Customer Segmentation Rules of the Road

A Marketing Plan Simplified

Creating a sound marketing plan can be super simple.

1. Have incredible idea.
2. ????
3. Profit!

If only marketing plans were that easy! We’d all be able to retire by time we were 30. Even “overnight sensations” like Instagram, Groupon and the Snuggie took a lot of work before they crossed the chasm. One thing those three examples had in common, as well as myriad big brands and successful businesses, is that they understood their core clientele, what they needed and where to find them. Without putting too fine a point on it, their success in large part comes down to customer segmentation. It is arguably the most critical component of any marketing or strategic plan.

A Plan for Your Plan

Customer segmentation is nearly equal parts art and science. It doesn’t need to be an exhaustive, arduous journey to identify key groups of customers; however it does require time, patience, collaboration and work if you want to knock it out of the park.

Seasoned backpackers don’t set out for the mountain top without making a few assessments. What’s the terrain? How long will I be gone? Who am I going with? Will there be any storms of the century? Where did I put all of my equipment?

Unless you fancy turning this into Project Donner Party, we suggest you follow this trail guide.

Think about your entire organization.

Your first step is to understand the needs of your organization. Identify all of your organization’s revenue streams, competitive pressures, shifting market dynamics and core strengths. The view from your perch may be a good one, but getting a feel for what’s going on across the organization in each department will give you very solid footing.

Don’t make the perfect the enemy of the good.

The segmentation itself could be quite challenging. It’s important to not pass on an excellent plan in search of the perfect one. Set the goals for this project to account for 80% of your customer base, not 100%. Even the largest companies have a few customers that are outliers for various reasons, and trying to develop a mutually exclusive, robust segmentation strategy with no exceptions could be asking a lot.

Do your research.

It is critical that you prepare a solid fact base. With very few exceptions, unless you take a data-driven approach you will end up with a fairly meaningless result. Much like hikers who take stock of their equipment and food supplies, you’ll need to identify what research is available to you, which surveys have been completed (or are planned) and as many analytics pertinent to your customer base that you can find. It will span the gamut from anecdotes from the sales team, to site analytics and even insights from your latest focus group. In an ideal world, these multiple inputs will align. In a less ideal world, you will need to figure out ways to validate your insights or to scrub the data to get rid of bad datum.

Socialize.

Take the time to plan out a socialization strategy. Through the process you will identify key stakeholders, and it is important to keep them aligned, informed and supportive of your efforts. Customer segmentation is a bit of a leap of faith, and keeping everyone on the same page and on-board with your progress-to-date will create a much better result with less time and effort. As you make changes to your segmentation approach, you’ll find new information. Do the internal work necessary to share that information and get buy-in.

Rules of the Road

Alright, you’ve got your plan together. Now it’s time for the fun part. Through all of the scoping you’ve done and by creating your general plan of attack, you’ll begin to see a pay-off almost immediately.

Plan & Define

Create and document an assessment of what’s going on around you, who you know, and the scope of your project. Determine what you want to do, and then chart out the steps to get there alongside a timeline. Define what you are solving for, and make an effort to avoid scope creep. This plan can then be socialized with everyone whose support is important. They’ll begin to understand what you are trying to accomplish, can make sure they’ve assigned resources to support you and will verify that this work isn’t already being done elsewhere.

Discover & Assess

Identify and interview internal stakeholders. You’ll need to get a strong sense for what everyone already knows about your customer base. These stakeholders will be able to guide you to available information sources. Politically, generating their support will help make sure your efforts are well-received when it comes to gaining consensus.

Cluster & Define

By now, you’ve got a firm grip on your customer base. It’s now time to put them into buckets. The challenge is to make sure these groups are mutually exclusive. Customers can’t fit into more than one group. Here are some questions you can ask yourself about these segments:

• Are there groups who have different needs?
• Are there groups who think or feel differently?
• Are there groups who have different lifestyles?
• Are group differences wide enough to justify targeting them?

Research & Validate

You’ve designed a framework you can use to assess your markets. You’ve created groups of customers and identified a common set of demographics and psychographics for each of these customers. Now it’s time to execute some primary research to validate your hypotheses and assumptions about each group. Whether it’s through focus groups, surveys or other research methods, there are a few things you’ll want to verify before moving forward with your marketing strategy.

• What are the unique needs of each segment? What similar needs do they share?
• How well, and in what manner, do competitors already meet the needs of each segment?
• How big is each segment? Is each segment profitable enough to target? How much of each segment do you already do business with?
• Are the segments stable enough? Are their needs shifting?
• Is the segment wealthy enough to avoid your product and service?
• How loyal are they to existing products and services? Will your offer be evolutionary or revolutionary?
• What are their hobbies? How can you reach them? How will they become aware of your products and how can they try them?

Breathe & Socialize

You’ve developed a new lens to look at your customer base, you’ve validated the segments and know how to create a compelling offer, and it’s time to make sure everyone loves it. You’ve been sharing your progress with your stakeholders as you go along, so it shouldn’t be difficult to get their support on where you’ve landed. Many of them will find it very interesting, and they’ll be excited about the next step, but for now make sure all of the heads in the room are nodding.

Align & Strategize

The customer segments you’ve developed, and the supportive research

behind them, now positions you and your organization to create strong alignment between each product line and the customers they support. It will create up-sell and cross-sell opportunities, while also providing strong support for your advertising initiatives.

Congratulations! You’ve got a major accomplishment under your belt, and it’ll help make the rest of your marketing department wildly successful.