Customer Segmentation
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Transcript of Customer Segmentation
Nothing makes you learn like getting stripped of your acorn cap
What customer segmentation is
I don't know the key to success, but the key to failure is trying to please everybody.
- Bill Cosby
Customer segmentation is a means of identifying and prioritizing current and future customers in a way that is actionable and relevant to your business
B2C
Manufacturer of ergonomically safe travel products for parents
B2B
Provider of digital publishing of ecommerce enabled catalogs
Products: diaper bags, dry bags, changing pads, etc.
Services: Development and deployment of catalogs, catalog apps for mobile, etc.
Let’s meet our subjects:
What’s relevant
§ Age§ Disposable income§ Activity level§ Price sensitivity§ Number of kids§ Marital status§ Sexual orientation§ Where they live
Go GaGa
What’s relevant
§ Age§ Disposable income§ Activity level§ Price sensitivity§ Number of kids§ Marital status§ Sexual orientation§ Where they live
Go GaGa
§ Type of business§ Ecommerce enabled§ Size of marketing
budget§ Size of company§ Company goals§ Distribution channels
Zmags
What’s relevant
Not only does it make you sound smart, but it can save your business.
§Focuses the entire team on the same target
§Gives you a touchstone for making decisions
§Prioritizes where to invest your resources
§Increases customer retention
§Identifies new market opportunities
Why segmentation matters
There’s no bad time to be thinking about your customers
§Before launch
§With 6-12 months of sales data
§When expanding into new markets or segments
§When decisions become tough because you’ve lost common vision
§Every 12-18 months after roll out
When to do it
Hint: do not go to the library and check out 7 books on marketing research
1| Gather data
2| Analyze
3| Create segments
4| Validate
5| Roll out
6| Reassess
It’s not all about Excel
Now it’s all about Excel
What’s actionable
Talking with your front line
This is the fun part
Checking accuracy and relevance
How to do it
This will be determined by what’s relevant and available
§Demographics
§Needs
§Values
§Purchases
§Personality
§Decision Making
Who they are
Why they buy
What’s important to them
What they buy (vs. what they say)
What shapes their interactions
How they shop and buy
§Alternatives
§Interests
What their options are
What brings them joy
What types of data to leverage
Hint: you will have to talk to people, just try not to get arrested
Interviews
Crowdsourcing
Site analytics
Order info
Customer svc.
On the street, on the phone, but best done while fully clothed
Polls and surveys are often done first but are more effective later
Traffic sources, flow, hang time, return visits to name a few
The most valuable because based on action, not intent
Great for capturing qualitative info while strengthening customer loyalty
How to get it
You’re simply looking for trends – correlation versus causality is irrelevant
1| Dump everything into Excel – survey results, purchase data, demographics, etc.
2| Begin by picking two features – age and gender, for example
3| Then add another layer – items purchased, repurchase rate, etc.
4| See if it’s meaningful – if not, go one step back up your tree
What to do with it
Identifying new markets for Go GaGa
Gender
Kids?
How use their bag?
Examples
Male Female
Yes No
Kids Self Work Fun
Diaper bag
LaptopGym bag
CommuteCourier
Photogr.
YogaPicnic
Yes No
Self Work Fun
Diaper bag
LaptopGym bag
CommuteCourier
Photogr.
YogaPicnic
Kids
Time to try
Identifying new markets for Go GaGa
Gender
Kids?
How use their bag?
Examples
Male Female
Yes No
Kids Self Work Fun
Diaper bag
LaptopGym bag
CommuteCourier
Photogr.
YogaPicnic
Yes No
Self Work Fun
Diaper bag
LaptopGym bag
CommuteCourier
Photogr.
YogaPicnic
Kids
Enthusiasts§Photography§Wine/picnic§Birders
Professionals §Couriers§Photographers
Commuting§Bike§Public transit
3 new markets emerged
Time to try
Shaping Go GaGa’s product roadmap
Kids?
1st time parents?
1st purch.
2nd purch.
Yes No
Yes No
Accessory Diaper Bag
No
“Diaper” Bag
Acquisition§Accessories get our foot in
the door for the second purchase, which was typically a diaper bag
Retention §Customers who love our bag
will continue buying products if the price is accessible
Accessories play two important roles
Diaper Bag Accessory Accessory
Another example
You’ll reach a lot of dead ends in the pursuit of actionable correlations, just like Isle Nine did
Gender
Age
Married?
1st purch.
Male Female
30-45 60+
Yes No Yes No
Shirt Shirt Shirt Shirt
30-45 60+
No Yes No
Kids Shirt Shirt Shirt
Yes
How worn? Leisure Work Leisure Leisure Leisure Leisure Leisure Leisure
Segments not sufficiently differentiated
Segments were evenly distributed across age and weighed heavily towards the purchase of men’s shirts to be worn for leisure.
The takeaway: just sell men’s Hawaiian shirts to anyone who will buy them.
Sometimes it doesn’t work
Zmags identifies a new service offering
Brand or retailer
Published catalog before
Sell direct/online
Brand Retailer
Yes No
Yes No Yes No
Yes No
No Yes NoYes
Let’s give B2B its due
Zmags identifies a new service offering
Brand or retailer
Published catalog before
Sell direct/online
Brand Retailer
Yes No
Yes No Yes No
Yes No
No Yes NoYes
Examples Incr. content
ROI
Testecom
Drive sales
Test ecom
Incr. content
ROI
Test ecom
Drive sales
Test ecom
Simple ecommerce engine run virtually by Zmags that enables retailers and brands not selling online to test
New service possibility
Let’s give B2B its due
Forming the segmentsAfter you’ve lost all perspective, five key questions can get you on the
right track
1| Are there meaningful differences between these groups?
2| Can I identify people based on these characteristics?
3| Can I market to them based on these characteristics?
5| Can I offer different products or services to meet the needs of different segments?
4| Can these segments peacefully coexist?
Building out the personasThese two factors will lead to impactful segments
What’s relevant to your business
What will help your team to connect with them
§Are they the decision maker ?
§What alternatives do they have to your offering ?
§How price sensitive are they ?
§What’s on their playlist ?§Where do they live ?§What’s their marital status ?§What brand of coffee do they
drink ?§Do they have kids ?
Go GaGa’s personasAge
Gender
Income
Where live?
Activity level
Christine Hannah Alan David
Kids
Sexual orienta.
Relationship status
37
Female
$250,000 (HH)
Downtown Chicago
Attends yoga 3x a week and jogs
Girl, 3 mos.
Straight
Married
31
Female
$42,000
Jamaica Plain, MA
Teaches 7 x a week & bikes to work
No
Lesbian
Single
42
Male
$150,000 (HH)
Suburb of Bethesda, MD
Jogs 3x a week
Boy, 2 yrs & expecting 2nd
Straight
Married
28
Male
$100,000
Brooklyn
Works out 6 days a week in the gym
No
Gay
In long term relationship
First time parent? Yes No No No
Education Masters Ugrad w/ certifications
Ugrad degree w/ grad classes
MBA at night
Go GaGa’s Personas
Hobbies/Areas of interest
Music
Research process
Price sensitivity
Personal style
Hiking & architecture
Madeline Peyroux
Online first then in store
Low
Rocks DKNY
Rock climbing & ceramics
Kate Bush
Word of mouth
Medium
Lives in Athleta
Punk rock & NPR
The Ramones & Stones
Wants to see & feel it
Low
Roxy shirt & cargo shorts
Pop art & travel
Passion Pit
Very thorough – mostly online
Medium
Hipster
Personality
Occupation VP at an ad agency
Upbeat but easy going
Yoga instr. & massage ther.
Loves being a dad
Sr. Dir of Finance
Intense at work & play
Development officer
Uptight
Zmags personasAge
Gender
Position
Years in role
Personality
Peter Blake
Decision maker
Sentiment about job
Culture
35
Male
Dir. of Marketing
4
High energy, high maintenance
Influencer but CMO decides
Wants a promotion but needs a win to stand out
Competitive – running of the bulls at Pamplona
42
Female
CMO
6, 13 with the company
Demanding but protects her team
Yes
Confident but under constant pressure to deliver
Pressure cooker, struggles to prioritize
Company challenge Incr. revenue from house brands
Build their direct channel for better margins
Employer Nieman Marcus Baby Phat
Avoiding the pitfalls
Run these filters before finalizing the segments
1| Too many segments2| Too narrow a focus3| Divergent groups4| Not actionably different
Validating the segmentsDon’t get bogged down trying to be certain – test ‘em instead!
Pull another data sample
Talk with your front line
Place small bets
Pull another data set and see if the trends are consistent
Your customer service and sales team knows your current customers best
Run a targeted email test, experiment with Google AdWords, try a promotion
Rolling it out to the team
Now it really gets fun
§Play their playlist§Create a facebook page for them§Develop a mood board§Start a book club§Have a guest appearance§Keep them top of mind every day
What your segmentation should impact
It can (and should) touch every facet of the business
Branding
Customer service
Hiring
Tagline, marketing messages, word choice, phone greeting, etc.
Policies, hours of operations, methods of contact
Personality, diction, energy level, hobbies
Product roadmap Future features, service/product offerings, pricing
User experience Site design, sales process, store layout and more