Create Homogenous Customer Groups
A customer database contains hundreds, thousands or even tens of thousands of pieces of information about your customers. Segmentation is a great technique to put some order into all this data. Segmentation consists in grouping your customers together into several homogenous groups, making them easier to find in your CRM, but also to efficiently target your customers or prospects during marketing campaigns.
To be efficient, these segmented groups need to be as homogenous as possible. Standard deviations between customers in the same group should be low. Segmentation aims to group customers together to send them similar offers. If customers in the same segment are too different, then segmentation is pointless.
Regularly Update your Segments
Customer knowledge is a work in progress. You need to continually feed your base by collecting more information about your customers. This will help you be more precise when targeting customers. But if customer knowledge is an ongoing task, it is also because your customers change. For example, a regular customer may become an occasional customer. The purpose of collecting customer data is not only to enrich your CRM, but also to update it.
Make your Segments Actionable
Segmentation is based on criteria. If you’re a car dealer, there’s no point classifying your customers by hair color. However, if you’re a hairdresser, this makes perfect sense.
To define the right segments and criteria, keep in mind the end-game of segmentation; to better target your marketing campaigns.
Segmentation is primarily for marketing purposes.
Unfortunately, it’s impossible to say which criteria are the “best”, because this depends on your sector, clientele, etc. But behavioral criteria are increasingly important and believed to be the most effective. So, don’t only focus on sociodemographic criteria.
It is particularly useful to differentiate customers according to their purchase frequency. You wouldn’t target a customer who buys from you every week in the same way as a one-off customer. This is true for most industries.
The Difference Between Segmentation and Targeting
People often confuse the two. But segmentation and targeting are not synonyms.
- Segmentation consists in classifying your customers according to certain social, demographic, “psychological” or behavioral criteria.
- Targeting consists in selecting people from your customer or prospect base who you think may be interested in a marketing campaign.
Use Customer Knowledge Tools to Enrich or Update your Segments
If segmentation comes before targeting, then data collection comes before segmentation. To build your segments, you need to have information about your customers and prospects.
There are several techniques to obtain customer knowledge, some very old (phone calls) and others very modern (retargeting). One of the most popular and efficient methods today is smart surveys.
The quality of your segmentation strategy depends on the quality of the customer data you have at hand. Which is why it’s so important to think about your customer knowledge strategy when building your segments.