Using segmentation to deliver better customer experience
We are all very different. There is nothing astonishing about this statement, it is obvious. And yet, many companies treat their customers as if they are the same. There may be good reasons for doing this. The culture of the supplying company might be such that it is impossible to treat customers in a different manner. It may be easier to have one rule which applies to everyone. However, we are all very different and so are our needs. There will be some customers who want a close partnership, others that seek innovation; there may be those who want lots of services and those who want a low price and nothing else.
The recognition of customers’ needs is at the heart of marketing. Indeed, a widely circulated definition of marketing is that it is the profitable satisfaction of customers’ needs. If customers’ needs are different then quite clearly we need to recognise these and serve them accordingly. A company that treats all customers the same will inevitably fail to satisfy some. In essence, we are talking about segmentation.
A good starting point when thinking about segmentation is to acknowledge that your offer may not be organised to deal with certain types of customers. This being so, you shouldn’t chase them. It is a hard pill to swallow for a sales orientated company. The good news is that at the opposite end of the spectrum there will be certain customers who are ideally suited to your offer. These customers will anoint you with high levels of satisfaction through what they see as excellent customer experience.
Segmentation is not just about recognising which company or which person buys a product, it is about understanding the decision-making unit that leads to the purchase. A mum or dad may pick up a product in the supermarket but they may not be the sole decision maker. There may well be others at home who exert their preferences.
The decision-making unit in business customers is more complicated. A technical person may be involved early on in the decision-making process when the specification of a product is being approved. Procurement people get involved when price negotiations are taking place. Logistics people become interested once supplies are underway. People on the shop floor who use the product or service may well also have their say.
A test of a good segmentation is to consider the degree to which customers’ needs really are different. We are not looking for nuances here between one group and another but clear blue water. This is important because once a customer has been assigned to a segment, they must sit comfortably within it. Any slight changes in their needs should be accommodated. A good test for determining a segment is what we call the 3Ds:
The segment should be distinctive– we are looking for key attributes that make the segment special and easy to recognise.
The segment should find an offer desirable – each segment should have a strong need for the offer. If the segment doesn’t have a resounding appetite for what you are selling, it isn’t a segment you will want to serve.
The segment should be durable– segments need to stand the test of time because marketing strategies will be put in place that last a year or two.
The emphasis in our blog has been about recognising and meeting customers’ needs. We know that it can be difficult establishing different needs and behaviours especially when customers are constantly changing. Fortunately that there are often physical attributes that give a good indication of needs without having to ask. Customers in a certain industry sector may have needs that differ considerably from those in other sectors. Large customers can have different needs to small customers. Customers in certain geographies could have distinctive needs. It isn’t always so but certainly it is a starting point when determining a segmentation to see if these physical characteristics are allied to special needs. If they are, customers can be readily assigned to segments. If they are not, it is more complicated because it will be necessary to ask the customer a series of questions to establish their needs.
Heck, what are we saying, we should always be asking our customers questions to establish their needs, even if physical attributes offer a good proxy. Good segmentation comes from knowing your customers inside out and backwards. And that means persistently asking “what do you need?”