Customer segmentationAll customers are not the same. Adjust your communication to their individual needs! Segmentation will transform the mass of customers into distinctive groups with different communication needs.
Segmentation offers targeting. Main goal of segmentation is to increase conversion rates using segment specific messages.
Segmentation is mainly used for the following communication channels:
- Direct paper mail
- Direct electronic mail
- Text messages
You can save considerable amount of money by assigning expensive communication channels, such as direct paper mail, or remarketing, to your most valuable customer segments. In electronic channels, segmentation is used to reduce the communication burden, to increase the relevance of the message, and thus to increase your ROI.
Below, you will find some of the useful segmentation types we offer:
MARKETING STRATEGY AND SEGMENTATION
From example in electronics trade below, we can see, that segments have sufficiently descriptive names.
CUSTOMER VALUE SEGMENTATION
Segmentation by customer’s value is the most simple one to create. We can start with their spending. The frequency of purchase that expresses the loyalty of your customers is also essential. When we also look at how long it has been since the last purchase, we have a complete RFM (recency, frequency, monetary value) segmentation that forms the basis for successful targeting. We provide this segmentation as a predictive model and we also offer a fully automated variant of this type of segmentation.
SEGMENTATION BY CUSTOMER NEEDS
If you really decide to understand your customers, you need to track their purchases and behaviors. This is where behavioral segmentation comes in. We use it to determine individual customer’s needs according to their purchases.
Customers in most industries and even multi-store shops can be segmented in the same way. It is sufficient to trace what items are your customers buying and what needs they saturate with them.
The shopping table is the basis for segmentation according to customer needs.
SEGMENTATION BY CUSTOMER’S SOPHISTICATION
If your industry attracts a more sophisticated clientele, it may be appropriate to distinguish between beginners, intermediates and experts.
Some customers will gladly accept just a pink notebook while others will appreciate a processor water cooler.
SEGMENTATION BY CUSTOMER’S LIFE CYCLE
Maturity is the ideal stage; it is where a company makes the biggest profit. In the he last stage of decline, retention (loyalty) activity is necessary, if your customer is to be kept.
However, the life cycle segmentation should not be the only type of segmentation used, because it omits the differences in customer value and needs.
RESEARCH BASED SEGMENTATION
For targeting the above-the-line (ATL, advertising) communication, it may be crucial to know psychography, relationship to shopping, brand loyalty, and relationship to competition. In this case, research based segmentation is necessary.
However, this segmentation does not provide you with the direct reachability of selected segments by direct marketing channels such as direct mail, telemarketing, e-mailing, etc.
Therefore, it is often combined with one of the above-mentioned segmentations, based on internal (transactional) data.
The combination of research and "operational" segmentation is slightly more expensive, but it provides you with both the soft (attitude) and the hard (transaction) information.
CUSTOMER SEGMENTATION PROCEDURE
Customer segmentation consists of several steps.
Usual segmentation dimensions are customer loyalty, expenditures, lifestyle and customer’s needs, seen from the viewpoint of purchased categories.
Workshop or consultation is needed in the beginning to determine the basic dimensions of the segmentation. It helps you to specify the parameters your customers segmentation, depending also on your business branch.
Data check up
At this stage, we'll take the data and see if they are whole and complete. We check if we have all the listings and whether some values deviate from the normal frame.
The data transformation phase means calculation of the derived variables, usually at the individual customer level.
Typical variables could be:
- ARPU (average revenue per user)
- number of purchases per customer
- total money spent per customer
- number of purchases
- length of relationship with customer
In the descriptive statistics phase, we inform you about your turnover or number of customers leaving. We will also test the largest product groups and see whether their sales are growing, stagnating or falling.
At this stage, we divide customers into individual segments so that they are internally consistent, but at the same time as different from each other as possible.
A check of the commercial importance of the segments is also carried out. Segments must be manageable by internal marketing and there should not be too many or too few of them.
CUSTOMER SEGMENTATION OUTPUT
- Customer segmentation output typically are:
- all segments descriptions
- recommended communication channels and messages
- all customers sorted to segments
- SQL script for internal segmentation processing
MORE ABOUT SEGMENTATION
Want to get a higher ROI (return on investment) from your marketing campaigns? Do you consider segmentation? Please contact us.