Date post: | 21-Oct-2014 |
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Business |
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How to Segment Your Customers?
Direct Marketing tips by Mediapost Hit Mail
#4
(Re)Grouping
What is segmentation?
Segmentation came out of the need to communicate more efficiently
with customers. It is crucial for direct marketers.
As your customers have many
different needs, it will be easier to
give them what they want if you
divide them into groups sharing
similar needs and threat each group
differently.
This division into homogeneous groups is usually called ‘segmentation’.
Segmentation benefits
Activities where segmentation can help you:
Identifying your most/least profitable customers;
Focusing your marketing on the customers who will be most likelyto buy your products or services;
Avoiding the non-profitable for you markets;
Building loyal relationship with customers by developing and offering them the products and services they want;
Improving customer service;
Getting ahead of the competition in specific parts of the market;
Using your resources wisely;
Identifying new products (combined with a relevant research);
Improving products to meet customer needs;
Increasing profit potential by keeping costs down.
Before you start segmenting..
... define what exactly do you need to know and
how a customer segmentation could
help you.
How to start segmenting:
Take a customer/ product inventory: literally pull out a list of your customers where you can see what they buy from you;
Form the groups of your customers using different segmentation criteria.
Some segmentation criteria
B2B /business to business/:
Area of activity: industry sector,
public or private, size, location
etc.
Operation: technology, how
they use your products.
Buying patterns: how they place
orders, their size and frequency.
Behavior: their loyalty and
attitude to risk.
B2C /business to consumer/:
Location: town, region, country.
Demographics: age, gender, income, occupation, education, social class.
Attitude and lifestyle
Buying behavior: product usage, brand loyalty, purchasing frequency, benefits they seek for in your product or service etc.
Promotion frequency: how often they have been offered by you and how they respond.
Your segments should be:
Mutually Exclusive: They cannot be overlapping and your
customer shouldn’t be members of two segments at the same
time.
Substantial: There must be enough members of a segment so
that you can take advantage of the economies of scale when
communicating with them. It has to be big enough in terms of
members or money and stably growing.
Homogenous: A workable market segment has members that
are similar enough to react the same way to your marketing
message or offer. They need to value the same things, do similar
things or interact with your product or service in a similar way for
your segmentation strategy to work.
How many segments?
It depends in part on the
size, but mostly on the
complexity of your
business.
The rule: the lower the
number of segments,
the better.
Our five segmentation tips:
1. Use your customers’ list and their purchase history as a start point;
2. Create the demographic profile first;
3. Look for deeper segments with criteria like product usage or
lifestyles;
4. Keep the number of segments as small as possible for simplicity
and better focus;
5. One proven segmentation model is the RFM method.
"R" is for Recency, how recently a customer has made a purchase.
"F" is for Frequency, how many orders have been placed.
"M" is for Monetary, how much the customer spends.
A point to remember
A meaningful segment is
a group of customers that
meets three criteria:
1. Common characteristics;
2. Profitable;
3. Growing over time.
More to come:
1. Why Do You Need Your Own Database?
2. How to Build a Database?
3. How to Manage Your Database?
4. How to Segment Your Customers?
5. Tests - How to Run and Analyze Them?
6. The Deliverability Problem
7. Personalization
8. Online & SMS Promotions
9. Useful Direct Marketing Tips
10. How to Launch Your CRM Program?
11. The Advantages of Direct Marketing (Summary)
two more slides...
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Web: www.MediapostHitMail.bg
just one more...
Hello,
This is the forth presentation in the “Direct Marketing Tips”series. I hope you liked it. I will be grateful if you share your opinion on it with us. Just drop us an e-mail at
or call us (+359 885 360 715). In case you’ve missed the previous ones, this way you will get all the presentations in our set as soon as they are available.
Thanks!
Hristo Radichev
Country Manager, Mediapost Hit Mail
P.S. Don’t forget - if you have a friend or colleague who you think would like these materials, please send us their e-mail as well.
They'll get a polite invitation to have a look at them (which they can decline) and we can help them build and exploit their database in an imaginative and profitable way.