Tips for Successful Customer Segmentation - dummies

Tips for Successful Customer Segmentation

By Jeff Sauro

Customer segmentation is more than a simple process. It requires a combination of facts and intuition to put yourself in your customers’ shoes. Follow these guidelines to success:

  • Start with the end goal in mind.

    Define what you will do with the segmentation data before you begin. If your segmentation goal is to increase the sales of one of your product’s optional features, data should be gathered about who buys the feature, which income bracket they belong to, and what their motivations are (low-cost solution or a premium high-quality option).

  • Be open-minded.

    Patterns emerge from data analysis. It’s fine to have preconceived ideas about what to expect, but don’t let that dictate how you look for patterns. Let the data do the talking.

    One of the goals of segmentation is to learn new and possibly unexpected things about how your customers are similar. For example, when my company wanted to understand the most important features to customers on a healthcare web application, the stakeholders felt they already knew what those features were.

    However, the survey results from a representative set of customers showed the top three features were different from what the stakeholders were sure they knew.

  • Use existing data.

    The data you need may already exist. There’s no need to commission an expensive survey if the data is already collected, say, for example, during the process of a sale or while on a call to customer service. What’s more, you don’t want to overburden your customers with questions about their details if you already have them.

  • Use multiple sources of data.

    Try not to rely on a single source of data. Look at existing customer lists, surveys, and third-party reports.

    For example, on a customer segmentation survey my company conducted for a software company, we looked at the response rates by product lines and compared them to actual sales by product line. We ensured that the composition of customers responding to questions about their product usage would match the actual breakdown by product.

    Running smaller surveys with open-ended questions and conducting a few interviews can provide a lot of insight into what questions to ask. Customer surveys are usually easy to implement. Some companies offer perks such as drawings or a discount on a future purchase as a reward for participating in a survey.

    When possible, use more than one source and plan on cross-referencing data.