Research shows 80% of data is “dark and unstructured,” meaning it’s never actually used to make improvements or changes deemed necessary by the customer. And by next year, that number is projected to be 93%. Today’s biggest pitfall is to get so focused on collecting data that you never actually use it. The beauty of data is not just in what it tells you, but what decisions you’re able to confidently make based on those insights.
Smart companies are using data to create customer segments.
A really good customer segmentation strategy benefits many users: the product development team, the marketing team, the data scientists, the salesforce, the finance department—you get the idea. 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.
Below are some things to keep in mind.
When done successfully, the following factors help ensure clients build a true understanding of their target customers and how to engage them. But more than that, they also help 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. Segmentations are living, breathing frameworks and must be treated as such.
But before you begin looking at your data to segment more effectively, you’ll need to do some other things first.
Solid, upfront planning is critical when it comes to building a segmentation your organization will accept and implement. 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 Your Audience
Making the most of your segmentation investment means more than choosing the right scheme—it means translating insights into decisions. Asking the right questions from the beginning ensures that you’ll be on your way to helping your organization gain clarity and focus with a "perfect" segmentation solution that offers insights to help them execute the strategic plan.
Perfect segmentation is possible! But what does it look like? Keep reading to find out.
In short, perfect customer segmentation gives everyone (all those interested parties we mentioned above) the insights they need for success. In other words, predictive analytics that takes customer attitude and behavior into account and is accurate.
What does this mean from an analytical perspective? It means 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. That’s because 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 like us at CMB to extract more value in less time. But the end of the research is really the beginning of your segmentation.
Once you’ve landed on an excellent model and algorithm for defining and distinguishing your new segments, you need everyone to know them! At CMB, a standard part of our segmentation program is to workshop 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 CMB's 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.
The ability to make smart trade-offs is critically important in customer segmentation initiatives. That’s why at CMB we believe 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 CMB clients make appropriate trade-offs to get a solution that maximizes impact.
- 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 the segments
- Overestimating accuracy
Smart trade-offs take careful planning, communication and partnership. Taking the time to focus will make all the difference.
Keep geeking out with CMB’s resident segmentation guru, Brant Cruz, by watching this on-demand webinar about the best practices of market segmentation.