Benefits of Customer Segmentation: Part 1 - Segmentation Defined
Customer segmentation is hailed as the driving force behind successful, efficient targeted marketing, product positioning, sales strategy and a key to customer retention. But what is segmentation? It has so many different meanings. If you were to ask a dozen of your colleagues, you would likely get 12 different definitions of segmentation. In this three-part series, we’ll discuss segmentation in the context of your business and your CRM system and show you how to reap the benefits of segmentation.
Customer Segmentation Defined
Businessdictionary.com defines customer segmentation as “The act of separating a group of clients into sets of similar individuals that are related from a marketing or demographic perspective.” Another way of putting it in the context of your CRM is: Segmentation - The grouping together of customers based on similar characteristics that you decide is relevant to your business. These characteristics may include a wild range of variables.
Not to put too fine a point on this, but the secret to success with segmentation is to determine how to segment your customers in such a way that it will have the greatest impact upon your business. We’ll talk more about this a little later. Segmentation, or to take it down to the individual, personalization is not just a nice idea, it is imperative in today’s business climate. Customers expect you to quickly address their individual needs and to understand their business environment and the most effective way to do that is through segmentation.
Segmentation Types
Segmentation is the key to understanding your customers. Here are some broad outlines for the most common types of segmentation:
- Demographic. What are the “facts” about your customers and prospects – Location, size, revenue, volume, job function, industry, products made, and stage of business life cycle
- Product/Service Benefits. What are the benefits the customer seeks – Look at the sensitivity levels to brand, price, delivery and quality?
- Behavioral. How do your customers behave with or act towards your products – Internal purchasing process, number of people involved in the process? What are their needs in terms of security, power and esteem? Other attributes include: Loyalties, usage, awareness, knowledge and purchase patterns. Does behavior change between segment use of email or text? Or does one segment use mobile more than desktop?
- Psychographic. Information about lifestyle or personality help fill in the blanks when other segmentation factors overlap – Are your customers formal or casual? Outgoing or more reserved? Other traits include: strivers, makers, believers, experiencers, achievers, innovators, thinkers and survivors. These traits can be hard to nail down, but are invaluable when deciding how to approach a customer or prospect.
CRM and Segmentation
The starting point for executing any business-to-business segmentation is a good CRM system. Without a well-designed and well-maintained CRM system, segmentation would be impossible to implement. This may sound obvious, but it’s not. All too often we’ll talk with a client and ask them to pull up all their top prospects and they won’t be able to because they didn’t plan for that segmentation ability when designing their CRM. For segmentation to succeed, you must take the time and evaluate your CRM’s capability to capture and track all aspects of your segmentation strategy.
Benefits of Segmentation
Customer segmentation is imperative in business today. Benefits can include: Providing focus for your company, increase in competitiveness, market expansion, improved communication and increased profitability. This makes a compelling case for spending the time and effort necessary to get your segmentation strategy right. Our next article will address the role your business goals play in segmentation. With a refined segmentation strategy incorporated into your CRM system, you’ll be able to fully leverage the information your customers are providing you.
Since 1994, AspenTech CRM has worked with clients across virtually all industries to create CRM systems that are designed to specifically meet their goals. Contact one of our CRM specialists today at (866) 880-4228 or by email to start a conversation about using segmentation more effectively to improve your business.
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Related Articles:
Benefits of Customer Segmentation Part 2 - Business Goals & Segmentation
Benefits of Customer Segmentation Part 3 - Segmentation Examples & Your CRM
