Only a percentage of the general population will buy your products or use your services, so the more accurately you can focus on them, the less your efforts will be wasted. It is a good idea not to aim too widely with your targets, to avoid spreading your resources too thinly.
Segmenting your customers into groups according to their needs has a number of advantages. It can help you to:
- identify your most and least profitable customers
- focus your marketing on the customers who will be most likely to buy your products or services
- avoid the markets which will not be profitable for you
- build loyal relationships with customers by developing and offering them the products and services they want
- get ahead of the competition in specific parts of the market
- improve products to meet customer needs
- increase profit potential by keeping costs down, and in some areas enabling you to charge a higher price for your products and services
- group your customers by factors such as geographical location, size and type of organisation, type and lifestyle of consumers, attitudes and behaviour
Three steps of Customer Segmentation
We in Colibri believe that customer segmentation is a three step process:
- identify potential channels to market
- test customer segment and perform basic optimizations
- further analyze customer behaviours
1. Identify Potential Customer Segmentation Funnels
Being inspired by this new technology they have created, I have been thinking about using it to segment customers. Check out these live examples of potenbelow.
Potential Customer Segmentation live examples with MeanPath:
- Sites talking about your company (NewRelic example) but not linking to you
- Sites accepting PayPal as a payment option
- Domains hosted in the Amazon Sydney Zone
- WordPress sites with ATOM or RSS feeds
- All sites in the index with .au domain names
- Links to competitor sites but not to yours
- Guest blogging opportunities on travel websites
- Travel within 20 words of “write for us”
- Sites serving Google Adwords that talk about finance
- Sites running Adwords with specific ad heights
- Sites that share the Google Analytics ID UA-991406-1
Because your individual customers have differing needs, it will be easier to give them what they want if you divide them into groups sharing similar needs, and treat each group differently.
Companies usually either target a large segment with many people in it or focus on a niche segment, which will have fewer people in it, but who they can serve well.
2. Test Customer Segmentation (traffic, users, funnels, goals)
Meet Colibri IO
Since the marketer’s goal is usually to maximize the value (revenue and/or profit) from each customer, it is critical to know in advance how any particular marketing action will influence the customer. Ideally, such “action-centric” customer segmentation will not focus on the short-term value of a marketing action, but rather the long-term customer lifetime value (LTV) impact that such a marketing action will have. Thus, it is necessary to group, or segment, customers according to their LTV.
Companies can use Customer Segmentation to:
- prioritize new product development efforts
- develop customized marketing programs
- choose specific product features
- establish appropriate service options
- design an optimal distribution strategy
- determine appropriate product pricing
Understanding your customers segments is a must for all online businesses. There are many methods marketers use to segment customers. Most frequently, these take the form of hard-coded rules based on experience and assumptions. More sophisticated approaches use mathematical models to analyze large amounts of data to group customers with similar data sets into particular segments.
The results in Colibri IO
How to set it all up?
We in Colibri believe that the most important aspects in Customer Segmentation are aligned with these simple steps:
- Setting up your goal conversions.
- Connecting your Google Analytics data to Colibri (two-click process).
- Analyzing your referral, direct, organic and social traffic with goal conversions in mind.
- Deciding which channel to perform further and invest in it more.
The key is to segment customers into groups based on predictions regarding their total future value to the company, with the goal of addressing each group (or individual) in the way most likely to maximize that future, or lifetime value.
3. Further analyze Customer Segmentation (behaviour, funnels, cohorts)
KISSmetrics helps identifying Customer Segment Behaviour. Among many tools, the ones that people love the most are the funnel reports, cohort reports, revenue reports, and A/B testing reports. You can identify, understand, and improve the metrics that drive your online business. Their actionable metrics tell you more than what happened. They also tell you who and why.
Key Concept – Events, Metrics, Conversions