One Size Does Not Fit All: The Importance of Customer and Lead Segmentation

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Mass marketing, or attempting to appeal to one large market through a singular strategy, is an age-old tactic. As the years go by, however, it is becoming clearer and clearer that mass marketing is a much too time-consuming, inefficient, and expensive plan, especially for niche brands and services. This so-called “one size fits all” approach is fading fast, and it seems that personalization is on the rise, and with good reason. Did you know that 74% of online consumers get frustrated with websites when its content, offers, or even its ads have nothing to do with their interests or past purchases?

It is a well-known fact that different people buy products and services for different reasons, and recognizing this reality will only serve to increase your brand’s likeability and inevitably lead to a stronger relationship between you and your customers. The most effective way to do this and ensure you and your brand are targeting each and every kind of buyer and lead you attract is through segmentation.

What is Customer and Lead Segmentation and Why Should You Care About It?

The term “customer and lead segmentation” is just a fancy term to describe the division of your customer base and your leads into smaller groups based on commonalities. This then allows you to develop more specific marketing and communication strategies for each cluster that accurately cater to their preferences and history.

While this may seem like an overly effortful process, it pays off in dividends. Breaking your large customer base down into more manageable pieces makes it easier to identify your target audience, advertise to the right groups with relevant marketing materials, improve your brand and content strategy, recognize new and previously unknown market opportunities, and demonstrate your knowledge of different customers’ wants, needs, and key motivators. All of these factors will allow you to rise above your competitors and establish both yourself and your company as customer-centric. In addition, customer and lead segmentation allows for a level of personalization that can improve your conversion and retention rates and customer loyalty. Impersonal marketing materials just don’t speak to people in the way that something they can relate to can. Have you ever received an email that started with a generic and impersonal “Dear Customer” rather than a friendly greeting with your name? But before you can create the campaign, you have to collect the data that supports it.

How Can I Collect The Data?

Besides your customer database, you can access all kinds of data about your current customers, leads, and target markets online and in person by getting creative and using detailed surveys and questionnaires, in-store, on-site, or online feedback boxes, incentives like sweepstakes that require a minimal amount of personal information to enter, telephone and face-to-face interviews, and focus groups.

You can also use free tools like Google Analytics as well as existing research reports and statistics that are available online and in various public databases.

How Should I Go About Segmenting My Customers and Leads?

Customers and leads can be segmented in an infinite amount of ways based on your product or service as well as your business goals and marketing strategies, but there are four fundamental segmentation approaches: analyzing data based on demographic information, behavioral information, psychographic information, and benefit-based information.

Demographic information typically includes location, age, gender, income level, and education. For business to business (B2B) plans, this term would describe the size and scope of the company, the number of employees they have, and their sales size. Behavioral data is about how your customers use your products or services, their sentiments, and their transactional behavior including where and how they make purchases. Psychographic data, also known as attitudinal information, covers personality traits, lifestyle preferences, and values to help you understand who your customers are as people, what motivates and excites them, and what affects their purchasing behaviors and buying decisions. Benefit-based data is solely about what the customer is seeking from you and your products or services; this allows you to understand what you have to do to help them get there.

Beyond the basics, one of the oldest and most popular ways to segment groups by purchase patterns is to collect, measure, and analyze recency, frequency, and monetary value (RFM) data. How recent was their last purchase from you? How frequently do they make these purchases? What is the average amount of money the segment tends to spend on your products or services? Answering these questions will help you to understand how to attract and retain the different types of customers that interact with you based on their buying history. By using purchase-based frameworks like RFM, you can calculate customer lifetime value (CLV), identify your most gainful customers, and optimize your sales strategy to increase purchases and profits.

As demonstrated in my previous post, this type of segmentation RFM and CLV can also help you target customers on popular platforms like Facebook, Twitter, and Google. Simply importing these segments into each platform allows you to reach your audience and tailor advertising for each group separately. This kind of targeting allows you to:

  • Increase conversion rates
  • Reduce the amount spent on advertisement
  • Retain existing customers and even convert them into repeated buyers

Should I Use Software or Analyze the Data Myself?

While software certainly isn’t necessary, especially if you or someone on your team is a natural data analysis and statistics whiz, it can make the latter half of the customer and lead segmentation process nearly effortless. There are dozens of types of customer relationship management (CRM) technology and tools that harvest information for you, supply you with a contact database, analyze patterns and trends in your data, and centralize your actions in response to these insights. Perhaps most importantly, it eliminates the guesswork aspect that so many tend to find daunting.

No matter how you collect your data, segment your customers and leads, and shape your strategy, you can reap the many benefits of the segmentation approach. As you continue to cluster your customers and leads, your content and messaging will become highly personalized and lead to improved response rates, stronger brand perception and connection, and increased revenue.

If you want to learn more about how to segment your customers automatically by using sales data and reach them on other platforms, feel free to contact me directly – e.miliauskas@stacktome.com

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