How do you segment your database?

By asking “who” and “what” to segment? 
By demographic and firmographic metrics such as gender, geography, company size or industry vertical?

What demographic segmentation does is, it answers the question of 'WHO your customers are'. It however falls short in answering core questions of 'WHY customers are buying' and 'WHAT problem is the product or service looking to solve'?

While it may be easy to identify observable and actionable segments based on who your customer are, it lacks in recognizing new and profitable groups that cut across demographics such as those that revolve around needs and behavioral patterns of customers.

Alternatively, focusing on 'WHY customers buy' will help in identifying new segments based on motivational attributes and distinguish demand driving pockets that could be targeted.
Some of the metrics that could be utilized in motivational segmentation include:
  • Adoption Stage – Is based on the stage in which your customers are in the adoption cycle - their psychographic patterns and different needs.  
  • Value Driven – Is based on different objectives and distinct problems your solution solves. 
  • Price Driven – Is segmentation that includes a highly classified group of customers who are willing to pay premium prices to access a solution.
  • Event Triggered – Are segments based on events that influence your customer’s business such as recent mergers, new product launches or compliance mandates.
Conceptualizing creative names for segments can be a lot of fun. They can however be of very little use if not exclusive! Segments need to be developed based on unique variables used to target them.

While some marketers segment based on rules and assumptions through their experience, others use sophisticated mathematical and clustering models to define data sets into segments. However, what seems to be unaddressed is the question of ‘how and when do customers migrate from one segment to another?’

In the lifetime of a customer, it is necessary to keep segments dynamic to allow for regrouping based on migration over time. The topic of Customer Lifetime Value and LTV based segmentation will be discussed in future. Stay tuned to this space. Here’s to a successful dynamic segmentation! From us at Info CheckPoint

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