Dec 4, 2009

Getting the Right Message to the Right Group

How to Segment Your Customers into Accurate Groups

Although most companies are generally reluctant to disclose these segmentation numbers to outsiders, they are critical for accurate marketing to customers, past and present. However, many companies struggle to produce accurate and dependable customer segmentation numbers. The data may be in different databases, variable record-keeping over the years, acquisitions, divestitures, product life cycles, time, staff turnover, etc. all contribute to the difficulty for producing more granular customer counts.

Your marketing message should be crafted to match the current stage of the customer. These stages will change over time and you should continually adjust the contact's group based on the criteria you establish.

Here's a basic segmentation breakout that all marketing groups should know:

Customers who bought – this is the most frequently quoted external number of customers who ever bought a product/service/solution from the company. A mostly irrelevant number as actionable marketing data.

Customers don't exist – the customer company no longer exists for various reasons.

Identify and flag these records accordingly in your database. Never delete any customer records, just use appropriate status flags.

Customers not using – those customers no longer using the product/service/solution bought from the company. These are ex-customers and should be flagged and counted as such.

Customers currently using – those customers actively using the product/service/solution they bought. Although this may seem like an obvious number to know, it requires a continuing customer contact program to keep track of active customers.

Customers in continuity relationship – these are customers that send you money on a regular basis for license/maintenance/service/support/hosting/etc. It should be straightforward to identify this subset from billing records.

Customers who bought recently – there are two subsets to track in this group;

1. those who recently bought for the first time, and
2. those who recently bought again.

The qualification of "recent" depends on the cost and scope of the product/service/solution – anything from 12-24 months.

Customers who bought multiple times recently – these are customers that have made multiple independent purchases during the "recent" period. Although this group could be a third subset of the previous group of customers who bought recently, the frequency attribute is important and should be of particular interest for marketing.

Customers with unknown status – take all the customers who ever bought and subtract all the other subsets leaving a group of customers with unknown status. For companies that are large, that have diverse products lines, have done or been involved acquisitions, or have been around a long time, this could be a sizable group of customers.

By using this type of segmentation, you will have a far more accurate method of determining who your active customers are. If you use some form of analysis on the trends in these group movements; then you can automate a message to them that will help to maintain the revenue flow of the company.

Several studies indicate that a customer that recently purchased from you is more likely to purchase again within 60 days. By using that information from the "customers who recently bought" group to send another offer inside that 60 day window will most likely generate another sale.

Our experience, with clients that have a large number of "customers not currently using", who have sent a re-activate offer have been able to revive between 10-15% of them into new sales. Think about that for a moment. You had a relationship with them at some point. They trusted you enough spend money with you; but probably have not returned because they have not heard from you. Sometimes, just a gentle reminder is all it takes.

There are also techniques to explore the possibilities of doing business with customers in the other stages. Some are simple, while others take some doing. The primary advantage of “Re-mining” your database is that you already have these contacts! Let us know if you would like to find out more how to re-engage with these customers.

Name: Getting the Right Message to the Right Group
Author:  David Brydson