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SMB Owners: Are You Segmenting Customers?

[1]We make marketing blunders [2] 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.

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.