SMB Owners: Are You Segmenting Customers?

We make marketing blunders when we don’t know who it is we’re marketing toward or when we try to treat all of our customers the same way. The truth is that our customers are not the same. They don’t take to marketing the same way, they don’t want the same things and they’re not equal in what they mean to our business. By segmenting customers into different “buckets” or personas it allows us to create a more targeted experience, while also helping SMB owners to better manage internal resources.

How Narrow Should You Segment? How Many Groups?

The simple answer is to create as many as make sense, whether that means creating two or twenty. Segmenting too broadly will take away your ability to customize service to the segment, while segmenting too narrowly may reduce profitability. You want to segment customers by the common characteristics shown to affect conversions. For example, if you’re a local hardware shop, you may only find that you have two customer types – Commercial and Non-Commercial. If you’re a florist, maybe you want to create an entire segment for marketing at Special Occasion customers or Men Buying For Wives. Once you get into the data, your segments should become fairly obvious.

What Kind of “Data” Should You Collect?

You already have most, if not all, of the data required to create your customer buckets. All you have to do is organize it and put it together in a way that makes it usable. Here are just a few different areas you can look at to help form your segments.

  • Demographic Info: Look at age, gender, location, profession, lifestyle decisions, Web savviness, browser type, referral information, etc. This info typically isn’t that useful on its own, but it becomes more important as you’re able to tie it into other factors.
  • Buying Behavior: How often do the customer place an order? Do they identify as first-time, regular customer, or a special occasion purchase? What is average order size? What do they buy? What are their preferred brands? Do they buy via online/in store/phone?
  • Product Inventory: Note product purchased and associated profit margins with it.
  • Customer Service Level: On a scale of 1 to 10, how much time/effort does that customer require? Some are notorious for quick and easy purchases, while others require quite a bit of hand holding. You should know associated ROI.
  • Influence Level: As you capture email addresses, start capturing information regarding social media influence, as well. Identify who these people are online in order to understand how large their social networks may be. Your Influencers may require attention different from “regular” customers. When SouthWest recently made headlines for kicking director Kevin Smith off a flight, you can be sure he got special attention because of his social influence and because he was Twittering as things were unfolding.

Create your Personas

The information you collect should be used to tell a story about the different groups of customers who seek out your business. Once you can identify the “type” of customer you’re dealing with, it will help you understand the ROI associated with each bucket and provide insight on how to better address their needs. For example, you may find that you’re losing money by focusing on a segment that fails to convert or that you’d increase your ROI if you handled customer service via social media rather than email. To help you tie everything together, create tangible personas around your buckets.

For example, meet Joe and Sarah.

Joe is a 37-year-old male who considers himself “average” on the Web. He prefers to research online but make the actual purchase offline. He’s brand loyal and is willing to pay more in order to get service that he trusts. He owns a home in the nicer part of town. He doesn’t have an active social network and identifies as a Special Occasions Purchaser, spending several hundred dollars with each visit.

Sarah is a 19-year old female who identifies as “very savvy” on the Web. She does all of her shopping online and prefers not to shop instore. She makes frequent, small purchases about once a month and is very vocal with her social network about what she buys. She has 3,000 Twitter followers and has ‘fanned’ more than 100 brands on Facebook.

Put Your Buckets To Use

Once you’ve created your buckets, use them.

If you know that Sarah and Joe shop differently, then it doesn’t make sense to send them the same email newsletter. Instead, craft two that speak to their different needs. Sarah may be interested in weekly sales, however, Joe forgets about your company until the holidays roll around. It doesn’t matter how many emails you send him, he’s not going to buy. Segmenting also allows you to treat first-time customers differently than you do everyone else to increase your chances of getting that second sale. You can even segment emails down to particular product types. If Sarah has a history of purchasing a certain type of album, you may want to let her know when her favorite artist has a new release in.

You should also take your segments into account when dealing with customer service issues. Do this by assigning ROI to each customer type. Once you know the profit margin for each group, you’re able to make smarter decisions when assigning time and resources. If Joe and Sarah both have a customer service issue and you only have the resources to fix one, who’s going to bring you the most ROI?  No one likes picking favorites, but sometimes resources only flex so much.

Knowing who your customers are, what motivates them to buy and ROI in earning that sale, puts you in a better spot to market more effectively and customize what you’re putting out. When you get to know customers on a more personal level, it becomes easier to spot what will and will not work when talking to them. And, of course, by assigning certain personas to ROI groups it will help you to “fire” bad customers who become more of a resources drain than anything else. Not that we have customers like that.

13 Comments ▼

Lisa Barone


Lisa Barone Lisa Barone is Vice President of Strategy at Overit, an Albany Web design and development firm where she serves on the senior staff overseeing the company’s marketing consulting, social media, and content divisions.

13 Reactions

  1. Two key thoughts for me in this post: (1)”You want to segment customers by the common characteristics shown to affect conversions.” Looking at buyer motivations, behaviors and influences is, I agree, a great way to segment buyer personas. (2)Love the idea of letting go of your least profitable customers – the squeaky wheels that become a drain on your resources and that keep you from building your business around more promising and productive segments. Thanks, Greg

  2. Another great post Lisa,
    I particularly like the piece about Joe and Sarah because I find it so much easier to think and market to a person that an anonymous segment. With a person in mind it seems to be much easier to be more relevant and personal which clients and customers really like.

  3. Susan Oakes

    This is a good start to the topic of segmentation. Generally after you gather the information and analyse it, you will find 2 or perhaps 3 segments that are key for your business. After that then you can slice and dice within those segments to tailor for example special occasion offers.

    One other point is once you have your segments, keep a track on them as people can move between segments and in and out of the segments. Customer segmentation does not remain static.

  4. You can’t overemphasize the importance of creating personas. As Lisa points out, they are a very practical and useful tool. The irony is that they are too often ignored or undervalued.

  5. CRM software can help automate the lead management & qualification process. Check out the Commence CRM Blog “Manage Those Leads!” here
    http://www.commence.com/blog/index.php/2009/11/04/manage-those-leads

  6. Ever wondered why telemarketers frustrate you? They are mostly reading a script and not talking to you as a person. Developing personas will help you better tailor your communications, but remember that any time you’re dealing with a person one-on-one you should deal with them in a personal way.

  7. Lisa, I want to speak with you regarding matching marketing messages to personal preferences, psychographics and even personality types. Scott Zimmerman: 330-848-0444 x2

  8. HI Lisa,
    I was very impressed with the insights on segmentation. I am so much in aligment that segmentation must be about people not objects. I recently wrote a blog about new way of segmentation in SMB market called “SMB Owner Personality Model” and was created by Forrestor. When combined with your insights you have the power to win the hearts and wins for your customers.
    Thanks for sharing..

  9. We have an affordable way to do the kind of analysis that Lisa describes. No need to buy expensive software. Load your customer data to http://www.harvesttrends.com and, for $6K per month, you can see the trends in customer behavior, and we can help you to identify those “buckets”.

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