How Does Customer Segmentation Enrich The Relationship?
The new routes and customer users have put an end to the era of mass marketing. From now on, to differentiate ourselves from the competition and to commit ourselves permanently to its targets, it is essential to propose a fluid, non-intrusive and above all individualized client experience. In this context, customer segmentation is an essential step in adapting to the profiles and paths of each target. Provided not to be satisfied with the old marketing recipes that have made their time …
Consider each client individually
Today, what the customer wants above all is to be recognized, and this on all points of contact. He wants brands to communicate with him in a personalized way and reward his commitment: coupons, promotions, the invitation to events, involvement in the creation of new products … If this tacit agreement is respected, the brand can hope in return for the support and dedication of its customers. For this, the degree of attachment and commitment to a brand must be thoroughly evaluated, analyzed, with the aim of further refine the relationship with the customer.
Exceed product segmentation
To take account of this customer’s commitment and the maturity of its journey with the brand, traditional product segmentation, which consists in dividing the market into substitutable product categories or RFM segmentation (recency, frequency, amount). Suffice more.
Other data must be taken into account and analyzed in order to refine this customer knowledge: transactional data, navigation data, data resulting from conversations on social networks … these are all data that will enrich the segmentation to propose A unique experience for each client (see the Redken group L’Oréal Professionnel: how the data re-enchants customer relations ).
“The digital data offers a considerable opportunity to cross the different information to refine its customer knowledge and individualize the relationship on all points of contact,” said Guillaume Chollet, CEO, and founder of the Loyalty Company Group.
Towards a dynamic segmentation?
At the time of the digital, the notion of contextualization takes more and more importance in the activation of this intelligence client. The challenge is to move from behavioral segmentations to contextual segmentations: to capture the famous “micro-moments” key in the client’s journey (discover the Metro case: the seamless customer experience ).
Dynamic segmentation must, therefore, take into account the specificities of each client, organize them according to their economic, behavioral and contextual reality, and enrich them continuously by following their course.
HOW TO PROPERLY MANAGE CONFLICTS BETWEEN DIFFERENT CUSTOMER SEGMENTS?
Whatever the nature of a service or product offered, there may always be the conflict between different customer segments. The wider the spectrum of supply, the more likely the conflict. This is why it is better to design your service or product to best match the customer target for which it is intended.
ANTICIPATE CONFLICT RATHER THAN SOLVE IT
Over the long term, it is virtually impossible for a company to offer products or services, to manage a conflict. Benoit Aubert, therefore, advises anticipating the conflict well before the conception of the marketing strategy. The positioning of the service on the correct client segment thus avoids any conflict.
Customer segmentation: the 10 traps to be avoided
The segmentation is a powerful technical marketing, provided that they have understood the meaning and how to use it.
We have deciphered for you the 10 pitfalls to avoid when building a client segmentation:
1. Segmentation is a means and not an end in itself
Do not make segmentation a goal in itself. Keep in mind that segmentation should be thought of as the verb “fair”. The customer segmentation is taking action after a clearly defined strategy and objectives.
2. A segment too large, too little yield
To simplify the concept of segmentation, we could say that it consists in dividing the market into several customer segments. For example, five to ten segments may be sufficient for a company wishing to achieve economies of scale in product development.
However, this is not enough to improve customer relationship management sustainably. Indeed, the risk for any brand is that some of the segments contain millions of consumers. This does not satisfy the objective of “getting closer to the customer” or of “personalized communications”.
3. The customer “chimera”, or the story of the five-legged sheep
In Greek mythology, the chimera is a beast with a lion’s head, the body of a goat and the tail of a snake. Just like the following profile:
“Young Fun”:
• Gathers both men and women (40% / 60%)
• One of the youngest segments, but 56% are over 35 years old. The average age is 38.
• Brings together both single and married people
• More than half have children
• Gathers the “lower” social classes
• Tend to be manual workers/factory workers, office workers, students, unemployed
Have you ever met someone who could possibly meet all these criteria?
If you were directly addressing customers regarding your latest product or service, would you consider this information useful?
How would you deploy an effective ROI strategy based on that person’s characteristics?
4. Frozen segmentation, condemned efficiency
Another key element for most existing segmentation approaches is the fixed size of the segmentation approach. If an organization creates several major segments and develops marketing actions for each of the segments, the last thing it might want is for customers to jump from one segment to another. This would mean that the segments are designed to be static, or fixed in time so that companies can measure performance over time and be confident about return on investment.
But this vision is not realistic, because customers keep evolving, taking different paths. They place a great deal of importance on brands taking into account all these changes: age, jobs, homes, marital status, parental status, or consumption to name a few. As a result, overly fixed segmentation does not reflect the dynamic behavior of clients; And unfortunately, marketing campaigns are losing their effectiveness.
5. Creation of segments and marketing studies: which of the chicken or the egg …?
Often, companies do an external survey upstream of the definition of customer segmentation. In this survey, customers and prospects are asked what they want, what they need and what they do. With all the information gathered, organizations then build segmentation models. An investigation can be very instructive, but when a brand wishes to emphasize a particular point, it may become less representative and therefore less relevant.
Thus, once a company begins to confront these models with its own customer and prospect data, it faces the following problems:
• The only way to create references is to implement algorithms using common data (to internal segmentation models and databases ) in order to recreate new segments. However, if you have not started your thinking from your own database, there will be very little common ground on which to support you.
• The scoring process becomes basic and inefficient.
• Companies can spend years (and spend fortunes) picking up pieces.
The solution is to start from your own data and then to enrich it with third-party data, in order to derive the appropriate customer segmentation. Once you have identified the key variables, then you can conduct a market research on the right indicators.
Originally published at Entrepreneur News and Startup Guide.
