Why Your Segmentation Strategy May Be Causing Poor Customer Experience

Why Your Segmentation Strategy May Be Causing Poor Customer Experience image stock chart2Why Your Segmentation Strategy May Be Causing Poor Customer ExperienceOne of Forrester’s most recent reports, “Competitive Strategy in the Age of the Customer,” found that customer experience leaders had an average of 22.5 percent gain in stock performance over the past five years. Last month, I discussed how Netflix has outperformed the S&P 500 by tenfold, largely by focusing on customer experience.

This month, I want to talk about how to create these positive customer experiences through segmentation. The simple truth is that the Internet has raised demands on companies and flattened the playing field. For companies to truly connect with customers, it’s necessary to deliver a personalized and relevant experience. Many marketers know this, but the process of overhauling and consolidating systems and data can seem like too big a leap. In the meantime, though, standard customer segmentation strategies may actually be a leading cause of poor customer experiences.

The key is to at least start thinking about segmentation differently. By segmenting customers in more granular and behavior-centric ways instead of depending on number-driven, brand-centric segmentation, brands can use existing systems and data sets to building more personalized customer experiences.

Segmenting by Behaviors, Not Statistics

Most businesses can offer reams of customer data in the context of some business value metric: Type of product bought; Cost of products; Time spent with items in shopping cart, average revenue per user, etc. But just because two people bought the same product or deliver the same value to the business doesn’t mean the same marketing messages will resonate equally well with them both.

Impersonal, brand-first segmentations can lead to inaccurate marketing messages and can even be enough to cause churn. One study shows that if consumers aren’t pleased with their experience, most (86 percent) will never do business with that brand again. Imagine if, instead of a mass email advertising a sale or upgrade, a software customer instead received an email offering advice on how to more effectively use the software for the specific function for which the customer was already using the product. That’s a customer experience and certain to drive better engagement than untargeted, mass blasts.

A successful method I’ve used to create more personal customer experiences is segmenting audiences by unusual angles. For example, rather than focusing on value and product ownership, businesses should segment by demographics and behaviors, monitoring things such as product use and segmenting based on those trends. This type of segmentation can lead to innovation and opportunity, as well as improved customer experience. In fact, working with a customer recently we identified a pattern of behavior with a group of customers and actually created an entirely new service offering to fill the gap left in the product line to meet that behavior trend.

As companies try to view problems from a 50,000-foot view, the core of every customer experience – the one-to-one relationship with the business – tends to get lost in the clouds. Behavior-based segmentation can provide the fuel needed for truly personalized marketing, moving companies closer to a segment-of-one that truly identifies customer needs. You won’t just have the hard facts like geography and demographics, you’ll have the emotional factors gleaned from use cases and goals – and those are ultimately more important for customer loyalty.

Want to learn more about customer experience? Read my other posts here.

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