How & Why to Segment Your Customers

Segmentation is the process of defining who, along the spectrum of potential groups, should be your customer (who is most likely to value your offer, product or service).  Segmentation shapes every piece of the marketing strategy since the reason you exist is because you create value for a customer group.  Read why it is critical that your marketing strategy start with the customer here.

The segmentation process deserves time and thought. Below I've outlined the steps to start the segmentation process. You should seriously consider if you need to hire a marketing professional to help you complete your segmentation study if you do not have the expertise yourself. 

Segmentation Steps:

Brainstorm: Who are the Buyers?

Who are all the potential buyers or consumers of your product or service?  Make a list.  Get creative.  Think about different ways to describe them.

Brainstorm:  Consider Different Ways to Segment the Consumers

Think:  what are all the different ways you could divide the list of buyers & consumers you made?

Some common differentiators include geographic (city, nation, rural vs urban, etc.), demographic (age, income, gender, etc.) and lifestyle (luxury, modest, etc.). 

Push beyond these generalities and consider how consumers use or engage with your product or service (at a category level). For example, are there heavy users & light users?  Do they value different benefits - price vs performance?

Define the Segments

Give your segments names & descriptions.

For each segment, describe:

1) use of product or service, 

2) benefits they seek from the product, 

3) attitude and level of loyalty toward product, and

4) pain points or satisfaction level with existing options.

Create Scenarios & Evaluate

For each segment, consider what it would mean for you & your organization if you pick them.  

Take time to explore each segment fully to understand the implications to channel selection or distribution, pricing & brand positioning.

Pick a Segment

Deciding which segment to select depends on several factors.  You need to assess:

1) your "own-able" competitive advantage,

2) your business goals, 

3) available resources and 

4) the expected return or profitability of the different segments.  

Develop Your Positioning Statement

This is one of the hardest steps, but it is very important.  The goal is to "define the specific position you want to occupy in the mind of the target audience you chose." 

This is based on 3 critical elements: 

1) your point of difference or competitive advantage over the other choices your target audience has (your claim), 

2) the reason to believe your point of difference (your proof), 

3) the end benefit your target audience receives (emotional benefit, not functional).

Read more about the concept of positioning from the people who originated the idea in the short book Positioning: The Battle for Your Mind. 

Got a question about segmentation?  Need help?  Email me.

Why You Need To Segment Your Customers

A worthy re-post. I originally posted this in July 2010, if you missed it, now's your chance!

Often businesses and organizations skip a critical step in formation of their marketing strategy - target audience segmentation, or essentially defining who, along the spectrum of potential customers, to attempt to serve.  Segmentation shapes every piece of the marketing strategy since the customer, not the product or service, determine the game plan and rules by which the game is played.

So why do smart people (like you perhaps) skip it?  Common response:

In reality, many people just don't understand the power of segmentation or how to do it well. 

As I mentioned, segmentation drives key decisions related to your marketing strategy.  To do it well does take time, but it is absolutely, one-hundred percent worth it.   And even if your product is designed for the mass market, you still need segmentation to define who the most likely early adopters are and how to engage them.

For example, a chocolate brand segmenting the market based on use habits may choose to target those who primarily use chocolate for cooking & baking, while another might target those using it for daily snacking.  The choice has important implications for what kind of chocolates to make & in what shapes, how to package & price their chocolates, and where to sell it. 

Segmentation involves deciding on what basis to divide the variety of consumers that might benefit from your product or service.

Thought-starters:  How does your organization segment the market?  How should they segment it?  Are you using the right marketing tools to reach the segment you've chosen?

Need help answering these questions?  Email me.

How to Make the Most of Your Next Focus Group

First, video it if you can. 

Every good researcher videos the focus group.  This is because a focus group is a psychological experiment and you will have to use your ability to read and understand human behavior.  The info you gather will need to be interpreted, and having a recording of the group really, really helps.

Second, come up with good questions. 

Lots of them. Then, PRIORITIZE your questions, because a good focus groups almost always runs over time. To come up with good questions, think about what you want to know in order to make decisions.  So, think first of all the decisions you have to make. Then, think about what you would like to know to help you make a better decision. Then, think what you would like to know from the target audience that might provide that info. 

Third, let the conversation flow.

While you need to have your questions prepared, at the same time, be ready to let the conversation flow and be more free form in order to get at the "whys" behind the answers your participants give.  Again, its psychological - you want to know the rational AND, more importantly, emotional reasons people behave a certain way.

Finally, remember success relies on your skills to interpret & understand human behavior.

If you don't know how to do this, hire a professional who can.  Participants will not be able to articulate the "whys" behind their behavior very often.  You will have to draw it out of them with questions that will flow from the answers they give.

Gobbledygook

Great (and free) ebook from marketing veteran, David Meerman Scott, on writing messages tailored for your audience that focus on how your business, product or service solves their problem, versus blathering on about features.......worth the read!

Does your marketing plan answer these 5 questions?

1. How do your marketing strategies & objectives support the critical organizational goals?
2. How are you measuring each marketing initiative?
3. What is your target cost per acquisition?
4. What is the customer lifetime value of your target customer?
5. What are your alternative strategies if things change?

These questions are fundamental to your plan, in addition to many others that I'll touch on in future posts.  If your plan answers these it means that you are headed in the right direction in order to move your business or organization forward and spending time on the right things.

If your plan does not answer these questions, get to work understanding where you are falling short.  Get your team together and answer them together.  Be prepared to change what you are working on after answering them......

Of course, I am assuming your marketing plan answers "Who is your target customer?" because that is fundamental. How well do you know your customer is an entirely different question.  Read this to get inspired on that topic.

Oh and if you said your target customer is everyone - don't believe yourself. Read this.

Why your marketing strategy has to start with the customer

Often businesses and organizations skip a critical step in formation of their marketing strategy - target audience segmentation, or essentially defining who, along the spectrum of potential customers, to attempt to serve.  Segmentation shapes every piece of the marketing strategy since the customer, not the product or service, determine the game plan and rules by which the game is played.

So why do smart people (like you perhaps) skip it?  Common response:

In reality, many people just don't understand the power of segmentation or how to do it well. 

As I mentioned, segmentation drives key decisions related to your marketing strategy.  To do it well does take time, but it is absolutely, one-hundred percent worth it.   And even if your product is designed for the mass market, you still need segmentation to define who the most likely early adopters are and how to engage them.

For example, a chocolate brand segmenting the market based on use habits may choose to target those who primarily use chocolate for cooking & baking, while another might target those using it for daily snacking.  The choice has important implications for what kind of chocolates to make & in what shapes, how to package & price their chocolates, and where to sell it. 

Segmentation involves deciding on what basis to divide the variety of consumers that might benefit from your product or service.

Thought-starters:  How does your organization segment the market?  How should they segment it?  Are you using the right marketing tools to reach the segment you've chosen?

Need help answering these questions?  Email me.