Customer Segmentation 101

JILL CARTWRIGHTjill@gogagalife.com

Nothing makes you learn like getting stripped of your acorn cap

What customer segmentation is

I don't know the key to success, but the key to failure is trying to please everybody.

- Bill Cosby

Customer segmentation is a means of identifying and prioritizing current and future customers in a way that is actionable and relevant to your business

B2C

Manufacturer of ergonomically safe travel products for parents

B2B

Provider of digital publishing of ecommerce enabled catalogs

Products: diaper bags, dry bags, changing pads, etc.

Services: Development and deployment of catalogs, catalog apps for mobile, etc.

Let’s meet our subjects:

What’s relevant

§ Age§ Disposable income§ Activity level§ Price sensitivity§ Number of kids§ Marital status§ Sexual orientation§ Where they live

Go GaGa

What’s relevant

§ Age§ Disposable income§ Activity level§ Price sensitivity§ Number of kids§ Marital status§ Sexual orientation§ Where they live

Go GaGa

§ Type of business§ Ecommerce enabled§ Size of marketing

budget§ Size of company§ Company goals§ Distribution channels

Zmags

What’s relevant

Not only does it make you sound smart, but it can save your business.

§Focuses the entire team on the same target

§Gives you a touchstone for making decisions

§Prioritizes where to invest your resources

§Increases customer retention

§Identifies new market opportunities

Why segmentation matters

There’s no bad time to be thinking about your customers

§Before launch

§With 6-12 months of sales data

§When expanding into new markets or segments

§When decisions become tough because you’ve lost common vision

§Every 12-18 months after roll out

When to do it

Hint: do not go to the library and check out 7 books on marketing research

1| Gather data

2| Analyze

3| Create segments

4| Validate

5| Roll out

6| Reassess

It’s not all about Excel

Now it’s all about Excel

What’s actionable

Talking with your front line

This is the fun part

Checking accuracy and relevance

How to do it

This will be determined by what’s relevant and available

§Demographics

§Needs

§Values

§Purchases

§Personality

§Decision Making

Who they are

Why they buy

What’s important to them

What they buy (vs. what they say)

What shapes their interactions

How they shop and buy

§Alternatives

§Interests

What their options are

What brings them joy

What types of data to leverage

Hint: you will have to talk to people, just try not to get arrested

Interviews

Crowdsourcing

Site analytics

Order info

Customer svc.

On the street, on the phone, but best done while fully clothed

Polls and surveys are often done first but are more effective later

Traffic sources, flow, hang time, return visits to name a few

The most valuable because based on action, not intent

Great for capturing qualitative info while strengthening customer loyalty

How to get it

You’re simply looking for trends – correlation versus causality is irrelevant

1| Dump everything into Excel – survey results, purchase data, demographics, etc.

2| Begin by picking two features – age and gender, for example

3| Then add another layer – items purchased, repurchase rate, etc.

4| See if it’s meaningful – if not, go one step back up your tree

What to do with it

Identifying new markets for Go GaGa

Gender

Kids?

How use their bag?

Examples

Male Female

Yes No

Kids Self Work Fun

Diaper bag

LaptopGym bag

CommuteCourier

Photogr.

YogaPicnic

Yes No

Self Work Fun

Diaper bag

LaptopGym bag

CommuteCourier

Photogr.

YogaPicnic

Kids

Time to try

Identifying new markets for Go GaGa

Gender

Kids?

How use their bag?

Examples

Male Female

Yes No

Kids Self Work Fun

Diaper bag

LaptopGym bag

CommuteCourier

Photogr.

YogaPicnic

Yes No

Self Work Fun

Diaper bag

LaptopGym bag

CommuteCourier

Photogr.

YogaPicnic

Kids

Enthusiasts§Photography§Wine/picnic§Birders

Professionals §Couriers§Photographers

Commuting§Bike§Public transit

3 new markets emerged

Time to try

Shaping Go GaGa’s product roadmap

Kids?

1st time parents?

1st purch.

2nd purch.

Yes No

Yes No

Accessory Diaper Bag

No

“Diaper” Bag

Acquisition§Accessories get our foot in

the door for the second purchase, which was typically a diaper bag

Retention §Customers who love our bag

will continue buying products if the price is accessible

Accessories play two important roles

Diaper Bag Accessory Accessory

Another example

You’ll reach a lot of dead ends in the pursuit of actionable correlations, just like Isle Nine did

Gender

Age

Married?

1st purch.

Male Female

30-45 60+

Yes No Yes No

Shirt Shirt Shirt Shirt

30-45 60+

No Yes No

Kids Shirt Shirt Shirt

Yes

How worn? Leisure Work Leisure Leisure Leisure Leisure Leisure Leisure

Segments not sufficiently differentiated

Segments were evenly distributed across age and weighed heavily towards the purchase of men’s shirts to be worn for leisure.

The takeaway: just sell men’s Hawaiian shirts to anyone who will buy them.

Sometimes it doesn’t work

Zmags identifies a new service offering

Brand or retailer

Published catalog before

Sell direct/online

Brand Retailer

Yes No

Yes No Yes No

Yes No

No Yes NoYes

Let’s give B2B its due

Zmags identifies a new service offering

Brand or retailer

Published catalog before

Sell direct/online

Brand Retailer

Yes No

Yes No Yes No

Yes No

No Yes NoYes

Examples Incr. content

ROI

Testecom

Drive sales

Test ecom

Incr. content

ROI

Test ecom

Drive sales

Test ecom

Simple ecommerce engine run virtually by Zmags that enables retailers and brands not selling online to test

New service possibility

Let’s give B2B its due

Forming the segmentsAfter you’ve lost all perspective, five key questions can get you on the

right track

1| Are there meaningful differences between these groups?

2| Can I identify people based on these characteristics?

3| Can I market to them based on these characteristics?

5| Can I offer different products or services to meet the needs of different segments?

4| Can these segments peacefully coexist?

Building out the personasThese two factors will lead to impactful segments

What’s relevant to your business

What will help your team to connect with them

§Are they the decision maker ?

§What alternatives do they have to your offering ?

§How price sensitive are they ?

§What’s on their playlist ?§Where do they live ?§What’s their marital status ?§What brand of coffee do they

drink ?§Do they have kids ?

Go GaGa’s personasAge

Gender

Income

Where live?

Activity level

Christine Hannah Alan David

Kids

Sexual orienta.

Relationship status

37

Female

$250,000 (HH)

Downtown Chicago

Attends yoga 3x a week and jogs

Girl, 3 mos.

Straight

Married

31

Female

$42,000

Jamaica Plain, MA

Teaches 7 x a week & bikes to work

No

Lesbian

Single

42

Male

$150,000 (HH)

Suburb of Bethesda, MD

Jogs 3x a week

Boy, 2 yrs & expecting 2nd

Straight

Married

28

Male

$100,000

Brooklyn

Works out 6 days a week in the gym

No

Gay

In long term relationship

First time parent? Yes No No No

Education Masters Ugrad w/ certifications

Ugrad degree w/ grad classes

MBA at night

Go GaGa’s Personas

Hobbies/Areas of interest

Music

Research process

Price sensitivity

Personal style

Hiking & architecture

Madeline Peyroux

Online first then in store

Low

Rocks DKNY

Rock climbing & ceramics

Kate Bush

Word of mouth

Medium

Lives in Athleta

Punk rock & NPR

The Ramones & Stones

Wants to see & feel it

Low

Roxy shirt & cargo shorts

Pop art & travel

Passion Pit

Very thorough – mostly online

Medium

Hipster

Personality

Occupation VP at an ad agency

Upbeat but easy going

Yoga instr. & massage ther.

Loves being a dad

Sr. Dir of Finance

Intense at work & play

Development officer

Uptight

Zmags personasAge

Gender

Position

Years in role

Personality

Peter Blake

Decision maker

Sentiment about job

Culture

35

Male

Dir. of Marketing

4

High energy, high maintenance

Influencer but CMO decides

Wants a promotion but needs a win to stand out

Competitive – running of the bulls at Pamplona

42

Female

CMO

6, 13 with the company

Demanding but protects her team

Yes

Confident but under constant pressure to deliver

Pressure cooker, struggles to prioritize

Company challenge Incr. revenue from house brands

Build their direct channel for better margins

Employer Nieman Marcus Baby Phat

Avoiding the pitfalls

Run these filters before finalizing the segments

1| Too many segments2| Too narrow a focus3| Divergent groups4| Not actionably different

Validating the segmentsDon’t get bogged down trying to be certain – test ‘em instead!

Pull another data sample

Talk with your front line

Place small bets

Pull another data set and see if the trends are consistent

Your customer service and sales team knows your current customers best

Run a targeted email test, experiment with Google AdWords, try a promotion

Rolling it out to the team

Now it really gets fun

§Play their playlist§Create a facebook page for them§Develop a mood board§Start a book club§Have a guest appearance§Keep them top of mind every day

What your segmentation should impact

It can (and should) touch every facet of the business

Branding

Customer service

Hiring

Tagline, marketing messages, word choice, phone greeting, etc.

Policies, hours of operations, methods of contact

Personality, diction, energy level, hobbies

Product roadmap Future features, service/product offerings, pricing

User experience Site design, sales process, store layout and more

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