Understanding & Segmenting Your Customer - Part I

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Understanding & Segmenting Your Customer –
Part I
Getting the Right Customer For Your Marketing Message

So do I need to talk to all my
customer to get to know them?

A strong customer profile is a
mixture of a number of
characteristics that define your
customer from a variety of items
that make it easier to segment,
target and sell your product,
services and brand to them

Nine Need to Knows
When It Comes to Knowing Your Customer

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9 Need to Knows
 Revenues are still relevant
– Collect information about customers to establish how
much cash money they bring to your table
 Happiness is contagious
– Focus on happy customers
 Price sensitivity is NOT a good thing
– Don’t make your market position about price
– When Mickey Drexler took over a CEO of J Crew, he was
looking for customers willing to pay more for well-made
clothing and increased revenue 170% in the first 5 years

9 Need to Knows
 The bigger the problems the better
– The bigger the problem your brand can solve, the bigger
the market response
– In the early days of the internet, AOL went after people
interested in getting online but not willing to do it alone
– As a result, 30 million people signed up and they became
4th on the list of events that shaped the first 25 years of
the web
 Be on the lookout for something new
– Introducing new products and services can generate
organic growth companies crave
– Focus on your customers that are most interested in new
innovations from your brand to generate bottom line
growth

9 Need to Knows
 Out there advocating for your brand
– The greater the level of influence a buyer has among their
social networks and word of mouth marketing, the more a
brand’s marketing ROI will benefit
 A hub with lots of spokes
– The more active and engaged a customer is with different
social media, the more valuable they can be to your brand
– Ford Motor Co. picked out 100 twenty-something YouTube
storytellers who’d developed a fan community of their
own and gave them a Fiesta for 6 months
– Each month they share their experiences with their
communities via YouTube, Facebook, twitter and Flickr
– Ford received 50,000 requests for information and sold
10,000 units in the first 6 days of sales

9 Need to Knows
 Distinctive needs and wants
– The more similar and predictable a target group’s needs
and wants, the easier it is to develop compelling
positioning and messaging
 Meaningful to traditional and digital decision makers
– Get a sense of how high-value customers use traditional,
digital and social media communications throughout the
pre- and post-purchase process
– Understand how the like to interact with a brand within
different communications channels

What is Customer Equity?

A firm is only as good as its
customers think it will be the
next time they do business with
them

When we talk about customer
equity, we talk about 3 specific
things…

Value Equity
A customer’s objective assessment of
the utility of a brand based on
perceptions of what is given up for what
is received

Value Equity is determined by:
Quality – value of the brand offerings
Price – attractiveness of the price
Convenience – ease of doing business

Brand Equity
The customer’s subjective and intangible
assessment of the intangible, above and
beyond its objectively perceived value

Brand Equity is determined by:
Building awareness to attract customers
Building emotional connections
Remind customers to repurchase

Retention Equity
The tendency of the customer to stick
with a brand above and beyond the
customer’s objective and subjective
assessments of the brand

Retention Equity is determined by:
Loyalty Programs
Special Recognition & Value Programs
Affinity/Emotional Connection Programs
Community Programs
Knowledge Building Programs

Know Your Customer Types

There are 2 major distinctions to
customer types before we talk
about the actual types of
customers you will deal with

Retail Customers
Retail customers are the buyers that
purchase everyday items without regard
to the brand – they are price conscious

Brand Customers
Brand customers are loyal to a brand no
matter where they purchase it –
sometimes paying a premium

The Resistant Customer
 Mindset: Hates your company and
holds deep resentment for your brand
 Behavior:
– Will spread negative word of
mouth wherever possible
– Took their experience with your
brand personally and is looking for
revenge
– Will defect to your competitor first
chance they get
 Loyalty: Zero
 Possibility of Defection: Extremely
High (you can’t save this group)

The Indifferent Customer
 Mindset: Sees your
company/product/service as nothing
more than a commodity
 Behavior
– Will always try to get lower prices
to the point of near zero margin
– They will promise volume or future
business, but see little unique
value in your offering
– Always willing to walk away from
the sale because they have other
options available
 Loyalty: One
 Possibility for Defection: Very High

The Acceptant Customer
 Mindset: Expects your customer to
provide the maximum of what’s asked
and nothing more
 Behavior:
– Doesn’t think of your brand until
absolutely necessary
– Comes to you because you have
become a habit or more
convenient choice
– Maybe aware of other, better
options, but simply hasn’t made
the effort to pursue them
 Loyalty: Two
 Possibility for Defection: High
– Customer expectations can
outpace what you provide

The Preferential Customer
 Mindset: Has grown to like your brand
and tends to understand the unique
value that you provide
 Behavior:
– Most of us make the mistake of
making this customer type the top
of our customer pyramid
– When given a choice, they will
probably continue to use your
brand
– Very aware of industry trends and
can surprise by defecting if you
have not given them benefits or
raised the bar on service or
innovation
 Loyalty: Three
 Possibility for Defection: Somewhat
High

The Evangelist
 Mindset: The pinnacle of the customer
relationship and would buy anything
you offer
 Behavior:
– They tell everyone they know
about your company
– Mentions how satisfied they are
even in casual conversations
– Your brand has become part of
their life
– Finds personal meaning with your
brand
– Worth their weight in gold because
they do more to grow your
business than any ad campaign
 Loyalty: Four
 Possibility for Defection: None

The Customer Profile
Who is my target customer?

When we talk about profiling
customers, we start with the
basics – or what is know as the
old way….

Old Way
Standard Demographics
Age, Race, Income,
Education, Family Size, Employment

Now this way has given marketers a
great deal of information over the
decades, it has not improved the
marketing performance of our
activities and campaigns

Why?

The standard demographics are a
very general way of looking at a
customer – it gives us insights but
not details which we need to drive
our marketing

This is the limitation of the old
way of marketing segmentation

New Way – Audience Segmentation
Getting to the root of your customer

When you use a audience
segmentation method, you are
better able to break down your
customer into clear sets of detail
that allow you to target them more
effectively

Is audience segmentation just
about behaviors?

When we work with this method,
we start from a different point
than the traditional
demographics

Where do you think we start in this
method?

Life Roles are the different things
that we are that make up our
buying decisions.

When marketers start with life roles,
we are better able to define our
customer because different
behaviors fall into the different roles
we carry in life.

When you define someone’s life
roles, you are better able to define
their –
behaviors, habits, interests and
purchasing decisions

Understanding Market Segmentation
Learning How to Break Down Your Customer’s Into Groups

Market segmentation is the process
that companies use to divide large
markets into small markets that can
be reached more efficiently and
effectively with products and
services that match their unique
needs

Market Segmentation

Market Segmentation
Geographic
segmentation
Demographic
segmentation
Psychographic
segmentation
Behavioral
segmentation
Divides the market
into different
geographical units
such as nations,
regions, states,
counties, or cities
Divides the market
into groups based on
variables such as
age, gender, family
size, income,
occupation and
education
Divides buyers into
groups based on
their knowledge,
attitudes, uses, or
responses to a
product
Divides buyers into
different groups
based on social class,
lifestyle, or
personality traits

How Do We Market To These Segments?

Marketing Segmentation
100% of visitors 100% of visitors
1 segment = all 16 segments = all
All
New vs.
Returning
4 Key
Products
8 Major
Markets
16 Visitor
Personas

Market Targeting
Undifferentiated
Marketing
Differentiated
Marketing
Concentrated
Marketing
MicroMarketing
Mass Segmented Niche Local/Individual
Targets the
whole market
with one offer
Mass marketing
Focuses on
common needs
rather than
what’s different
Targets several
different market
segments and
designs separate
offers for each to
achieve higher
sales and
stronger position
Targets a small
share of a large
market
Limited company
resources
Knowledge of
the market
More effective
and efficient
Practice of
tailoring
products and
marketing
programs to suit
the tastes of
specific
individuals and
locations

Price
Volume
Direct Sales
Fill by ad networks
Results from Mass Marketing

Fill by ad networks
Price
Volume
Direct Sales
New Revenue
Audience-based selling
Results from Market Segmentation

Price
Volume
Direct Sales
Fill by ad networks
New
Revenue
Audience-based selling
Results from Audience Targeting

Understanding & Segmenting Your Customer - Part I

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