How to segment your customer list

Have you heard that you should “segment” your customers before marketing to them?

Ever wondered what that means, much less how you’d do that?

We’re going to talk about that today in simple terms, but before we do that, you might be wondering …

Why should I segment my customers?

Good question.

You want to segment your marketing is to achieve something called “Message-to-market match“.

Let me explain with an example. Let’s say your company sells women’s underwear.

Would you advertise the same underwear in the same way with the same photos and the same messaging to each of these groups?

  • Single women
  • Pregnant women
  • Newlyweds
  • Moms of girls approaching puberty
  • Dads of girls approaching puberty
  • 50-plus women
  • 80-plus women
  • Women under 5′ 6″ tall
  • “Plus sized” women
  • “Tiny” women
  • Very curvy women
  • Not-so-curvy women
  • Women who have survived breast cancer
  • Significant others

I’ll assume you answered “No”.

Message-to-market match” means your message is refined for a specific group of recipients so that it’s welcome and in-context, rather than annoying and out of left field.

A lack of message-to-market match is why people tune out ads and pitch so much mail – the message isn’t truly for them. If it happens enough times, everything you send them is ignored. Ouch.

Like the recycling bin

When recycling different materials, the processes required to break down cardboard (shredding, pulping, etc) will differ from the process that prepares glass, plastic or animal manure for reuse.

Think of your messages in the same way. If the message a customer receives doesn’t make any sense because it’s out of context, it’s like recycling something with the wrong process. The money, time and energy invested in creating and delivering the wrong message will be wasted. Worse yet, the wrong message can alienate your customer and/or make your business look clueless.

Ever received an offer “for new customers only” from a business that you’ve worked with for months or years? How does that make you feel?

You might think a generic piece of news is received the same way by everyone – when in fact that news might excite some customers and annoy the rest. The time spent considering this and segmenting your announcement can save a lot of pain.

Your First Oil Change

Look at the groups listed for the underwear business. That’s customer segmentation.

If you sent “The Single Dad’s guide to helping your daughter pick out her first bra” to the entire customer list, how many would think “This is exactly what I need”? Only the single dads group. Most others would hit delete, unsubscribe, click the “Spam” button or just think you’re not too swift.

The smart folks sending the “first bra” piece would break it down further by sending a different guide to the moms than they send to the dads.

Need a simpler version? Chevy vs. Ford vs. Dodge. Harley vs. every other bike. You shouldn’t have the same conversation with these groups, even if you sell something common to all of them, like motor oil.

Think that list is broken down too much? Don’t. I just scratched the surface.

Why people think they can’t segment

– They don’t have or “get” technology.

Whether you use a yellow pad or a fancy customer relationship management (CRM) system, you can make this work. If not, consider a better way to keep track of things.

Long before computers, savvy business people would sort customers into the “blue pile, red pile, yellow pile” before putting together a marketing piece. No technology is no excuse.

– Their media doesn’t offer segmenting.

What if your chosen media doesn’t provide a way to target a specific segment? They don’t deliver special Yellow Page books to single people, retired people, CPAs or car dealers – so how do you segment your message?

You can segment those media buys by message since many vendors are unable to deliver a different book, newspaper, magazine or radio/TV ad to different types of customer – which should also improve ad ROI.

You might be getting pressure from internet-savvy staff (or vendors) to drop old-school media. If it works now (do you know?), dropping them makes no sense.

– They don’t have a customer list

Start creating one today, even if it’s on a yellow pad. Figure out what differences are important to you and record them.

Show them the ladder

On many occasions, I have advised you to offer higher-priced, higher-value products and services because they focus you on high-lifetime-value customers whose loyalty extends beyond what’s on sale this week.

Likewise, we’ve talked about using those higher-priced products and services to “subsidize” the value-priced part of your business so that you can find more high-lifetime-value clients from that group.

What I’ve been urging you to do is build a customer ascension ladder.

It’s not like you haven’t seen this before. You’re probably on several of them and might not realize it. Despite that, it’s entirely possible that you haven’t used it strategically in your business.

Ladders you know

Take a look at Kraft cheese.

If you want sliced cheese in a wrapper, you might buy Kraft Singles. In their product ladder, Velveeta Slices are a bit of a luxury item. To step beyond that, you have to go to a higher-priced Kraft brand name like Cracker Barrel and you might have to slice it yourself.

Some of you might never buy these brands, but if you buy cheese, you’re in another vendor’s cheese ladder (Kraft may own them too).

A simple ladder that everyone is familiar with is car brands.

Ford Motor Company has Ford, Mercury and Lincoln. General Motors has Chevrolet, Pontiac, Buick and Cadillac (among others). These brands illustrate simple ascension ladders.

Back in the olden days, your typical Chevy customer longed to step up the ladder and get a Cadillac someday and in fact, doing so was a sign to their co-workers, friends and family that they had “made it”. Likewise, many Ford customers longed to own a Lincoln Continental.

Today, things are bit more muddled in the car business and these things aren’t the universal success/status symbols like they once were. F250’s, Hummers and Escalades have supplanted them to some extent, illustrating that the idea and the desires are still valid.

Where’s your ladder?

What works for Kraft, Ford and General Motors also works no matter what you sell.

The ladder works for firewood, imported crystal, septic tanks or legal services…and for whatever you do.

Whatever you sell, you can usually sell more by designing an ascension ladder for your customers. It isn’t just about selling more, more, more. It’s about matching what your customers want to what you sell…which tends to make you sell more.

If some of your customers need/want an Escalade and all you sell is Yugos (the “Mona Lisa of bad cars“), you’re going to lose them. If selling Escalades isn’t your thing, that’s fine. Even so, deal with it strategically as you should know how long this progression takes based on customer

You may already have a makeshift ladder in place. It isn’t like “good, better, best” is some sort of secret of brilliant business owners.

What you seldom see is a business strategically designed to move people from through the tiers of “good, better, best”, identifying the most likely “best” buyers based on their behavior, buying habits and other factors (such as demographics and psychographics).

Designing your ladder

Take a hard look at your customers from end to end. Do the same with your prospects, who tend to be substantially different from your long-time customers.

For example, consider the differences between a customer of 20 years who is starting to think about retirement and a customer who just got their first job. Their needs, values and *what* they value day-to-day might be completely different as it relates to your products and services. “First job” is just one example and may not have any impact on their choices for what you sell. Something else definitely will, so pay attention.

If you take this task seriously, you should be able to segment your customers into groups based on any number of things from age-based needs to buy frequency to number of calls for help. You may find that there are correlations between any of these individual segments.

What you’re looking for is segments that would respond positively to the same message, the same product/service offer. Other customers might use a different version of the same service that may not interest this particular group. Thus, the importance of the message/offer.

Next….Show them the ladder you’ve designed.

Photo credit: https://www.flickr.com/photos/rod_waddington/