Definition of Customer Segmentation
Q: I hear a lot about customer segmentation. Can you please let me know what the term means and what it means to me as a direct marketer?
A: Ah, one of our favorite topics! Segmentation simply refers to the practice of isolating different groups of customer groups within your total customer list. Once the distinct customer segments are identified, you then have the ability to market to those groups with the message/offer/tone that best resonates with the niche group. Done right, this practice will increase response and boost overall results.
We all perform segmentation intuitively in our day-to-day lives. Imagine the conversations you have with your grandmother and think about how they very different in tone, context, topic, etc. than those you have with your friends. Well, segmentation works on the same premise. Customizing your conversation increases the effectiveness of your communication.
If you have segmented your customer group and separated your overall customers into distinct niches, you now have the opportunity to develop offer and pricing strategies for each group. You can vary your creative (i.e.: use photos or language that resonate with the segment). If done well, you should see increased performance. Remember to always use a control group to test the effectiveness of your segmentation and the new treatment (offer, price, creative).