Customer Segmentation: 5 Steps to Increase your Sales
One of the basic principles of marketing is that if you’re marketing to everyone, you’re marketing to no one. It’s pretty straightforward, actually. There are seven billion people in the world, and there is no chance that every single one is interested in what you’re selling.
The same can be said for your own customers. Let’s assume that you have thousands of customers who are happy with the goods or services you sell. They all have their own characteristics and personalizing your approach to attract a specific customer is a sure-fire way to get their heart and credit card.
However, we can’t adjust sales and marketing to every single customer. So, we can do the next best thing – use customer segmentation. Let’s find out how you can do just that.
What is customer segmentation?
Customer segmentation is the process of grouping your customers according to different characteristics – age, location, activities, previous purchases, etc. It allows you to break down your entire target audience into smaller, more manageable groups of people that you can sell and market to.
For example, you could segment your customers into those who made a purchase before and those who are first-time buyers. You may also segment them into those that came from content marketing vs. paid acquisition channels. The options are endless, which is why you need to approach customer segmentation seriously, as it can provide a massive return on investment if done correctly.
Step 1: Track your customer data
There is no way to segment your customers if you don’t know anything about them. The first step is to get some data about your customers that goes beyond their name. Once someone purchases from you, ask for additional information to improve their shopping experience. Since you’re already shipping to them, you’ll know the name and address, but you can also ask for:
- Reasons for purchasing (i.e. why they chose you and not a competitor)
- Company size
Depending on what you sell and whom you’ll sell it to, you’ll want to collect and track different customer data.
Since this data is no good if it cannot be sorted and stored properly, it’s a great idea to invest in a CRM application to keep it all in one place. This will make segmentation easier at a later point. Moreover, it will make it easier to create personalized marketing messages too.
It’s worth noting that collecting customers’ information before they purchase (e.g. when they sign up for your mailing list) is not such a good practice. These are potential customers so their information doesn’t have as much value as that of people who already purchased. Moreover, they are not likely to leave more than their email address.
Step 2: Create buyer personas
You now have a wealth of data thanks to the fact that you collected it and stored it in your CRM. However, it means very little on its own. You have all the data but no way to categorize it, so it’s time to take the next step. For true segmentation, you need to create buyer personas.
In short, a buyer persona is a specific type of customer that buys from you, with all of their traits. For example, one buyer persona for our product, Better Proposals, is a freelancer offering services in the B2B sector. They’re aged 20-40, male or female, and they typically buy our cheapest plan and send 4-5 proposals per month.
You don’t need to have countless buyer personas, but the more you can single out, the better. This will make it much easier to send targeted marketing messages to those personas specifically. Plus, you can do it without having to create content for each individual customer.
Some information to include in your buyer persona includes:
- Spending history
- Business size and type
- The main problem they’re trying to solve with your product/service
Buyer personas are a great way to see how well you know your customers. The more specific they are, the more valuable they are for your marketing and sales.
Step 3: Get to emailing
Year on year, email is one of the most powerful marketing channels out there. In terms of return on investment, there are very few tactics out there that compare to email marketing. Getting your customers’ email addresses is one of the best ways to secure additional sales and income, no matter what their buyer persona is and what they previously bought from you.
You’ve previously done two things: you added all of your data to a CRM and you created buyer personas. Based on these buyer personas, you now have segments of your total email list. Instead of blasting one and the same email to everyone, you now send highly targeted emails to segments of your lists, i.e. buyer personas.
Let’s take an example. We previously mentioned freelancers as a part of our target audience. They’re pretty volatile as customers, meaning that they can churn pretty easily. They’re also concerned about price because every cent matters for their budgets.
Every Christmas, we’d send all of our freelancer customers two different types of emails. If they used to be a customer but they are no longer one, we offer them to come back with a discount. That way, they get to use our product again at a discounted price if they buy a plan for a year ahead. Cheaper for them, more value for the business.
If they are already a customer on the cheapest, entry plan, we’ll send them an email to upgrade to a higher-tier plan that gives them more features. In our case, they get to send more proposals, which brings more value to their business. If they upgrade during the promo period for a year or more, they get a sizeable discount.
Using these two examples, you can see that the value of email marketing is in segmenting your list and sending the right offer at the right time. If we were to send the same emails to customers on the enterprise plans or to someone who is on the free trial, the results would not be as impressive as this.
And last but not least, don’t give up on one email. We receive hundreds of emails per day and sometimes a drip campaign of a few reminder emails is necessary to get those conversions going.
Step 4: Launch social media ad campaigns
Remember those emails you collected? This is another place where they come in super handy. Once you have an email list (ideally, segmented according to different criteria), you can upload it to Facebook to create highly targeted ads.
Once you import your email list from your CRM (or email marketing software), you’ll be able to target that exact audience on Facebook. You can show them video or image ads and capture their attention in countless ways compared to emails, where you mostly have to rely on the power of the subject line to lure the email recipient to open. With Facebook ads, you have a powerful tool at your disposal.
What’s more, you can get a bigger audience using the one you already have. Upload your emails to Facebook to create a lookalike audience based on the characteristics of the people you already have on your list. It’s not always a 100% match, but it’s much easier than setting up targeting on your own in the Facebook ad manager.
Step 5: Upsell and cross-sell
Did you know that it’s almost 5x more expensive to acquire a new customer than it is to sell to a new one? If you think that segmentation works well for new customers, it’s even better for those who are already paying you.
Since you already know what your customers bought and what they could be interested in, you’re in the perfect position to offer them more of that or something that should be the perfect addition to their existing purchase.
For example, we have a customer that’s been with us for months. They’re a great candidate for offering an annual plan, discounted of course. We already covered this approach above, but it’s a super easy way to get more value from someone who’s already there.
For example, if you sell cameras, it’s a pretty good idea to cross-sell. You can offer your existing customers lenses and tripods and more camera gear. You can easily get these customers to buy an additional product based on the data you already have on them.
The same logic can be applied, no matter what you sell – goods or services. If you sell blog articles, you can upsell your client and ask them if they’re interested in ebooks or social media copy.
The key is knowing what to offer and whom to offer it to. The only way to be able to do that is to previously have segmented lists of customers. You can then base the upsell and cross-sell offers on the data you have available.
Conclusion: customer segmentation is worth your time
Customer segmentation may seem like it’s complicated and not worth your time. In reality, it can be one of the most useful things that you can do for your marketing and sales and overall revenue. The earlier you start segmenting your customers, the better for your business.
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