Smart companies use data to create customer segments. But choosing the best segmentation scheme can be tricky—it requires a bit of both art and science. Segmentation is about interpretation. It’s about tendencies. It delivers a framework—the keys to success. But you have to open the door.
When there’s no one “right” answer, the best solution is most often a balance of statistical validity and real-world usability.
A successful customer segmentation strategy benefits many users: product developers, marketing team, data scientists, salespeople, the finance department—the list goes on. With so many interested parties, it’s easy to see why getting buy in up front is critical to the success of any customer segmentation.
However, today’s biggest pitfall is to get so focused on collecting data that it’s never actually used. The beauty of data is not just in what information it offers, but what decisions you’re able to confidently make based on those insights.
Below are some articles and resources to help address and improve customer segmentation challenges.
Getting Your Customers Beyond Price
In this world of information overload, it’s becoming harder and harder for brands and retailers to truly differentiate their offerings, especially when they lack a captive audience in their physical store locations.
Discrete choice modeling and/or segmentation can come in handy since most consumers will say they want all the product’s bells and whistles for the lowest possible price. Spend time combining the art and science of research—during up-front design and analysis—to help bring the customer journey to life. Proper questionnaire design trumps speed to keep the story and research insights at the forefront. Keep reading to learn more.
The 5 Keys of Successful Customer Segmentation
The following five critical success factors help ensure clients build a true understanding of their target customers to engage them. Implementing these factors also helps drive strategy across the organization including resource management, marketing messaging, product development and innovation.
- Focus on business decisions from the start
- Account for a wide range of influencers
- Anticipate trade-offs
- Leverage existing resources
- Empower decision-makers to act
Ultimately, segmentations are evolving frameworks and ought to be treated as such. Once business leaders have bought in, segmentation enters into a life of learning, testing and relearning. Keep reading to learn more.
Start Here: Up-Front Planning You Must Do Before Building Customer Segmentations
Organizations investing time, money and people need to see meaningful outcomes. And the key to these outcomes comes from engaging stakeholders early and often. Follow these five steps to ensure alignment prior to diving in and building segmentations:
- Set expectations
- Understand relevant initiatives
- Learn from the past
- Define success
- Identify audience
Making the most of segmentation investments means more than choosing the right scheme—it means translating insights into decisions. Asking the right questions from the beginning ensures your organization gains clarity and focus that offers insights to help execute the strategic plan. But what does it look like? Keep reading to find out.
A User’s Guide to the “Perfect” Segmentation
Perfect customer segmentation gives everyone (e.g., product developers, marketing team, data scientists, salespeople, the finance department, etc.) the insights they need for success. In other words, predictive analytics take customer attitude and behavior into account and is accurate.
What does this mean from an analytical perspective? We have differentiation on needs for the product development folks, attitudes for the marketing folks and a predictive scoring model for the internal database team.
Sounds easy enough, but in practice it gets a bit trickier. Attitudes are not always predictive of behaviors.
Behavioral data might show things like monthly spend, products purchased or points redeemed—an accurate representation of what happened and when it happened. But this doesn’t necessarily show who did it. Adding demographic and attitudinal data to the database can help provide the links. How well we can accurately predict the segments is contingent in part on the accuracy of our data.
Thankfully, there’s no better time to be in research as mobile stitching, AI, agile qual, etc. are helping researchers extract more value in less time. But the end of the research is really the beginning of your segmentation.
Socialize Your Segments to Inspire Action
Once an excellent model and algorithm for defining and distinguishing your new segments is decided, let everyone know them! Work with clients' internal teams to obsess over the persona behind each segment (e.g., understand more deeply what can motivate “Defensive Donna” or how to pin down the “Explorer”).
The goal of workshops is always the same: Socialize the key insights about each segment, then apply that learning to real business needs.
There are myriad exercises that organizations can engage in—from in-person workshops to VR experiences. All of them deepen and hone an organization’s understanding of the segments and compel them to apply their learning to critical business issues. Participants walk away from the workshop with memorable and actionable insights, and as enthusiastic evangelists. Keep reading to learn more.
Maximizing Customer Segmentation Impact With Smart Trade-Offs
The ability to make smart trade-offs is critically important in customer segmentation initiatives. It’s important to focus on best and highest uses. Below are a few examples of what worked and what didn’t work when helping clients make appropriate trade-offs to get a solution that maximizes impact.
What worked
- Communicate early and often
- Think through all the downstream implications and make the most informed decision
- Understand what is critical now versus what can be done in stages (later)
What didn’t work
- Looking through only one lens
- Underestimating the time it takes to socialize segments
- Overestimating accuracy
Smart trade-offs take careful planning, communication and partnership. Taking the time to focus will make all the difference. Keep reading to learn more.
Keep geeking out with CMB’s segmentation experts by watching this on-demand webinar about how to build and socialize segmentations at large organizations with diverse needs successfully.