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How to Sell More to Less People: Essentials of Segmentation

Denyse Drummond-Dunn | Dec 14, 2016 125 views No Comments

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Businesses often make the mistake of trying to sell more to everyone.

Why is this a mistake? Well, if you try to please everyone you end up delighting no-one. This is why best-in-class marketing works with best-practice segmentation. Read on to find out how.

Every brand needs to appeal to a precise group of customers. This means that you need to make a choice of who to target amongst all category users. Making a choice also implies that you will have to ignore some category users who you could perhaps attract. Does that scare you?

It certainly worries many marketers and yet it’s the only way to sell more. Although this may sound counter-intuitive, segmentation ensures you have the best possible chance to satisfy the needs of your targeted customers.

Where to start

When deciding who to target, most companies conduct some sort of analysis. This can be as simple as identifying your users by what you observe, such as young men, or large families. Or it can be more complex, like trying to appeal to those who value freedom and are looking for brands that can provide or suggest this dream. This latter one would result from a values and motivational segmentation.

As already discussed in an earlier post called “The 3 Rules of Effective Targeting”, the deeper your understanding of your target customer, the more likely it is to provide you with a competitive advantage. Therefore segmentation alone is insufficient; you must then get as close as possible to your target customers in order to understand them as deeply as possible.

The MIDAS touch

Whatever method you use for segmenting and choosing your target customers, the results of your exercise of customer grouping needs to meet the following five conditions, known collectively as the MIDAS touch. (>>Tweet this<<) 

Measurable: The individual groups need to be clearly defined and quantifiable using KPI’s such as size, market share, value share.
Identifiable: Each segment must have a distinct profile and each customer must be attributed to only one segment.
Definable: Every cluster must be easy to describe and share with others so that you have mutual understanding of each of them.
Actionable: The groups must be easy to identify, in order to be able to target your actions and communications to them.
Substantial: The chosen segment must be financially viable to target, which means that it should, in general, be stable or growing, and durable over the long term.

All good segmentations or clusterings will fulfil these five key conditions, or at least they did until recently. Today the last condition is being adapted thanks to personalisation. It is more important to assess whether or not it is sustainable rather than substantial.

Even with this change, it is still easy for you to evaluate your segmentation, to ensure it is both valid and robust. If it does not meet these five conditions, then you will struggle to activate it and target your actions to your chosen group of customers.

As already mentioned, understanding your target as completely as possible is vital to the success of your business. I would, therefore, suggest that you review your own segmentation and decide how it can be improved. (>>Tweet this<<) (There’s always room for improvement, isn’t there?)

This may mean simply completing the information you have on each segment. Or it may mean running a whole new segmentation exercise. However, it is definitely worth getting your segmentation and target customer choice right. After all, they form the very foundation of your brands’ customer centricity.

A solution for those with few resources

If you do not have the time, money, or expertise to run a detailed segmentation study, you can still make an informed decision based on simple criteria. These could be gathered by mere observation, an analysis of who your purchasers are, or a review of contacts from your customer services group.

Once you have identified the different types of users you are attracting, you can then decide which is the most important group to you, using what is often referred to as the Boston Matrix. This analysis was first developed in the 70’s by the Boston Consulting Group. At the time, the matrix  was created to help corporations analyse their business units and was based on market growth and relative market share.

Today this scatter plot is created using various elements to make up the two axes. Whilst the criteria you use for each axis can vary, this simple analysis has the advantage of being able to be further refined over time, as you get more information.

Choosing the criteria for the axes

The two axes you specify for the Boston Matrix can be as simple or as complex as you like. Obviously, the more criteria you use, the more accurate your analysis is likely to be. Examples of the criteria you can use include:

Attractiveness: Segment size, segment growth rate, segment value, competitive environment, how well the group fits the company or brand – or vice versa.

Ability to win: Attractiveness to your customer, completeness of your distribution channels, your media mix, your reputation.

You can use any or all of the above suggestions for creating the two axes. C3Centricity provides an automated tool for calculating the two axes and then positioning segments on them. This is made available to all participants of the Customer Centricity Champions Classes. Find out more by signing up to one of the forthcoming webinars.

Choosing the actions to take on each segment

Sell more through better customer targetingOnce you have positioned the different segments or groups of customers on the axes, you can easily see what needs to be done for each:

Target: these are your core users as they are both attractive to the business and easy for the company’s product or service to attract. Therefore, they need to be protected from possible attacks by the competition.

Convert: these users can be attracted to your product or service but your ability to win them is currently low. To win these customers you probably need to consider improving one of the elements of the mix in order to attract them.

Grow: your product or service can easily win these groups but perhaps they are not as profitable as you would like. This might change, so it is important to review them from time-to-time or develop a different strategy to attract them.

Ignore: many organisations struggle to make the decision NOT to go after a group of category users. But if you have neither the product / service nor the segment size that would be profitable to you, why spend time, money and energy going after them?

Conclusion

All businesses want to sell more. They also want as many customers as possible. However trying to sell to everyone is unlikely to meet with the success you hoped. Choosing the right group of customers to attract with your product or service is essential. But so is doing everything you can to then understand your chosen segment as deeply as possible. Truly customer centric organisations excel at doing both; do you? (>>Tweet this<<)

Need help in segmenting, identifying or understanding your target customers? Let us help you catalyse your customer centricity. Contact us here or check out our forthcoming Webinar Customer Centricity Champions. You’ll learn far more about segmentation, how to use the Boston Matrix and a whole lot more. Reserve your slot before it’s too late!

C3Centricity used an image from Denyse’s book “Winning Customer Centricity

This post is an updated version of one first published on C3Centricity.

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Republished with author's permission from original post.


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