Customers

The importance of customer segmentation

As a business owner/executive you have probably heard the term “customer segmentation” before. Segmentation is described in Wikipedia as “dividing the market into groups of individual markets with similar wants or needs that a company divides into distinct groups which have distinct needs, wants, behavior or which might want different products & services.”

But why is segmenting your customers important? After all, won’t most customers use your product or service in the same way?

There are 3 good reasons you should attempt to segment your customers:

First, to gain knowledge about whom your best customers are and which products or services they prefer. You should have a database of your customers that gives you basic information. You can gather this information by having customers fill out a survey to receive a special promotion or you can purchase a market segmentation tool. For ex. A fitness center owner may produce a survey that reveals that their best customers are single, age 33, have an annual income of $40,000 and live within 10 miles of their location.

Second, more efficient allocation of funds by targeting similar customers using their preferred method of communication (Direct mail, text message, email). Equipped with the knowledge of the most profitable customer for your business, you can purchase lists that will help you find similar customers in your area. Two resources I recommend are MindBase® from The Futures Co. and PRIZM® from Nielsen.

Third, you will be able to develop a communication piece that is relevant to different groups and motivate them to act. To continue the fitness center example, you now know whom you are marketing to and where to find them. But do you know why they want a membership?  A deeper segmentation tool can show you the difference between the customer who works out to “feel better” vs. the customer who works out to “look better”. The end result would be the same, a sale of a membership. The difference would be in how you communicated to each customer and which of your services to highlight. For example, the customer who works out to “feel better” may respond to a message that highlights a personal nutritionist and Yoga class. Conversely, the customer that wants to “Look Better” may respond to a communication around a training coach and cardio classes/machines.

Depending on your budget you may not be able to go through all three stages but you should be able to describe your best customer in ways that are definable and measureable. This will translate into a more successful marketing strategy and more sales for your company.

Does your company have detailed information on your customers? If so, how did you collect that information?

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3 thoughts on “The importance of customer segmentation

  1. Pingback: Marketing Strategy vs. Tactics: Do you know the difference? | 10K Marketing

  2. Pingback: Marketing Strategy vs. Tactics: What’s the difference? | 10K Marketing

  3. Pingback: How did you land that whale? | 10K Marketing

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