The Ten Things Customer Segmentation Should Help You Do Better
by Glen Drummond
Recently we had a chance to discuss customer segmentation with a B2B marketer with a recurring revenue stream. The approach we proposed was “experiential” segmentation. Whereas most B2B marketing segmentation is organized around categorical differences like company size, spend, or industry vertical, experiential segmentation wraps those factors around a core of attitudinal differences.
Here is the list of capabilities B2B brands can radically improve by adopting the experiential segmentation approach.
1. Persuade using stories instead of arguments.
How? By systematically organizing marketing communications around insights into the relationship of customer motivations to the solutions and experiences offered across our industry.
Why is this important? Story-telling activates the connection between a brand’s offering and the identity-related motives that cause people to act. Factual arguments have their role, but research by CEB (now Gartner) shows that B2B buyers are more powerfully motivated to action when identity-value is activated.
2. Reduce reliance on direct mail to drive customer acquisition.
How? By enabling a digital content-marketing strategy that more efficiently attracts and converts inbound traffic through persona-based personalization.
Why is this important? In the short-term, tactics with high customer acquisition costs can be justified based on lifetime-customer-value, but there’s a catch: LTV embeds an assumption about the future rate of customer churn. If churn goes up in the future, the organization will find itself addicted to costly tactics with declining marginal utility. A strong inbound content ecosystem defends against this kind of deterioration.
3. Predict and pre-empt churn in response to disruptive technology.
How? By overlaying churn-model classification with persona insights to understand not just who will churn in response to technology disruption, but also why.
Why is this important? Disruptive technology does show up from time to time. Faced with this situation, and no organized theory about the actual motivations of the people churning out, the response quickly devolves into discounting that harms margins and offers little assurance that you’ve done anything more than delayed the inevitable.
4. Reduce the reliance on aggressive pricing as a lever for influencing buyer behavior.
How? By activating insight into buyer motivations as an alternative to price as a behavioral trigger. (See 1, 2 & 3 above.)
Why is this important? Studies of B2B buying by CEB/Gartner show that price is not typically the most important factor in buyer loyalty. Treating price as the key behavioral lever commodifies your value proposition and leaves money on the table.
5. Elevate solution-selling ability of business development reps.
How? By providing inside-sales with (a) easy-to-grasp persona-based sales enablement tools and (b) visibility into the persona profile attributed to customers and prospects they are interacting with.
Why is this important? Customers expect sales-people to treat them with a certain amount of empathy. Equipping BDRs with personas that speak to customer attitudes helps them do so, despite the pressures of the inside-sales environment, including, in many cases, a short period of time on the job.
6. Increase customer “share of wallet.”
How? By examining the cohort of customers represented by each persona from the standpoint of the trade-offs they experience, and attenuating that experience of trade-offs through thoughtful cross-selling, and by evolving the solution portfolio through new products and partnerships according to a persona-based gap analysis.
Why is that important? If your competitors are accessing a similar value-chain of component providers, business will migrate to the marketer who can integrate those components in ways that make the most sense to the customer.
7. Shift from product-centric to customer-centric offers and experiences.
How? By attaching a persona tag to each customer file, and by using the personas as a core resource in the creative briefs for content and experiences in all channels.
Why is that important? If you have attitudinal insight to drive personalization, you have a choice between leading with or leading to your products and solutions.
8. Migrate marketing spend from paid to owned media channels.
How? Narrow the job of paid media from “selling offers” to the more modest goal of directing traffic towards owned channels where the persona-based design can guide personalized buying experiences.
Why is that important? B2B marketing sometimes demands content richness (currency, depth, personalization) that is at odds with the constraints of paid media.
9. Guide new product/ introduction.
How? By acting as a framework for problem-finding, product screening, market sizing, user-experience design, pre-launch research respondent profiling, and market launch targeting.
Why is that important? Breaking down the silos between product development and marketing can improve the success of both.
10. Build a stronger brand.
How? By taking a systematic step in the corporation’s capacity to treat customers empathetically.
Why is that important? When customers feel that they are seen, heard, understood, and appreciated they are more likely to appreciate (and recommend) the brand in return.
Consider the ten capabilities listed above. They are the core disciplines of marketing in a experience-driven, customer-led, digitally-powered, and fast-moving world. If you’re good at them all now, then your segmentation is serving you well. But if you’re not, then it might be time to ask if outdated theories, hiding in your segmentation model, are the root cause that’s holding you back.
As Peter Drucker pointed out in The Theory of the Business — segmentation is core to the business model and the business model is an integrated framework of assumptions. A segmentation reset can be transformative because it offers a chance for the organization to pause, examine and update its deep assumptions. Those that seize this opportunity stand to gain an impressive jump in capabilities. Those that don’t will likely settle for a solution that rests on industrial-age beliefs and reinforces industrial-era actions.
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