

  • Personality

  • Interests

  • Hobbies

A common way to capture psychographics is through Qualitative focus groups or surveys. For example, if you are targeting multiple generational demographics, such as Baby Boomers or Millennials, it's important to study and consider their different attitudes and lifestyles when approaching them. For example, insurance and financial services companies target generations across the board, however, they use different messaging, channels, and tactics, to acquire and cultivate relationships based on attitudes, lifestyles, and opinions.

Consumer Behavior / Usage

Consumer behavior is the study of individuals, groups, or organizations and the processes they use to select, secure, use, and dispose of products, services, experiences, or ideas to satisfy needs and the impacts that these processes have on the consumer and society.

Segmenting your database by similar purchase behaviors and loyalty metrics allows you to upsell or cross-sell and laser focuses your strategy for a particular objective. Common consumer behavior metrics might include:

  • Revenue

  • Lifetime Value

  • Buying Rate/Frequency

  • Customer Journey Status

  • New vs. Returning vs. Lapsed

  • Shopping Channel

  • Purchase Channel

  • Attribution

For example, Viviscal Extra Strength, a nutritional supplement for customers with temporary hair loss and hair thinning, is sold in one month and 3-month supplies or a 90-day recurring shipment. Naturally, someone taking this product for 30 days will have different results and different loyalties to the brand, than someone who purchased the 90-day package. There is a relationship building and upsell opportunity for the customers who purchased the single box -- not only to encourage them to purchase the next supply but to connect and engage on a personal level through appropriate messaging and content. Similarly, the 90-day customer could be encouraged to subscribe to the recurring packaging, as well as personal encouragement to complete the recommended duration of the Viviscal regimen. Naturally, these two types of customers are in different places in the customer journey.

Often consumer goods companies will invest in shopper marketing services to learn how people shop. These companies will study consumers' in-store and online shopping behaviors.

Organizational Demographics / Firmographics

For businesses targeting other businesses, it is common to target and analyze sales and marketing efforts by the following segments:

  • Industry

  • Number of employees

  • Functional area

  • Job Title

It's possible that your product is beneficial for certain verticals. Alternatively, maybe your service is useful for a lot of industries, but your key decision maker works in a particular department at a particular level. Further, it is a good idea to measure and analyze if you have more or less business from organizations of a certain size.

One way to get some of this information upfront is to buy a direct mail mailing list and enter the data into your CRM system. It's important when buying these lists that you are confident of the hygiene of the list. How often has the list been updated? What information is updated regularly? What is the source of the data? Additionally, it's often common to ask for this information directly when calling or email prospecting.

Product Related

Product related segmentation markets to customers based on their relationship with your product or service. For example, if an Apple customer has a MacBook or an iPhone, it's possible that they would be interested in an iPad as well. Segmenting your database by folks that have purchased specific products or services, allows you to upsell and increase your revenue.

Combining several of these elements in multiple targeted lists allows you to learn more about your customers and your products. It is important to listen to your market as much as or more than you talk to your market to gain deeper insights into your business. While Alex Osterwalder's Strategyzer Series (the Business Model Canvas and Value Map) provides the tools to create customer profiles and an ideal business model, as your business progresses, it is important to capture more granular information about your customers, which will fuel your future promotional and operational strategies, as well as foster innovation.

#targetmarket #demographics #geographics #socioeconomics #psychographics #consumerbehavior #usagesegmentation #productsegmentation #locationbasedmarketing #databasemarketing #customersegmentation #customerprofile

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