What is customer segmentation?

Like so many buzz words in business & marketing, "customer segmentation" is one of those terms that is interpreted by folks to mean many different types of things. If the word "segmentation" were blurted out in a room of 20 business people, chances are it would conger up 20 different images. So what is customer segmentation, and how can it be used to propel one's business?


Segmentation defined
Customer segmentation is a method for grouping customers based upon similarities they share with respect to any dimensions you deem relevant to your business - whether it be customer needs, channel preferences, interest in certain product features, customer profitability, etc. The key is for you, the marketer, to first decide on what basis you wish to segment your customers (or prospects for that matter). And, the only way to answer this question is to first determine what your objective is for the segmentation, and thus what you want the segmentation to "do for you".


Common segmentation objectives

• Developing new products
• Creating differentiated marketing communications & ads
• Developing differentiated customer servicing & retention strategies
• Targeting prospects with the greatest profit potential
• Developing multi-channel distribution strategies

Once you have decided what your objective is for the segmentation, you can answer the question, "what do I want the segmentation to do for me?"



A brief example: segmenting for customer win-backs
Let's say you worked for a subscription-based magazine such as Newsweek. Your boss has asked you to optimize Newsweek's retention strategy utilizing the current save tactic of sending people who have recently canceled their subscriptions (aka "attritors") 1 of 3 "win-back" mailers. This existing save tactic has been employed by Newsweek for the past 2 years, and the method for determining which attritor receives which mailer has been based largely on "intuition" (aka random selection).


Step 1: Your first step in undertaking this project would be to clearly state your objective. Your objective, as per your boss, is to optimize Newsweek's retention strategy for recent attritors. This is shorthand for saying, "I want you to maximize your return on your retention-dollars invested". Without getting into the nitty gritty of the approach, what you essentially want to do is determine the relative ROIs for each of the 3 mailers at the individual attritor level. For each mailer, you then want to identify those attritors with high ROIs (i.e., those attritors who re-instated their magazine subscriptions after receiving the mailer and provided you with future profits that well-exceeded the cost of the mailer).

Step 2: For each win-back mailer you want to identify those attributes which the high-ROI attritors have in common, essentially creating a profile for "high-ROI attritors" for each mailer.

Step 3: The final step is to operationalize the three profiles you've created so you can use them to determine which of the 3 mailers, if any, to send to future attritors. This essentially entails implementing a process in which new attritors are matched up against the 3 profiles to determine which, if any, best describe them. A more sophisticated approach would be to build predictive models that would calculate the expected ROI for each mailer for each attritor, and then send out the mailer with the highest expected ROI to the attritor. And, for those attritors in which all 3 mailers have negative expected ROIs you might choose not to send any win-back mailers.

Closing thoughts on segmentation
In closing, segmentation can be tricky and complex, and no doubt requires a great deal of expertise & experience. Putting in place flawed segmentation strategies can be far more detrimental to a business than not having them at all. However, when designed the right way, segmentation strategies can provide tremendous returns relative to one-size-fits-all approaches. In future posts I will tackle some other types of segmentation strategies, including those involving new product development and portfolio management. As always, feel free to email me with any of your questions, comments or thoughts. As always, feel free to email me if you have any questions about segmentation and how to most effectively use it within your business.






More posts on segmentation & marketing strategy:

• Segmentation and targeting
• Using the 5Ws for segmentation & marketing innovation
• Using segmentation to develop your marketing strategy
• Marketing Strategy Framework to hang on your wall
• My Frameworks Library - many empowering segmentation tools!

Great books & articles on segmentation:

Check out my favorite business books

read more

Marcom case study: the “Hyatt Shuttle” of New York’s Grand Central Station

It’s not often these days I’m stopped in my tracks (no pun intended) by an ad or related form of marketing communication. Most of them seem to fuse with the background becoming invisible in mere seconds. This week was an exception, however, and it underscores one of the core principles any marketer should keep in mind when crafting effective marketing communications…


My encounter with "The Shuttle"
As I boarded the Shuttle train this morning, half-awake from my morning coffee, I was brought to full attention by a completely transformed subway interior (for those unfamiliar, the shuttle is a train that runs between Time Square & Grand Central Station in NYC). Beyond the expected surprise I felt from entering a subway car that had been bathed in the accoutrement of a solitary theme, there were a few reasons in particular that made the experience so memorable. And, it serves as a great example of how marketers can cut through the clutter – objective number one for any marketing communication. This feat was all the more impressive given that it was competing head-to-head with the madness that is midtown Manhattan during morning rush hour.


Why the Hyatt Shuttle = effective marketing communication
So what made the experience so compelling?

For starters, the train’s interior broke any existing schema (or expectation) I had for “what the inside of a NYC subway looks like”. Instead of steely, cool panels, the train was affixed with faux wood “wall paper” reminiscent of some bachelor’s finished basement from the late 70s, pool table & wet bar not included.

In place of slick, high-design ads pressed into the metal picture frames that dot the subway’s interior were color graphs printed on basic white printer paper; graphs that reminded me of the simple bar charts Microsoft Excel spit out circa 1989 . The charts, whose effectiveness was heightened by their simplicity, depicted how much more successful face-to-face meetings are in comparison with video conferencing, email, or phone calls.

At its essence, Hyatt transformed a cold, unfriendly space (the inside of a NYC subway) into a warm, inviting place - the inference being that Hyatt Conference Centers create the type of warm, inviting atmospheres conducive to effective business schmoozing & networking.

Now I’m neither an event planner nor coordinator of large-scale meetings, so I cannot speak to the level of influence "The Hyatt Shuttle” might have on my decision-making for those upcoming conferences.

However, to some degree that’s irrelevant. “The Hyatt Shuttle” compelled me to whip out my blackberry on a crowded train and snap away - much to the annoyance of my fellow commuters. It got me to write this post with blurry crackberry photos attached for the entire world to see (or 0.00022% of the Internet world per my latest Alexa rankings). And perhaps most compelling - Hyatt was able to convert me into an online PR guy who’s apparently willing to work for free. All Hyatt had to do was serve up a unique experience that added a little bit of zest to my otherwise predictable day. Clever, high-ROI strategy… and heck of a marketing communications case study for marketers to sink their teeth into & leverage for their own business.


The Law of the Unexpected
Let’s bubble-up this mini case study and see what useful principles we can derive for you to use in your business… at its core, what made The Hyatt Shuttle so compelling is that it successfully employed the law of the unexpected, which simply states that throw something out there that I don’t expect and you’ll capture my attention... think giraffe in a field of cows, an orange in a bowl of apples, or your waiter at The Four Seasons dressed in a white t-shirt & cut-off jean shorts.


How to apply the law of the unexpected to your marketing communication
Let's get right to what you're no doubt wondering - how to apply the law to your own marcom efforts... (to be continued... coming soon...)


If you’d like to read more about the law of the unexpected and other means for cutting through the clutter, I highly recommend:

• Made to Stick: Why Some Ideas Survive and Others Die

• Metaphorically Selling

read more

Marcom case study: the “Hyatt Shuttle” of New York’s Grand Central Station

It’s not often these days I’m stopped in my tracks (no pun intended) by an ad or related form of marketing communication. Most of them seem to fuse with the background becoming invisible in mere seconds. This week was an exception, however, and it underscores one of the core principles any marketer should keep in mind when crafting effective marketing communications…


My encounter with "The Shuttle"
As I boarded the Shuttle train this morning, half-awake from my morning coffee, I was brought to full attention by a completely transformed subway interior (for those unfamiliar, the shuttle is a train that runs between Time Square & Grand Central Station in NYC). Beyond the expected surprise I felt from entering a subway car that had been bathed in the accoutrement of a solitary theme, there were a few reasons in particular that made the experience so memorable. And, it serves as a great example of how marketers can cut through the clutter – objective number one for any marketing communication. This feat was all the more impressive given that it was competing head-to-head with the madness that is midtown Manhattan during morning rush hour.


Why the Hyatt Shuttle = effective marketing communication
So what made the experience so compelling?

For starters, the train’s interior broke any existing schema (or expectation) I had for “what the inside of a NYC subway looks like”. Instead of steely, cool panels, the train was affixed with faux wood “wall paper” reminiscent of some bachelor’s finished basement from the late 70s, pool table & wet bar not included.

In place of slick, high-design ads pressed into the metal picture frames that dot the subway’s interior were color graphs printed on basic white printer paper; graphs that reminded me of the simple bar charts Microsoft Excel spit out circa 1989 . The charts, whose effectiveness was heightened by their simplicity, depicted how much more successful face-to-face meetings are in comparison with video conferencing, email, or phone calls.

At its essence, Hyatt transformed a cold, unfriendly space (the inside of a NYC subway) into a warm, inviting place - the inference being that Hyatt Conference Centers create the type of warm, inviting atmospheres conducive to effective business schmoozing & networking.

Now I’m neither an event planner nor coordinator of large-scale meetings, so I cannot speak to the level of influence "The Hyatt Shuttle” might have on my decision-making for those upcoming conferences.

However, to some degree that’s irrelevant. “The Hyatt Shuttle” compelled me to whip out my blackberry on a crowded train and snap away - much to the annoyance of my fellow commuters. It got me to write this post with blurry crackberry photos attached for the entire world to see (or 0.00022% of the Internet world per my latest Alexa rankings). And perhaps most compelling - Hyatt was able to convert me into an online PR guy who’s apparently willing to work for free. All Hyatt had to do was serve up a unique experience that added a little bit of zest to my otherwise predictable day. Clever, high-ROI strategy… and heck of a marketing communications case study for marketers to sink their teeth into & leverage for their own business.


The Law of the Unexpected
Let’s bubble-up this mini case study and see what useful principles we can derive for you to use in your business… at its core, what made The Hyatt Shuttle so compelling is that it successfully employed the law of the unexpected, which simply states that throw something out there that I don’t expect and you’ll capture my attention... think giraffe in a field of cows, an orange in a bowl of apples, or your waiter at The Four Seasons dressed in a white t-shirt & cut-off jean shorts.


How to apply the law of the unexpected to your marketing communication
Let's get right to what you're no doubt wondering - how to apply the law to your own marcom efforts... (to be continued... coming soon...)


If you’d like to read more about the law of the unexpected and other means for cutting through the clutter, I highly recommend:

• Made to Stick: Why Some Ideas Survive and Others Die

• Metaphorically Selling

read more

Show-Don't-Tell Marketing: enhance your marketing communications by using "picture-words"

"Show, don't tell!"
Yes, that annoying piece of feedback you received from your your 6th grade English teacher in creative writing class is as important for marketers to practice as it is for writers of fiction.

Let’s illustrate the point by looking at the following tag lines:

• "Use Lowenstein’s fertilizer and ensure the health & vitality of your lawn!"
• "Use Lowenstein’s fertilizer – it’ll make your lawn so green, so thick, and so soft you’ll ditch your bed and sleep outside on your grass!"

So how do these two tag lines differ? (Other than the 1 sentence vs. 2 sentence thing)

Unlike tag line 2, you can’t see tag line 1 in your mind’s eye. T1 uses non-visual, conceptual words like "health" and "vitality". T2 goes the visual route. It paints a picture in your head - you sleeping on a plush bed of the greenest grass.

Tag line 2 brings the benefits of Lowenstein’s fertilizer to life. Tag line 1 requires that YOU bring it to life, which requires mental energy – a non-starter for today’s consumers.

An easy tool for improving your sales & marketing copy

Step 1 - Assess
Take your sales copy, email campaign, landing page or what have you, and ask:

• Do the words paint a picture in my mind? How vivid is that picture?
• Does the picture clearly express the core benefit of my product? (Why paint a beautiful picture that doesn’t help sell your product?)

Step 2 - Identify
Identify the conceptual/abstract words in your copy – those words that don't paint clear pictures in your head.

Step 3 - Improve
Take the list of conceptual words you identified in Step 2 and do either of the following:

• Replace these conceptual words with visual counterparts
• Add visual words to your copy that bring your conceptual words to life. For example, if you're using the word "healthy", you can add visual words like "32-inch waistline", "glowing, beautiful skin", "well-sculpted muscles", etc.

In closing... whether your 6th grade English teacher had strong coffee breath, a grating voice, or a curious way of holding his chalk, when he shouted those three little words, “Show, Don’t Tell!” he was speaking the Marketing Gospel. Heed his words. Because if the consumer can't see the benefits he'll receive from your product, the consumer won't buy it. Amen.

read more

Show-Don't-Tell Marketing: enhance your marketing communications by using "picture-words"

"Show, don't tell!"
Yes, that annoying piece of feedback you received from your your 6th grade English teacher in creative writing class is as important for marketers to practice as it is for writers of fiction.

Let’s illustrate the point by looking at the following tag lines:

• "Use Lowenstein’s fertilizer and ensure the health & vitality of your lawn!"
• "Use Lowenstein’s fertilizer – it’ll make your lawn so green, so thick, and so soft you’ll ditch your bed and sleep outside on your grass!"

So how do these two tag lines differ? (Other than the 1 sentence vs. 2 sentence thing)

Unlike tag line 2, you can’t see tag line 1 in your mind’s eye. T1 uses non-visual, conceptual words like "health" and "vitality". T2 goes the visual route. It paints a picture in your head - you sleeping on a plush bed of the greenest grass.

Tag line 2 brings the benefits of Lowenstein’s fertilizer to life. Tag line 1 requires that YOU bring it to life, which requires mental energy – a non-starter for today’s consumers.

An easy tool for improving your sales & marketing copy

Step 1 - Assess
Take your sales copy, email campaign, landing page or what have you, and ask:

• Do the words paint a picture in my mind? How vivid is that picture?
• Does the picture clearly express the core benefit of my product? (Why paint a beautiful picture that doesn’t help sell your product?)

Step 2 - Identify
Identify the conceptual/abstract words in your copy – those words that don't paint clear pictures in your head.

Step 3 - Improve
Take the list of conceptual words you identified in Step 2 and do either of the following:

• Replace these conceptual words with visual counterparts
• Add visual words to your copy that bring your conceptual words to life. For example, if you're using the word "healthy", you can add visual words like "32-inch waistline", "glowing, beautiful skin", "well-sculpted muscles", etc.

In closing... whether your 6th grade English teacher had strong coffee breath, a grating voice, or a curious way of holding his chalk, when he shouted those three little words, “Show, Don’t Tell!” he was speaking the Marketing Gospel. Heed his words. Because if the consumer can't see the benefits he'll receive from your product, the consumer won't buy it. Amen.

read more

Marketing & the 5 W's: a framework for marketing innovation

In my prior post I introduced the wonders of the 5 W's, and how you could benefit from utilizing this foundation of journalism in your efforts to innovate & develop potent marketing strategies. In this post I provide a peak into one of several dozen 5W's frameworks you can use to turbo-charge your marketing efforts.

5 W's Consumer Journey Framework
This framework provides you with a powerful tool for generating a rich inventory of ideas & insights with respect to the customer journey for your product or service.

	WHAT?	WHEN?	WHY?	WHERE?	WHO?	HOW?
Need / demand for product arises
Researching options
Decision-making process
Purchase & payment(s)
Delivery (& installation)
Product usage & maintenance
Product disposal
Repurchase & renewal

(click to download as PDF)


Using the tool couldn't be more straightforward:

1. Create a matrix like the one above, comprised of two dimensions - the 5W's dimension and the consumer journey dimension.

2. Take each customer journey dimension (e.g., demand, search, purchase, etc.) through each of the 5W's, one at a time. Note that some of the Ws will be less relevant to some of the journey dimensions. Within each journey/W box, write as many ideas & thoughts that come to mind.

3. Redo the exercise a few days later and see what additional thoughts pop out of your mind. A little incubation period can reap serious dividends.

4. Now, with your fully blown-out matrix in-front of you, ask yourself the following questions:

• What new channels should I test to increase product awareness, improve product search, selling, & servicing ?
• What additional consumer needs are generated at various points along the consumer journey and how might I meet them?  What complementary products can I offer?
• What new partnerships should I explore to provide greater value to customers at points along the journey?
• What marcom approaches should we test with certain customer segments, within certain contexts, or at different stages along the journey?
• What ways can I improve & influence the search & decision-making process for customers (specific customer segments)?
• What ways can I can improve the {purchase & payment, delivery & installation, usage & maintenance, disposal, repurchase & renewal} experience for customers / specific customer segments?

Use the tool & share your experience
So I'd like to ask each of you to try the tool out on a product or service that you currently sell or manage. After you have run through the tool and the battery of follow-up questions for improving your business, let me know what insights or ideas you were able to generate - I would love to hear about them, and have you share them with the rest of our marketing community.

And of course, please let me know if you have any questions along the way - I am more than happy to answer them.

Have fun, and I'm looking forward to hearing about the innovative ideas & insights you come up with!

-------

Related posts

• Innovation using analogous people, places & things (powerful tool)

• Using the 5W's for your marketing strategy

• Using the 5W's to reduce customer churn

read more

Marketing & the 5 W's: a framework for marketing innovation

In my prior post I introduced the wonders of the 5 W's, and how you could benefit from utilizing this foundation of journalism in your efforts to innovate & develop potent marketing strategies. In this post I provide a peak into one of several dozen 5W's frameworks you can use to turbo-charge your marketing efforts.

5 W's Consumer Journey Framework
This framework provides you with a powerful tool for generating a rich inventory of ideas & insights with respect to the customer journey for your product or service.

	WHAT?	WHEN?	WHY?	WHERE?	WHO?	HOW?
Need / demand for product arises
Researching options
Decision-making process
Purchase & payment(s)
Delivery (& installation)
Product usage & maintenance
Product disposal
Repurchase & renewal

(click to download as PDF)


Using the tool couldn't be more straightforward:

1. Create a matrix like the one above, comprised of two dimensions - the 5W's dimension and the consumer journey dimension.

2. Take each customer journey dimension (e.g., demand, search, purchase, etc.) through each of the 5W's, one at a time. Note that some of the Ws will be less relevant to some of the journey dimensions. Within each journey/W box, write as many ideas & thoughts that come to mind.

3. Redo the exercise a few days later and see what additional thoughts pop out of your mind. A little incubation period can reap serious dividends.

4. Now, with your fully blown-out matrix in-front of you, ask yourself the following questions:

• What new channels should I test to increase product awareness, improve product search, selling, & servicing ?
• What additional consumer needs are generated at various points along the consumer journey and how might I meet them?  What complementary products can I offer?
• What new partnerships should I explore to provide greater value to customers at points along the journey?
• What marcom approaches should we test with certain customer segments, within certain contexts, or at different stages along the journey?
• What ways can I improve & influence the search & decision-making process for customers (specific customer segments)?
• What ways can I can improve the {purchase & payment, delivery & installation, usage & maintenance, disposal, repurchase & renewal} experience for customers / specific customer segments?

Use the tool & share your experience
So I'd like to ask each of you to try the tool out on a product or service that you currently sell or manage. After you have run through the tool and the battery of follow-up questions for improving your business, let me know what insights or ideas you were able to generate - I would love to hear about them, and have you share them with the rest of our marketing community.

And of course, please let me know if you have any questions along the way - I am more than happy to answer them.

Have fun, and I'm looking forward to hearing about the innovative ideas & insights you come up with!

-------

Related posts

• Innovation using analogous people, places & things (powerful tool)

• Using the 5W's for your marketing strategy

• Using the 5W's to reduce customer churn

read more

Use your customer's language so they can HEAR you

"... all I need is some cigarettes, a little food, and my HBO..."

-Anonymous gentleman on downtown #1 train, NYC

Well you certainly have to respect a guy who knows exactly what he wants. I wish I had his level of clarity...

I heard the above quote on the 2 train this morning during my work commute down to the World Financial Center, and it really slammed home a point that Sam Horn makes in her wonderful book, Pop! The key insight is to use your own customer's language in your marketing communications. Rather than playing around with formal-sounding or hip-sounding terminology, listen to the actual words that come out of your customers' mouths.

What do your customers say or think to themselves when they're in a situation in which they would benefit from your product (or service)? What do they say or think when they're enjoying the benefits of your product? What words do they use to describe the product to their friends?

Why pay an expensive copywriter or worse, try to write the copy yourself when you have thousands or millions of customers doing the writing for you already? And remember, perhaps the easiest way to gain access to the language of your customers is via the web - blogs, discussion boards, etc.

If you want your copy to sound real and resonate with your prospects & customers, what better way to accomplish this than to take the words straight from the horses' mouths?

read more

Wilton Stentz, the Yoda of online marketing...

All marketers know how important successful communication is - whether you're trying to build brand awareness, maintain the loyalty of an existing customer base, or influence key decision makers at work.

The Law of Association
While there are several core 'laws' that underlie successful communications, few are as crucial and as powerful as the law of association.

The law of association is based on the solid yet simple notion that in order to communicate effectively with anyone, you need to work with the material that already exists inside of their heads. Al Ries & Jack Trout underscored this premise in their classic book, Positioning: The Battle for Your Mind.

The law of association is particularly powerful when you are introducing something new to people, especially when it is complex, hard to "size up" or hard to visualize. Through using what is already in people's heads, you can instantly communicate in a manner that is both clear & compelling.

Who the heck is Wilton Stentz?
Let's use the title of this article as an example of the law in action. Now you probably don't know who Wilton Stentz is, but you most certainly know our friend, Yoda. Let's imagine that Mr. Stentz is a wise & experienced online marketing consultant who lives in Zurich. Now I could simply say these very words to you and you would be able to comprehend them; whether you would really hear them & remember them is a different matter. But when I look into your mind to identify something that represents wisdom & experience in a rich & visually compelling way, I come up with an association that immediately brings Mr. Stentz's attributes to life. When Wilton is compared to Yoda - in an instant - you "get it".

"It's the Rolls Royce of..."
To touch upon a few additional examples, you've probably heard the law of association used with respect to a a famous luxury automobile brand. Ever had someone tell you, "It's the Rolls Royce of... so-and-so"? Or, how about the brilliant use of the law by baby toy manufacturer, Baby Einstein? What parents don't want their children to become as brilliant as Albert Einstein?

Looking at current events you can see the law of association playing out in the presidential primaries on the Republican side. Just have a look at what Fred Thompson has tried to do, attempting to associate himself with former President Reagan. Perhaps it was a clever idea; however, one requirement that Fred seems to have overlooked is that the law requires there to be real integrity behind the association that is made. There is no substitute for this requirement, nor will there ever be.

The law of association has a rich and varied set of applications within communications, and I look forward to exploring them in future posts.

read more

Marketers and the "us vs. them" illusion

As marketers there seems to exist a cognitive split between our work brains and our non-work brains, which I refer to as the "us vs. them illusion".

Our work brains view customers as "other"; an assemblage of abstract people whom we often glob together in our minds and try to "do things to" in order to influence their behaviors in ways that are beneficial for them as well as for the company. Under this mindset, which I have found to be a pervasive one among marketers, we forget that "we", in many ways are "them".

As a result of our inability to see ourselves in our customers, we often do not ask some of the most basic questions about the products & services that we market. For example, "would I buy my product? If so, why? When? If not, why not? What would have to happen, or how would the product have to be different for me to consider buying it?"

While it's very dangerous to project our answers to such questions onto our customers or prospects, and assume their answers are our answers, it's even more dangerous to not ask these questions at all.

As marketers, we need mechanisms & tools to help us comfortably "walk in our customers shoes", and minimize the cognitive divide that exists between our work brains and our non-work brains.

One such tool that I like to use is what I call the purchase journal. The journal helps me become more conscious and cognizant of why I purchase what I purchase; how I go about making these decisions, even the most subtle ones, such as the purchasing of a cup of coffee at Joe's deli instead of La Petite deli.

With the journal I am able to reflect on all of the nuanced and almost invisible, tiny forces that act on me and pave the way for a myriad of different purchase decisions that I make - the small ones and the big ones. I like to think of the approach as the consumer equivalent of getting in touch with your "inner consumer voice".

So what exactly is the purchase journal?
While I consider the purchase journal one of my many "trade secrets", in brief, it is essentially a log of the purchases you make over a period of time, including--most importantly--the reasons behind your purchase decisions.

As you build your purchase journal, you'll begin to tap into your "inner consumer voice", and in the process become a more mindful consumer. Buddhist analogies aside, as you cultivate this mindfulness, you'll significantly enhance your ability to move closer to "the truth" about how consumer decisions are made with a rich appreciation for the subtleties of many of these decisions.

Ultimately, this process will help you develop the skills for identifying insights about the consumers of your products - the types of insights that lead to more sustainable competitive advantage; the types of deep insights that can only be gleaned by becoming the Indiana Jones of your own consumer mind.

To learn more about the Purchase Journal - what it is and how to use it within your business, please feel free to contact me via email.

Related Posts

• Marketers and the "us vs. them" illusion... take 2
• Marketers and the "us vs. them" illusion... take 3

read more

Focus on Product BENEFITS not features

Features, features, features... whether a product (e.g., a car) or a service (e.g., a vacation resort), it's sure to have plenty of features... bells & whistles... "goods"... "extras"...

I often find my eyes crossing as I read through descriptions of products or services. They often seem to be written for "insiders" - either people who work within the industry (e.g., car engineers, resort business managers) or the "pro-sumer" segment of the market (i.e., those consumers who are near experts when it comes to the product or service).

The challenge I find that many have within a given industry is remembering what it was like before one became an industry insider - i.e., to remember what it was like when one was simply "one of the masses".

When it comes to marketing a product or service, I find that this dynamic is one of the biggest challenges plaguing many who are in the business of marketing their products or services. The old adage of "putting yourself in your customers' shoes" is as necessary today as ever. Perhaps it is even more important given the pace at which new technologies and new products are introduced into the market.

The bottom line is that the more one lives & breathes a given industry, the more & more challenging it becomes to "put oneself in the shoes of one's customers". Industry jargon and features with non-intuitive benefits, begin to bleed into the marketing communications, leaving many consumers dumbfounded & confused.

Valvetronic technology... A 5-link/5-beam rear suspension... Does BMW expect me to know what these engineering terms refer to? I'm an average consumer with limited knowledge of cars. Words such as these make my eyes cross, and my brain hurt. They no doubt mean a lot to the engineers who developed the car; and likely to autophiles as well. But to me these terms resemble some form of early Greek. And I have neither the time nor the desire to learn a new language. My days are busy enough as it is.

So the burning question we are left with is how should BMW talk "Valetronic technology"? Clearly they're excited about it. So what should they say & do?...

read more

CoNtEXT iS KiNg

All good marketing requires a rich understanding of context - environmental and personal.

We are always embedded in a context. The time of day; the weather; the people we are with or not with; our location - at home, at the doctor, in a store, at work; our present goals, objectives and activities; our current emotional states & energy levels... to name only a few dimensions...

When I am standing on a packed subway platform during my Monday morning commute to work, with coffee in my left hand and organizer in my right hand, I'm in an entirely different context than when I'm in upstate New York in the fall, walking through the woods with my lovely wife & our charming French Bulldog.

While I remain "Doug" in both situations, my environment and my state of mind could not be more different. While my values, beliefs & views of the world might remain relatively fixed in both situations, my needs, objectives, mental filters, and basic physiology likely diverge greatly.

In a nutshell, good marketing requires a deep, rich understanding of context. People's needs, objectives & mental filters are dramatically influenced & shaped by their environments. Given this basic tenet, marketers need to align their strategies with the environments in which their target (and existing) customers find themselves.

To give a basic example, if your main customer acquisition channel is direct snail mail, you need to develop your mailer with an understanding of the context/environment in which your mailers are likely to be viewed.

While research can help you identify the most common contexts in which people open up their mail, for the sake of this example let's say assume it's in the evening just after coming home from work. Let's also assume that people look through their mail in one sitting, and thus will view your mailer as part of quickly sifting through a stack of other mail, most of which will be quickly identified as "junk mail". Let's take our premise one step further and assume that the process of sifting through mail is a frustrating one as people try to "separate the wheat from the chaff".

So that's the context you need to keep in mind as you develop your mailer. All of the decisions that you make about the mailer (envelope, copy, design, cadence, pieces, sizes & shapes, colors, etc.) should be made keeping in mind this context, which should heavily influence your decisions.

to be continued...

read more

What is customer segmentation?

Like so many buzz words in business & marketing, "customer segmentation" is one of those terms that is interpreted by folks to mean many different types of things. If the word "segmentation" were blurted out in a room of 20 business people, chances are it would conger up 20 different images.

So what is customer segmentation, and how can it be used to propel one's business?

Segmentation defined
Customer segmentation is a method for grouping customers based upon similarities they share with respect to any dimensions you deem relevant to your business - whether it be customer needs, channel preferences, interest in certain product features, customer profitability, etc.

The key is for you, the marketer, to first decide on what basis you wish to segment your customers (or prospects for that matter). And, the only way to answer this question is to first determine what your objective is for the segmentation, and thus what you want the segmentation to "do for you".

Common segmentation objectives

• Developing new products
  
• Creating differentiated marketing communications & ads
• Developing differentiated customer servicing & retention strategies
• Targeting prospects with the greatest profit potential
• Developing multi-channel distribution strategies

Once you have decided what your objective is for the segmentation, you can answer the question, "what do I want the segmentation to do for me?"


A brief example: segmenting for customer win-backs
Let's say you worked for a subscription-based magazine such as Newsweek. Your boss has asked you to optimize Newsweek's retention strategy utilizing the current save tactic of sending people who have recently canceled their subscriptions (aka "attritors") 1 of 3 "win-back" mailers. This existing save tactic has been employed by Newsweek for the past 2 years, and the method for determining which attritor receives which mailer has been based largely on "intuition" (aka random selection).

Step 1: Your first step in undertaking this project would be to clearly state your objective. Your objective, as per your boss, is to optimize Newsweek's retention strategy for recent attritors. This is shorthand for saying, "I want you to maximize your return on your retention-dollars invested".

Without getting into the nitty gritty of the approach, what you essentially want to do is determine the relative ROIs for each of the 3 mailers at the individual attritor level. For each mailer, you then want to identify those attritors with high ROIs (i.e., those attritors who re-instated their magazine subscriptions after receiving the mailer and provided you with future profits that well-exceeded the cost of the mailer).

Step 2: For each win-back mailer you want to identify those attributes which the high-ROI attritors have in common, essentially creating a profile for "high-ROI attritors" for each mailer.

Step 3: The final step is to operationalize the three profiles you've created so you can use them to determine which of the 3 mailers, if any, to send to future attritors. This essentially entails implementing a process in which new attritors are matched up against the 3 profiles to determine which, if any, best describe them.

A more sophisticated approach would be to build predictive models that would calculate the expected ROI for each mailer for each attritor, and then send out the mailer with the highest expected ROI to the attritor. And, for those attritors in which all 3 mailers have negative expected ROIs you might choose not to send any win-back mailers.

Closing thoughts on segmentation
In closing, segmentation can be tricky and complex, and no doubt requires a great deal of expertise & experience. Putting in place flawed segmentation strategies can be far more detrimental to a business than not having them at all. However, when designed the right way, segmentation strategies can provide tremendous returns relative to one-size-fits-all approaches.

In future posts I will tackle some other types of segmentation strategies, including those involving new product development and portfolio management. As always, feel free to email me with any of your questions, comments or thoughts.

As always, feel free to email me if you have any questions about segmentation and how to most effectively use it within your business.






More posts on segmentation & marketing strategy:

• Segmentation and targeting
• Using the 5Ws for segmentation & marketing innovation
• Using segmentation to develop your marketing strategy
• Marketing Strategy Framework to hang on your wall
  

Great books & articles on segmentation:

• Market Segmentation: How to do it, how to profit from it
  
• Counterintuitive Marketing: Achieving Great Results Using Common Sense
• Managing Customers as Investments: The Strategic Value of Customers in the Long Run
• Making Segmentation Work - (Monitor Group article)
  
  

read more