Segmentation is the Best Friend of Small Business
Updated: Feb 25
Segmentation allows small business to compete in the marketing arena…
121 marketing is the dream of all businesses and whilst even the big brands cannot realistically achieve this, with the tools and data now available, they can get closer than ever before. But do you know the secret to how they do it?
It’s not massive marketing budgets, it’s not expensive software or even working with big-ticket agencies.
The answer is segmentation.
Segmentation in a marketing sense dates back to the 1920s, as the market size increased and businesses started to differentiate products to sell to different groups of the population. In the last 30 years, its become a lot more sophisticated due to the data the internet has given us and the systems available to access and maximise that data.
But again, this isn’t a great secret that small businesses cannot hope to achieve. In fact, segmentation and the use of data are the great levellers in modern marketing.
As a small business, you can utilise segmentation in two key ways — Understanding your customers’ lifecycle through segmentation and then segmenting down those lifecycle stages so you can create campaigns that deliver the right messages to the right people at the right time.
Let’s look at some examples of these segments, the data they utilise and the campaigns you can deliver.
Segmenting the Customer Lifecycle
This is the absolute bedrock of a segmentation strategy and will improve your marketing tenfold. Everyone has a different flavour on lifecycle stages but they all come back to a similar theme.
Prospect; Customer; Advocate; Lapsed; Lost
Prospects are leads, potential customers, maybe signed up to a newsletter but have not made that first purchase, they might just be site visitors that you have not yet engaged fully.
Customers are exactly that, someone that has taken the key action. Remembering that for some businesses this might be downloading an article, it isn’t always about a purchase.
Advocate, otherwise known as a VIP to big brands, but advocate is a much better term when it comes to small businesses because it is advocates that tell the rest of the internet about you and grow your business. Identifying them and treating them differently is critically important to any campaign. This is all about segmenting your repeat customers, those that buy as frequently as is sensible to expect for the product you are selling. For example, if you sell bread, then you can expect an advocate to buy weekly, so anything that is at least weekly or better would be classed as an advocate.
Lapsed customers MUST have purchased at least once previously and have not purchased in what’s a sensible period to have expected them to purchase, for example, with our bread business above, it’s reasonable to say if they have not purchased in over a month, they are likely to have lapsed and will need a targeted message to get them back.
Lost customers have moved past the point of being classed as lapsed and moved to the stage where it’s reasonable to assume they have made the decision not to purchase from you again. With a lapsed customer, reminding them of your product/service can help return them to your site, but when they are lost, you will only succeed in annoying them and lead to them complaining, junking your emails or maybe even moaning about you online, the exact opposite of the advocate. It takes a lot to put someone into this segment, but it is important to be aware of them.
One thing to not confuse is the difference between the lifecycle and the level of engagement you have with the individual. As I’ll explain next, it is possible to be engaged with a brand but not buying anything. It’s also possible to be disengaged with all marketing but still be an advocate.
The simplest form of segmentation, where most small businesses start with segmentation is using types of demographic data that can enable you to tailor your campaigns and messaging towards the individual. Certainly, before the advancement of behavioural data, it was the best way to get close to 121 marketing.
Gender — Not quite the same level of use as in the early days of direct mail, but clearly men and women look at different products and thus campaigns can be targeted accordingly. It’s key nowadays not to assume too much with gender and market in a stereotypical fashion, for example using pink colours for woman
Age — The most common form of segmentation, due to the ease of data collection (Date of Birth) and how useful an age range is. Over time people’s buying habits and needs change, so understanding the age group they fall into really does inform your messaging
Income — knowing the buying power of your audience can help you change the nature of a campaign or in fact if you target people with some specific products
Family — information like if they have kids are great ways of changing a message or selecting product ranges to highlight
The best modern example of segmentation that refines and gets you closer to 121 marketing is the use of behavioural data. The bigger your business, the more complex this can get and over the years I’ve built some pretty complex and successful segmentation plans this way, BUT the majority of success comes from absolute basics that businesses of all sizes can exploit. Let me explain some of the simpler forms of behavioural data
Pages/categories viewed — pretty simple but powerful stuff. If you know what someone has been viewing on the site, then you really can use that data to personalise your campaign
Sales funnel stage — The most powerful modern campaign is basket abandonment, but in fact, understanding where people get to throughout the buying process is great to target them and try and drive them back to the site
Campaign engagement — understand if they have interacted with a Facebook ad, if they have opened or clicked on an email. These are simple but powerful examples of campaign engagement and tell you a lot about how engaged a user is with your brand and its marketing
Preference data — A bit of a catch-all for things like preference centres and microsites, when you ask for information about a user, normally under the banner of wanting to make the email you send more meaningful. You will traditionally have a smaller set of data but it can be incredibly powerful
There are other sets of data that deliver different segments but for the small business, if you can master just the examples above, you’ll transform your marketing success, as the following campaigns prove.
Utilising These Segments in Campaigns
All these segments are meaningless if we don’t use them and the most powerful use for any business, especially small businesses, is using them in campaigns.
With just those few segments we’ve mentioned above, we have hundreds of potential campaigns. Let me highlight a few of the simpler ones that any small business could make great use of.
Basket abandonment — The classic campaign driven by behavioural segments, where you identify all people that added to a basket but didn’t complete a purchase. It’s possible to further refine the campaign by looking at the pages seen before adding to the basket, plus understanding if they are an existing customer
Lapsed campaign — Taking the segment of customers that have lapsed and then using the information you have on previous browsing behaviour or product preferences to tailor the campaign towards encouraging them back
Product interest — A programme often aimed at subscribers that have looked at a product but not gone through the buying funnel
Welcome programme — This style of campaign is normally reserved for post purchase or maybe after a sign-up. Whilst the customers’ lifecycle stage is well known by their action, the campaign can be further refined by understanding what they have viewed or potentially, in the case of the subscriber, some preference data obtained when they signed up
The above should give you a flavour for the importance of segmentation. If you want to understand more or need help understanding your segments and how to use them, please do sign up for one of our courses, designed to give small businesses the secrets and techniques that the big brands use, but without the costs.