Customer segmentation is one of the best marketing practices today embraced by all businesses—large and SMEs—to enable them to navigate and better understand the different categories of their target audience.
It empowers them with the ability to provide unique value propositions that address the various needs and problems of their target audience, and consequently, deliver a memorable customer experience.
This means, as a brand manager, or marketer for your business or company, you want to incorporate customer segmentation into your marketing culture, letting it drive your marketing plans and campaigns.
So this article offers a practical guide to get you started with a customer segmentation strategy using simple approaches that is easy to embark on—so no cognitive overload!
Also, this article is for you if you are confused on how to kick off a customer segmentation strategy for your business or brand—if you have been thinking it going to cost a fortune, then I am dispelling it right now, it is easier than you think!
So let’s kick off by exploring approaches you can take to getting started with customer segmentation.
Approaches to Customer Segmentation
Learning about your prospects takes a considerable amount of dedicated time and effort, but starting off, you want to gather data that allows you conveniently and effectively segment them into different buckets that align with your available value propositions or service offerings.
So we would be exploring two approaches to dealing with customer segmentation, each with its pros and cons.
Open-ended unintegrated customer segmentation approach
The approach is ‘open-ended’ because you ask your prospects open-ended questions in which answers follow no laid down format—so don’t mind the complicated name, it is a simple concept to grasp.
The approach aims towards triggering detailed responses to questions.
It allows you to get responses that put your prospect’s needs or problems in “context”—that is, your prospects’ situation, motivation, and goals.
And secondly, the approach is ‘un-integrated’ because your prospects don’t get to self-select themselves into segment buckets you already created for them, say, on an email service provider (ESP)—Mailchimp, ConvertKit, for instance—you use to collect, organize, and manage your email list.
Here, you collect first the data, then based on the feedback from each of your prospects, you decide the segment each belongs to, and then you segment them accordingly.
It is ‘unintegrated’, also, because of the “open-ended question” nature of the approach.
Open-ended questions allow your prospects to express their problems and needs in their own words and style.
This means you have to critically examine each feedback and decide what segment best fits each prospect.
You can’t just feed in those responses and feedback into your database directly. You analyze the feedback first, then you feed them into your database to enable you to segment your prospects.
Prons?
Defining segment buckets
What if you don’t know how to segment your customers or define what segment buckets you should create?
In such a situation, you want your prospects to give you a head-start or a clear direction on what kind of segmentation to implement.
You want them to lead the direction on what segment buckets you should create. So asking them open-ended questions helps you define their needs more specifically, which then helps you in mapping out and segmenting your prospects.
Problem depth
This is something you can only understand when your prospects express their problems in their own voice.
Having your prospects express their problems in their own voice affords you an opportunity to unveil their most pressing needs or problems—how deep, in terms of attention or significance, the problem is.
The importance of this is it gives you clarity on which value proposition at a point in time—if you have a number of them—to offer your prospects.
You don’t want to be offering a value proposition that might be solving a problem, but not solving a more pressing problem.
In essence, it allows you to rank your various value propositions starting from the one attending to their most pressing to least pressing problems.
This enables you to create and conduct more informed, efficient, and effective marketing plans and campaigns that maximize ROI.
Discover value propositions
Open-ended questions offer a rich database to discover various value offerings associated with your different customer segments.
It helps you expand your range of value offerings. It helps you discover value offerings you never thought of.
Crosscheck your buyer persona
What if your target audience turns out not to be who you thought they were?
You want to have a guide to help you know if the image you conceived of your target audience reflects who they really are.
Open-ended questions that allow you to get feedback directly from your prospects serve as valuable input in helping you evaluate your buyer persona to ensure you are in alignment with the needs and problems of your prospects.
Secondly, open-ended questions sent out periodically, help you update your buyer persona to keep in line with the changing needs of your target audience.
Great for beginners to customer segmentation
This is one point that makes this approach useful—it helps beginners to set up their customer segmentation strategy with better clarity.
So if you are just starting out with customer segmentation and you are wondering what data—problems—about your target audience to focus on or what segment buckets to create, then this approach is great for you.
Know your effective leads
Sometimes, you might want to discover your effective leads—that is, leads more likely to convert to paying customers—from your email list.
Prospects that take out time and effort to write responses to open-ended questions have higher conversion tendencies.
Cons?
Time-consuming
Sifting through the different feedbacks obtained from your prospects and deciding which bucket or segment each belong could take a considerable amount of time and effort.
Less response rate
It is relatively easier to get more responses on closed-ended questions than it is to get them to write an essay response.
Closed-ended integrated customer segmentation approach
In this approach, you interact with your prospects using closed-ended questions that allow them to self-select themselves into segment buckets you already created.
Using closed-ended questions makes it possible to integrate the data gathered into your ESP directly.
For instance, a simple closed-ended question could be a drop-down menu that allows your prospects or visitors to your website to select any of the options—beginner, intermediate, and advanced for instance—and simultaneously, depending on the option chosen, be directly enlisted in the correlating segment bucket you already created on the back-end in your ESP.
This approach is best for you if you possess enough knowledge about your target audience, have clarity and a good sense of direction on what their needs or problems are, as well as clarity on the value proposition(s) to set up to attend to those needs.
Pros?
Automation
This approach requires little or no time effort from you in the segmentation process. Your prospects self-select themselves into the segment bucket you already created on your ESP.
Higher response rate
This approach requires minimal effort from your prospects. That is, not much thinking is required of them in selecting an option compared to writing a response to an open-ended question that demands more thinking, articulation, and organization to put thoughts into writing in a meaningful way. In essence, this approach reduces frictions.
This increases the chances that they would respond or take the desired action (that is, selecting an option).
Cons?
Prospect’s needs and problems
One thing you will struggle with within this approach is your segment buckets will not always be exhaustive—that is, your segment buckets will not always capture all the problems or needs of your target audience.
This means, while you might have a set of segment buckets to which you want all of your target audience to fit into, some prospects may feel left out—that is, they don’t find a nice fit for their problems or needs from among the options or segments you created.
This is one advantage the open-ended approach has over this approach. It offers you the opportunity to drill into and uncover the different shades, depth, and forms of a single problem facing your target audience or discover myriads of problems your prospects are facing—which leaves you with the ability to create more specific segment buckets to better capture the problems or needs of your prospects.
Prospect-in-wrong-bucket phenomenon
Closed-ended questions being very easy to answer, a prospect who feels un-catered for by any of the segments may be compelled to select a random option especially if there is an incentive attached—freebies attached to sign-up forms, for instance.
The result is a set of prospects unresponsive to your marketing campaigns.
A quick tip: When starting, you might want to start with the open-ended un-integrated approach, then combining in the closed-ended integrated approach later on. Secondly, you don’t want to rely solely on one approach to the negligence of the other—it isn’t best marketing practice to do that. You should combine both for the best results.
Tools for Customer segmentation
Having covered approaches you can take to designing your customer segmentation strategy, we will now cover some tools you can utilize—onsite and off-site—to gather data from your prospects while collecting them into a database—be it google sheet to collect open-ended feedback or directly to your ESP—on the back-end for customer segmentation purposes.
Emails
Emails remain one of the most used tools for obtaining data from customers, prospects, and leads.
You can utilize emails for customer segmentation purposes through surveys that allow you to obtain the required data or an embedded link that leads to a landing page that allows your prospects to fill in the required data.
You can also request responses by asking your prospects to reply to your emails. The usage of this applies only to the open-ended unintegrated approach.
Surveys and landing pages, on the other hand, can be applied to both approaches.
Sign-up forms
You can utilize sign-up forms on your website or blog for collecting data. A best practice is to keep the questions as minimal as possible to ensure a maximal response rate. Also, it is best to embed only closed-ended questions in your sign-up form, in order not to harm the response rate.
Pop-ups
While you can merge the role of pop-ups into your sign-up forms, you can also consider using pop-ups that display just the question only. An advantage of creating separate pop-ups is that you can utilize them for both open-ended and close-ended questions.
Secondly, this practice could help prevent “friction” that diminishes response to your sign-up form—the more questions you have on your sign-up forms, the lower the response rate.
A best practice with pop-ups utilized for open-ended questions is to ensure you display one question per pop-up—asking more than one may cut the response rate to zero. In addition, ensure to ask specific questions—no vague, ambiguous, or generic questions.
Blog categories
I discovered this tool on ConverKit. I think it is a great tool you can use for segmentation. As a blogger or marketer at a company that houses a blog on their website, you would find it useful as it enables you to tag visitors and segment them from the moment they sign-up into your email list.
This tool works by allowing you to create sign-up forms for each of your blog categories, so visitors to your blog—depending on the content they are interacting with and the category in which the content belongs—are enlisted to receive targeted blog content on a category after signing up through the category’s unique sign-up form.
For instance, Profaily has several blog categories. Using this tool, a distinct sign-up could be created for each of the categories. So when a visitor engages with a blog content in one of the categories, say marketing, and then signs up, the prospect would be enlisted into our “marketing” bucket, and then we can send him targeted content when we publish new blog posts on marketing.
Summary
This article attempt to help you navigate through setting up your first customer segmentation strategy.
To get started, you want to decide which approach is best for you. You want to put into consideration the pros and cons of each approach depending on your marketing goal.
This means, the two approaches could be used singularly; but more often than not, you want to employ both simultaneously as you learn about your customers and prospects, increase your customer segment buckets, grow your customer segmentation strategy and gain more marketing insights.
You can kick off your segmentation strategy by utilizing tools already available to you—emails, sign-up forms, pop-ups, and blog categories—to collect important data about your prospects that allows you to segment them.
Lastly, you want to ensure to review your customer segmentation strategy periodically to discover better methods to improving it, such as, discovering new data to collect in order to set up more specific segments that allow you to create the best experience for your target audience.
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