Nothing can fragment a marketing meeting like the subject of segmentation – and I don’t mean that in a good way. People are using market segmentation and customer segmentation interchangeably and while arguably one shouldn’t exist without the other, they are quite different and need to be treated as such.
Segmentation is more than just dividing an audience into groups. It’s a strategy – dynamic and fluid. And it requires actual data at its core. When I think about segmenting a market, it always comes back to customer demographics and behavior. So knowing your customers first helps inform what you look at in the market.
So where do you start? I’ll give you a hint: it’s not with guesswork. Making assumptions about your customer base leaves a huge margin for error that’s really hard to defend in the boardroom. Don’t leave yourself exposed like that, especially when the data is at your fingertips.
Customer segmentation is the low-hanging fruit because it lives in your house. You should already know who is buying from you, what they’re buying, and what their preferences are in terms of upsells and reselling. Your data can tell you that. It’s information you already have, and augmenting that with overlays and demographic data is quite simple.
If customer segmentation is the horse, here’s the cart: the customer data informs the market segmentation. Once you have an intimate knowledge of your customers, you can see the bigger picture in terms of the market, i.e. your potential customers. Not only do you start to see the customers in a new way, but you can start to think about the market and products from a strategic standpoint.
We recently saw this shift start after producing a customer segmentation program for a very large service provider. Just a few weeks later, in a meeting about product strategy, folks started leveraging their new understanding of the customer segments with comments like “well, if these wealthy senior travelers aren’t utilizing our technical services, shouldn’t we be offering them security services?”Just like you can’t talk about your customers in general terms, you can’t talk about your markets in general terms. You have to consider them separately – and allow the data from one to inform the other. And it all starts with the data that exists under your own roof.