Segmentation: the key to connecting with your customers

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Traditional marketers know that marketing is, at its very core, about connecting with prospects and customers in a meaningful way -- on the customer's terms. The challenge is for online marketers to make sense of the vast information that traditional offline marketers only dream of. Armed with this information, online marketers can identify their key customer segments and connect and build relationships that benefit not only their organization, but also their visitors and customers.

Segmentation benefits customers
Marketers desire to create one-to-one relationships with each of their customers, and in some ways that's possible, but in many cases, it's impractical. Because online shoppers share many of the same demographics, psychographics and behaviors, online marketers can create meaningful groups or segments of shoppers and online visitors that are significant as well as manageable.

Online customers demand that the products and information they are presented with is relevant. How do you feel when an online store you frequent sends you an e-mail promotion with offers and recommendations for products that have nothing to do with previous purchases you've made or the profile you've shared with them? Nothing drives an online shopper away faster. Knowing who your customers are and what they need is a requirement to compete in today's competitive online world.

Not long ago, I was shopping for light fixtures online. I even put an item or two in my shopping cart, but decided to leave the site before placing the order. When I revisited the site a few days later I was offered a discount on lighting fixtures and I was provided additional information on a new line of lighting fixtures that the store was now carrying. This was an unexpected benefit and made my shopping experience easier.

Online marketers have access to a wealth of data that is constantly pouring into their Web site. Businesses that can successfully measure, segment and digest thousands or millions of customer transactions in a fast and efficient way gain significant advantages. When segmentation is done well, customers will feel more comfortable having a relationship with you.

Marketing segmentation 101
Wikipedia defines market segmentation as "the process in marketing of dividing a market into distinct subsets (segments) that behave in the same way or have similar needs. Because each segment is fairly homogeneous in their needs and attitudes, they are likely to respond similarly to a given marketing strategy. In other words, they are likely to have similar feelings and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way, and promoted in a certain way."

What are the requirements for successful segmentation? It doesn't matter if you want loyal, profitable, or growth-oriented segments, each of your segments should include the following:

  1. Similarities within the segment
  2. Differences between the segments
  3. Segments that are accessible and actionable
  4. Segments that are measurable and identifiable
  5. Segments that are large enough to be profitable

Stated a different way, these five areas can be summarized by the acronym ADAMS:

A -- Accessible: it must be possible to reach it efficiently

D -- Differential: it must respond differently to a different marketing mix

A -- Actionable: you must have a product for this segment

M -- Measurable: size and purchasing power can be measured

S -- Substantial: the segment has to be large and profitable enough

Improved segmentation can lead to significantly improved marketing effectiveness. With the right segmentation, the right lists can be purchased, advertising results can be improved and customer satisfaction can be increased.

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