“Any customer can have a car painted any color that he wants so long as it is black.”
— Henry Ford in 1909 by about the Model T
Henry Ford’s point of view worked in 1909 when the automobile market was in its infancy. But in today’s automobile market, there are literally millions of combinations of make, model, color, engine size, exterior options and interior options. This same evolutionary movement from simplicity to complexity happens in nearly every market and product category over time.
As markets, products, clients and competitors evolve and mature, a one-size-fits-all approach becomes less and less effective. Higher orders of complexity emerge to serve buyers’ ever-expanding, ever-splintering preferences. And with today’s information- and technology-enabled buyer, they increasingly expect a personalized, highly relevant experience with the brands with which they choose to engage.
(For now, I’ll have to skip the chicken and egg question– which comes first: the buyers’ preference or the marketer’s desire to force/create a distinction? Asking those questions could easily get us into a philosophical discussion, which would require a beer and front porch.)
As marketers, we analyze buyers, markets and competition in order to identify important distinctions among sub-groups. These distinctions often reveal significant opportunities for more focused strategy, more attractive and profitable product and service offerings, and more compelling messaging, content and engagement.
But how does segmentation pay off? Why bother with the hassle?
Segmentation = better focus.
This means your company focuses its finite resources where it has the best chance of winning.
Segmentation = more compelling value proposition.
This means your products and services do a better job of solving a problem than your competitors. And hopefully you deliver this value in a unique way that is difficult to imitate. (If you haven’t done so already, dive into Michael Porter’s work on this topic. It’s good bedside reading for nerds like us.)
Segmentation = better targeting.
This means your marketing and sales teams will spend their time pursuing the right kinds of customers/accounts.
Segmentation = more relevant messaging.
By speaking to people’s unique problems, fears, goals, concerns and hopes, your relevancy skyrockets. You stop speaking in generalities and start actually resonating with your target audience. And more and more, relevancy is a requirement for revenue.
Segmentation = increased success for your sales team.
By focusing on and aligning with segments with whom you have the strongest value proposition and resonance, you allow your sales team to spend more of their time working better qualified leads and opportunities who present higher engagement and conversion levels, potentially faster sales cycles, and ultimately, higher win rates.
Segmentation = higher revenue and higher profit.
By focusing on the right segments (including those segments who offer higher profit margins), and doing all of the above as well or better than your competitors, your company will be rewarded with higher revenue, higher profit and higher loyalty.
Segmentation in a Demand Generation Context.
It’s an exciting time to be a marketer. The digital revolution has given business-to-business marketers the ability to capture and analyze information that reveals distinct buyer interests, problems and preferences, and then respond appropriately with highly measurable and personalized campaigns.
In a very real sense, the field of marketing is growing up, thanks in part to a proven set of extremely powerful technologies and a growing set of best practices that support today’s increasingly online buying journey. Today, marketers have many ways to test, measure and learn about the effectiveness of their strategies and tactics for creating market awareness, generating leads, nurturing and influencing pipeline opportunities and creating loyalty and advocacy after the sale.
But traditional, batch-and-blast messaging strategies and tactics still persist. Segmenting and targeting your audience is a requirement to avoid bland, irrelevant, poorly timed messaging.
“By adopting a customer segmentation strategy, businesses will see a great increase in the value of their marketing. Knowing your customer is the starting point for any successful demand strategy and marketers who do not take the time to develop a segmentation strategy put their success at great risk. In these days of modern marketing, marketers cannot afford to blast their messages — they must be targeted and relevant to their customers. With that being the case, customer segmentation is a must.” Carlos Hidalgo CEO, The Annuitas Group (annuitas.com)
By implementing and integrating a growing set of technology solutions such as marketing automation, CRM, multi-channel media engagement (PPC, Display, Retargeting, Social Media, Webinar, Tele, Events, Channel Partners), Web Analytics, Predictive Analytics, Offer Optimization and more, marketers finally have visibility into what is working and what isn’t working.
“Google Analytics, Marketing Automation, social media and other digital channels have armed today’s marketer with more targeting ammunition then ever before. The trick is finding the best method to collect and make sense of this data.”
— Ashley Furness, Market Analyst, Software Advice.
And segmentation is a key tool that modern marketers use to analyze and respond appropriately to all of that data. Finite marketing budgets and CEO’s require it.
Even though segmentation can feel like a very complex topic, you can easily start small and grow from there. In fact, it’s highly recommended.
3 Simple Segmentation Examples for Lead Nurturing Campaigns
- Lead Source Segmentation: Use lead source to help determine ROI from various marketing channels. For example: Use segmentation in your reports to find out if webinars generate higher quality leads than telemarketing, social media or paid search.
- Behavioral Segmentation: Use segmentation to identify lead behaviors that are markers for different campaign treatment. For example: Route highly engaged leads (i.e. lots of opens, click throughs, page visits, form conversions) into a nurturing campaign that targets someone who is ready to receive buy cycle content, messaging and offers. Or, route unresponsive leads into a re-engagement campaign designed to reignite their interest in a relevant topic (and your brand/value proposition/product set).
- Demographic Segmentation: Use demographic segments to optimize your campaigns for particular buyer personas. For example: Target job titles that indicate decision maker status with content offers designed to help them create a vender short list or frame their business problem through the eyes of industry best practices and research. Or, create department/function-specific content that speaks to their field of expertise or unique concerns and points of view such as someone IT vs. someone in Finance.
Be Sure to Balance Complexity with Payoff
Beware though, as segmentation also creates more operational complexity. Be sure that whatever segmentation approach you choose delivers enough value in terms of real customer and prospect insight, message relevancy and potential revenue impact to outweigh the costs of designing, maintaining and optimizing the marketing campaigns to execute your strategy. As with most new initiatives, our strong recommendation is to start small, focus on learning foundational lessons, creating quick wins, eventually expanding your scope and complexity with ROI and data as your guide.
Some Questions to Think About:
- How could your company use segmentation to drive better revenue performance? Where are there clear, untapped wins?
- What data model, data and integration challenges would you have to solve to begin segmenting in an actionable and accurate way?
- What impact will segmentation have on your need for content?
- If you are already down the path of effectively using segmentation, what advice do you have for marketers who are ready to start using segmentation more in their campaigns?
As always, if you want to discuss segmentation with an ID consultant, contact us— we’re here to help!