Benefits of Customer Segmentation Part 3: Segmentation Examples & Your CRM

Mar 14, 2018 | General

Benefits of Customer Segmentation Part 3: Segmentation Examples & Your CRM

In our first two articles on segmentation we dove into the need for segmentation and its definition then we focused on the value of setting your business goals for segmentation as the first step in the process.In Part 3 we’ll get deeper into the benefits you can expect from effective segmentation and tying this back to your CRM.

Benefits of Segmentation

Segmentation is a requirement for success in business today. Can a company devise a market strategy without segmentation? No. How does a company know which customers to retain? Segmentationanalysis provides the answer. What are the best products to develop to grow your business? Without segmentation, companies don’t know what to sell and to whom to sell it.

We see segmentation everywhere. Visit a web site searching for a product and you will be continuously stalked for days online for that same product. Annoying, intrusive… maybe… but the reality is that offering customers options for products they are currently looking to purchase makes sense and turns into valuable sales. In fact, segmented marketing campaigns can generate an average of 760% increase in revenue.

Let’s examine the five main benefits of segmentation:

  • Providing focus for your company: When your business goals lead to a segmentation strategy, there is a natural focus within a company on its direction. A stronger focus leads to a better company. Segmentation is by definition exclusionary. In most companies, resources are scarce so efforts will be directed to where the greatest return will be realized.
  • Increase in competitiveness: A deep focus on goal-driven segmentation will lead to competitive gains:
    • More successful development of services, products and marketing messages that meet specific requirements of various segments. This leads to improved customer acquisition and retention.
    • Improved ability to optimally set prices that balance profitability and demand by segment.
    • Targeted marketing resources on the segments with the most promise.
  • Market expansion: Segmentation’s role in expansion is critical. You cannot expect to expand your product or services without knowing precisely who your target customers will be. Types of market expansion include:
    • Geographic Expansion: If your goal is to grow geographically, once you are successful in a particular territory, you can use your data to facilitate expanding into a nearby territory.
    • Product Expansion: Your success in selling specific products to specific customers, will allow you to expand your sales. Strategies that will help you sell more to existing and new clients include updating current products, develop extensions for existing products and introduce new complementary products.
    • Industry Expansion: Products and services successful in one industry have the potential to be expanded to other industries.
    • Size Expansion: Success serving a given business size can lead to growth into a different size market. Larger companies are enticing for the potential of significantly more sales. While smaller companies have potential because there are many more of them to target.
  • More Meaningful Interactions: Effective segmentation enables targeted communications. Once you identify a given segment, communication strategies will evolve as you develop your value proposition. These positioning strategies will result in messages that are tailored and relevant to your target customer: The right content at the right time, to the right person!
  • Increased profitability: Segmentation leads to improved company focus, better decision making, increased competitiveness, market expansion, improved communication with your target audience and reduced costs. All of which will inevitably lead to increased profitability.

Segmentation & Your CRM

Let’s explore how you would use segmentation and your CRM in sales and marketing. Your CRM should be the hub for implementing your segmentation objectives. A well-designed and maintained CRM, that has been built using your business goals as the centerpiece, may be the most valuable asset in your business. What could be more valuable than the encyclopedia of information about your customers?

While you have a wealth of customer information in your CRM, it may not be enough. You can also consider using outside sources to add certain demographic, behavioral, even psychographic data for the customers already in your database. This can add dimension to your segmentation and bring out common customer characteristics of which you were unaware. Once you have combined internal and external data sources to determine your initial customer segmentation, review the patterns and trends that are now available for analysis.

Next, consider creating a scoring algorithm to identify target customers and prime prospects. This process can be used to identify those in your prospect pool who look the most “like” your best customers. It can also be used to identify those who are most likely to buy again, or who may be ready for a product or service related to an earlier purchase.

Now that you’ve identified these hot prospects and the characteristics they share, you can use that information to personalize your marketing approach. This one example of a customer-centric marketing that AspenTech CRM excels at implementing, and we’ve seen it generate huge returns for our clients. Increased engagement equals increased sales!

Going beyond sales and marketing, you can use segmentation data to determine key performance indicators such as lifetime value and to analyze customer shifts and identify new products, services, and customer segments.

The benefits of customer segmentation are endless, but it can be a complicated process to implement. Don’t fall victim to the adage “the perfect is the enemy of the good.” Beginning with some basic segmentation is a starting point for improving your business. AspenTech CRM is ready to bring this valuable sales, marketing, and management tool to your business, just give us a call at (866) 880-4228 and let’s get started.

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Related Articles:Benefits of Customer Segmentation Part 1: Segmentation DefinedBenefits of Customer Segmentation Part 2: Business Goals & SegmentationCRM Insights Part 4: Artificial Intelligence