When it comes to targeting your marketing efforts, nothing is more important than understanding your customer.
The better your know your customers’ wants and needs and desires, how they behave, where they are in the purchase cycle, how sensitive they are to cross sell efforts, lifetime value, (I could go on…), the better your marketing effectiveness.
Market segmentation, then, is the ongoing process of analyzing your customers and prospects and clustering them by similar characteristics that relate to their product or service needs. Here’s the key—clusters should be distinct and respond similarly to a particular marketing strategy or offer. Consumer or industrial, the objectives are the same, smarter segmentation can help you reach a more responsive audience with better results. You can better manage your marketing spend. You can enhance customer loyalty and boost satisfaction as you show your customers you truly understand them.
Test yourself and see. Which segmentation strategy personality type are you?
Segments customers along demographic lines—age, sex, family size, family life cycle, household income, occupation, education, religion, race, nationality. And geographics—region, county size, urban/suburban, climate and season, zip code.
How do you know you’re a GeoDemo? If you were to write a marketing brief for a consumer package goods product and your target audience description is: female, age 25-54, married, children, household income of $32,000-$70,000, living in A and B counties. Then you’re guilty as charged. What does this tell you about the target that’s really actionable? What about mom’s interests? Career? Lifestyle? What age are those children? What activities are they in? How does your brand relate to those kids and how does that make mom’s life better?
Geographics and demographics are starting points. Not destinations.
People just aren’t monolithic. And it doesn’t matter whether you’re a Millennial, a baby boomer or a senior. One of my graduate students once asked me to help her with a marketing campaign targeting seniors. She queried, “What do seniors do?” I responded by asking several people in the class, “What do you do?” “And you?” “And you?” Of course, they were all different. And so are seniors!
At while back, I lived a couple doors down from a retired couple who loved cars and made a business of it. They got Detroit automakers to hire them to pick up the latest cars and drive them back to Chicago, check them over mechanically, shine them up, and turn them over to journalists to thrash for a few days prior to writing a review. The couple’s business employed a small number of like-minded folks—older and young—to help dealers deliver cars and fleet vehicles. Interest in cars, not age, defines this cluster. As I said, geos and demos are a starting point.
Confirmed Carpet Bomber
Distressingly common, though not formally a type of audience segmentation…more the result from a lack of applying targeting sophistication to marketing campaigns. Other names for this personality type: Scattergunner and Shotgunner.
You may recognize the sort, they tend to be siloed and think vertically. They may lead the direct or e-mail marketing efforts for a corporate division or department. And they’re charged with increasing loyalty and share of wallet from a customer database that crosses departmental lines. Confirmed Carpet Bombers have been known to deliver as many as three to five offers a month to the same folks. And ignore the fact that other corporate divisions are doing the same.
Their customers are bombarded with offers and become fatigued. What’s more, they wonder whether the business really values them as customers because the offers often don’t seem to recognize their needs. Responsiveness declines. Loyalty scores drop. Marketing dollars are not efficiently spent.
Segments customers with analytical data in hand. Marketing stimulus and response. Observation and measurement. Algorithm- and analyst-oriented, Behaviorists are definitely the power-user among segmentation personalities. Watson and Skinner would be proud.
Behaviorists have a lot going for them. Numbers, for one. Behaviorists aim to predict, using customer and historical data, which clusters are the most likely to respond to a particular offer. This is incredibly valuable. They can split a customer database into increasingly discrete and actionable targets. One analytics partner I worked with recently found more than 20 clusters for a banking client where previously Confirmed Carpet Bombers reigned.
Today, Behaviorists are everywhere, tracking every sort of web-browsing behavior. Pages visited. Searches made. Display ads clicked. Friends linked.
Weaknesses? Two biggies.
#1—Metrics Mania. It wasn’t long ago when behavioral types were all about clicks. The more clicks the better. And they were convincing, too. With CMOs continually having to justify marketing solutions to numbers-addicted CEOs and CFOs, it seemed the solution was at hand. Problem was—and is for Behaviorists who aren’t careful—unless you’re selling clicks, you need to measure something closer to your business and marketing objectives. Key Performance Indicators (KPIs). Like quality leads generated. Customers acquired or lost. Like sales. Better yet, profits. Loyalty scores. You name it. It’s your business. Your objectives. Measure what matters.
Weakness #2—Human Connection. Strictly objective measures can create blind spots. Successful brands connect with people on a subjective level and the best create passionate (sometimes irrationally passionate) customers. Even in the B2B market, human motivations are drivers. Why spend $X million on a new software package? Because the decision maker is internally driven to succeed. Because they want to be heroes, get promoted. Because their team will work smarter and faster so they can all go home and play with their kids.
Segments customers based on lifestyle factors. What customers do. Where they go. How they think of themselves. What they do with their free time. They can be anyone or anything they want. You can recognize Psychologists because they’re doing what their customers are doing. Going where they’re going. Getting to know them.
Why? Insight. And for marketers, insight is actionable.
A case in point. What do capitalist publisher, Malcom Forbes, and a twenty-something art director have in common?
It sure ain’t geographics or demographics. One could live anywhere he wanted in the world. The other, still with his parents. One was a multi-millionaire. And the other…well, let’s just say he earns somewhat less. It isn’t purchase behavior, either. The billionaire bought dozens of these products. The art director is eating peanut butter sandwiches every day for lunch and vacationing in his back yard to help save up for one.
The key segmentation variable. Lifestyle.
Both love Harley-Davidsons. They think (or thought, in Malcom’s case) of themselves as motorcyclists. They describe the feeling of the wind in their face and the freedom of riding. And when that art director finally saved up enough to buy his Fat Boy, he was just like Malcom Forbes! Live to ride. Ride to live.
Inclusive in their approach to segmentation, All-Rounders apply the techniques of multiple personality types. They draw from a base of GeoDemo tendencies and augment them with the analytical understanding and ability to quantify of the Behaviorist while applying the Psychologist’s insight into a customer lifestyle and mindset. The best of all worlds.
Smart All-Rounders are also known to understand another important characteristic of smart segmentation. Continual refinement. Analyze. Test. Refine. Retest. Refine again. Succeed.
Photo credit: Forbes image, AMA's Motorcycle Hall of Fame Museum.
__________________Paul Hydzik grows brand value. As a brand marketer and award-winning creative leader, Paul has more than 15 years of experience driving business success from start-ups to blue chips. His strategic resume covers all aspects of B2B and B2C branding from go-to-market to consumer insight to identity development and all forms of marketing communication.