Segmentation: Not all customers are created equal

When we think of customer segments, we often think of race, gender, age, and other demographic identifiers that can assist organizations in defining their customers. Such an approach can be a helpful start, but it is often not the most effective approach to clearly answering who our audience is. As we have learned in the last several election cycles, demographics are NOT destiny. Without sounding overly philosophical, the individual lived experience is too unique to boil down to what you can only see. This dilemma should then force us to better grasp how we account for such intricacies when we engage in customer marketing.

In addition to demographics, a marketer can also segment based on psychographics, which include interests, values, lifestyle choices, and other psychological factors that influence consumer behavior. Geographics and behavioral characteristics of their customers or potential customers can also be used for segmentation. For this post, I want to focus on how the basic engagement behaviors of existing customers can be used to define segments, the implementation of customer data within your technology stack, and the execution of marketing tactics based on how they are defined.

In my experience as both an academic and a practitioner, past user or consumer behaviors such as purchase history, frequency of interaction, and response to marketing campaigns have always been the most accurate predictor of future user or customer behaviors (instead of demographics, psychographics, and geographics) and, consequently, the most effective way to segment customers. So, what does an organization need to ensure "the right customers get the right message at the right time? ":

• Data Acquisition and Storage: Gleaning the data necessary to conduct well-run customer marketing campaigns is a MUST. Remember: Marketing is a science!! It should always be a data-driven business function. Smaller organizations or organizations new to customer marketing will often find themselves throwing spaghetti against the wall and seeing what sticks. If something does stick, they often lack the data practices to draw accurate conclusions that can be used to iterate marketing tactics. This is why ensuring your user or customer data flows cleanly to business intelligence software is essential. By housing your user or customer data in products like Tableau or Power BI, your organization can utilize cluster analysis (a statistical technique used to group similar data points), analyze them, and form customer segments.

• CRM Software Management: While there are a lot of great CRM products on the market (my personal favorites are Braze and Iterable), they are only as good as the data they receive and their setup, maintenance, and governance. It's crucial to have a clear-cut plan for implementing them effectively. This preparation ensures that customers are segmented properly within the CRM, aligning with the solid analysis defining the segments. CRM software is the lynchpin by which we communicate with our customers. In other words, there is no way to get "the right customer, the right message at the right time." It also makes the ability to analyze the efficacy of your messaging impossible, as CRM products will integrate with software that will measure the actual customer interface. For example, imagine you work for an app-based firm and are trying to direct a segment of your users to a particular part of the app by deploying an A/B test to determine which type of messaging is most effective. The only way to ascertain this is by tying users to the message they received and their actions within the app to compare the performance of the different marketing tactics. Without properly integrating your CRM into the rest of your technology stack, you will likely make major marketing errors and might not even know about it.

• Testing, Testing, and More Testing: You can never learn enough about your customers, which is why you should never send a message without comparing your marketing tactics to other tactics or a control group comprised of members of the segment who did not receive the marketing treatment. In other words, everything should be tested. Before launching a marketing test, however, it is essential to deploy the scientific method where you define the segment that will receive the treatment and the objectives of the campaign, explain why the targeted customers are likely to find value in a particular treatment, and articulate campaign-specific KPIs and a hypothesis that will guide how you measure the efficacy of the campaign.

Don't panic if your organization has yet to reach this point. Sound customer marketing practices take time and require real investment of time, money, resources, and talent. Trust me, though, it works. Once you have begun to establish your customer marketing operations, you will see significant results in retaining customers while also learning more about what types of resources you should look to acquire going forward.

How has your organization approached customer marketing? Share your thoughts and experiences below and let's get a conversation going. If interested, schedule a free one-hour consultation. I would love to learn more about your organization and discuss how I can help you and your team drive meaningful and impactful results.