How and why to segment your market – Step 2

My last blog looked at segmentation for marketing purposes. This post gives some suggestions on how to segment your customer list.

Your customer segmentation plan:

1. Analyse your own customer list (both past and present). 

Find out who your best, most profitable customers are. (Generally the 80/20 rule is likely to apply here: A 20% segment that delivers 80% of your profits.)

Do they fit into different segments, or are they a segment on their own?  

How can you find more like them?  

2. Cluster together customers with the same profiles. Profiling helps you to identify what characteristics differentiate your customers from the rest of the population.
3. Research which combination of criteria your customers are using to select the business they buy.  Why are they choosing you?  Why are they choosing your competitors? Your survey is best done by telephone, by mail, or by email or even a third party. I would suggest that this could be included in your regular review with the clients.
4. Now understand their different needs (See previous blog)
5. Review their buying processes.
6. Consider their common worries and concerns.
7. Agree how the 'Threat' and 'Opportunities' from a SWOT analysis might affect each segment. Example shown below.

8. Decide if they should also be segmented geographically. I use Batchgeo for mapping which is quick and easy.
9. Then create your segments - as many or as few as you desire.
10. If useful, give each segment a name.
11. Create a pen portrait of each type. This is a way to represent your customer profile target audience as a fictitious character. By creating a fictitious character you will be able to speak more directly to him/her. The more fleshed out and based on reality this portrait is the more effective the tactic will be.
12. Understand which segment is most profitable to the business.  Most loyal?
13. And finally, segment your customers on your client bank.

Some other examples are available 
Example 1 - Advisor Impact - Client segmentation workbook
Example 2 - Mind of marketing - What is customer segmentation?
Example 3 - Why most client segmentation models don't work.

There are many ways in which you can segment your customer lists and I hope that these two blogs have helped in creating some ideas on how and why to segment your client bank.

How and why to segment your market – Step 1

In my next two blogs I’m going to look at segmentation. Firstly on the marketing side (which follows on neatly from the last blog (Click here) and secondly a brief look at segmenting your client list.

Marketing Segmentation

Marketing segmentation is simply about communicating with groups of people with similar needs. How you do this is up to you as you will all be operating in different markets, but let’s look at a couple of examples.

Buying a car – What needs does the customer have?

1. The stated need: The customer wants an inexpensive car.
2. The real need: The customer wants a car with low operating costs. The initial price of the car needn’t be low.
3. The unstated need: The customer expects good service from the dealer.
4. The need to feel special: The customer would be delighted to receive a free atlas with the car.
5. The secret need: The customer wants to be seen as a savvy negotiator.

Or toothpaste - this might break down into groups with a need or priority for

• Tooth decay prevention.
• Teeth whitening.
• Desensitising teeth.
• Flavour.
• Appearance/colour/stripes.
• Price.
• Ingredients/natural ingredients

The benefits to you include: 

1. It’s much easier to get and hold the attention of your target audience – New clients? Existing clients? Clients you have lost touch with? Etc. Because your message is particularly relevant to them.
2. You are seen as being an expert in financial planning - again because your message is particularly relevant.
3. Your marketing gets a higher response and so is much more cost effective.

Each segment may, for example:

• Require different products/services.

• Be keen to buy a package of products/services from you – think of cross selling…

• Respond in large numbers to a particular tailor made offering that matches their needs

• Respond best when contacted through particular media Eg Networking events, newsletters, website promotion (Google AdWords etc), blogs, direct marketing, telemarketing, referrals etc

In my next blog I am going to be looking in more detail about your customer segmentation plan.