Creating and Testing New Customer Segments

09 Feb Creating and Testing New Customer Segments

In marketing, one size doesn’t fit all. In fact, if you’re preparing a general message designed to appeal to everyone, you’re likely not appealing to anyone in particular. Customers are becoming more savvy about their purchasing decisions, so the more you can personalize your marketing to address individual customers, the better you’ll do. The statistics bear this out: emails with personalized subject lines are 26% more likely to be opened and marketers have found a 760% increase in email revenue from segmented campaigns (Campaign Monitor). Today we’re going to talk about how you can create and test new customer segments and why you should do so!

What is Customer Segmentation?

Customer segmentation is the process of dividing your customers into groups based on their characteristics. This includes everything from demographics and location, to personality traits, technology usage, buying behavior, attitudes, needs, and values. If you’re not sure who your customers are, the first step is to build a customer avatar (also known as a buyer persona). In this exercise, you’ll identify characteristics about your customers, including their hopes and fears, and pain points and values. If you’d like a little help with this step, check out our YouTube video.

Why segment customers?

The more targeted you can make your messaging (reaching different segments of your potential audience) the more you can convince them your product or service will fill a need, answer a problem they’ve been having, enhance their lifestyle, and more. Customers respond far better to a targeted message that gives them exactly what they’re looking for as opposed to a generic message that doesn’t speak to them.

How to create customers segments – a 4-step process

1. Set a goal: The first step in the process is to set a goal. Hint: where will you derive the most value? You want to find your own niche of customers who your product or service perfectly suits. Is your goal to increase engagement (clicks, comments, interactions) or conversions to sales?
2. Divide customers into groups: Now you’re going to divide your customers into groups based on different segmentation models. These may be demographic (age, gender, income, marital status), geographic (location), psychographic (attitudes, values, interests), technographic (mobile, desktop or tablet), behavioral (buying patterns, habits), or based on their needs or values. We’ll discuss more about the mechanics of building your groups in the following section.
3. Build marketing targeted to those specific groups: Start thinking about how customers engage with you and build specialized marketing for those groups. For instance, you might offer coupons to visit certain locations near your customer’s geographic area. You could design emails based on a particular segment of customers interested in a service you offer. Or you could target an advertising campaign to mobile users only and see how they respond.
4. Review your analytics: As always, look at what the data tells you after you test out new segments. Observe which campaigns were successful and which were not. These will help you plan your next campaign. You can also conduct follow-up surveys in your segments to learn more about what they are looking for and discover their particular pain points so you can refine future marketing offerings.

Using the tools you have

If you’re looking at the 4 steps above and still wondering how to enact them, we’re going to give you some practical ways to use the data you already have at your fingertips to test new segments.

The easiest way to start is to test different offers or coupon codes on your different audiences. Do you have a newsletter list? A Facebook or Instagram profile? In-store shoppers or mail order customers? Track who uses their coupons or offer codes to find out where your most engaged audience spends their time. Also observe how they use the offer – which customers spend the most? Which customers claim the offer but never use it (or open the email but never click the links)? 

Listen to the feedback you’re already getting (or get some)! If you are selling through online commerce, you can easily incorporate post purchase surveys into your purchase sequence. Find out if customers found what they needed on your website, whether they were satisfied with the product or the service they received, and more. If you want to learn more about your customers, ask them! Simple customer relationship surveys might ask them questions about their interests or values, habits, demographics, which crafts they prefer, what skill level they are and more.

If you use a POS (point of sale system) or employ a 3rd party email platform (like Mailchimp), you can use the data it’s already collecting!

• Who are your most engaged customers? How often do they visit your store? Or open your email? Or click on your links? 
• Where are your customers located? Many businesses find they have a strong local customer base, but if you have a robust online presence you likely have customers farther away as well. For instance, you could directly target your local customers with “in-store only” specials to drive traffic to your brick & mortar. Or you could offer a free gift with purchase to online customers only.
• What is their buying behavior? You can also segment customers based on buying patterns. For instance, create a list of your top customers from your POS and send them special offers to return more frequently or offer loyalty options for frequent purchases. Conversely, you could try and reach those that don’t purchase often by sending them a “we miss you!” message.
• Both Mailchimp and Shopify offer options to collect birthdays; send your customer birthday greetings and a special birthday offer for a personal touch. Mailchimp can help you automate this process!

Exploring other tools to build customer segments

If you’re interested in a deeper level of personalization, there are systems you can invest in and use to help segment your customers. Hubspot offers both free and paid options, and a CRM (customer relationship management) system that integrates with Shopify. Shopify also integrates with a whole host of other apps that can help you build out your customer relationships. While pricey, Salesforce is another platform that can help you manage everything from your social media marketing to customer relationship management.

We hope we’ve given you some ideas on how to create and test new customer segments so you can speak more directly to your ideal customers. If you’d like help building customer segmentation into your marketing plan, contact us today and we can help you get started!