No two individuals or in this case customers are the same. However, there are certain groups of people/customers that may be very much alike. These customers may fall into the same category based on similar items they bought, how much they spent, the typical amount they purchased and so on.
Why segment customer behavior?
Knowledge is power. And, this can be very well illustrated with respect to customer behavior. Now the more you know about your customer’s behavior the easier and more effective it will be for you to come up with an offer or message that will resonate with your clients and lead to more sales for your business. For instance, if you own a website that sells female clothing, it is possible for you to have a group of customers that identify with “cool” colors. This, you may get to know through their online profile or purchasing history.
However, it is also possible for you to have another group, which on its part identifies with “warm” colors. Okay instead of sending exactly the same email to these two groups recommending accessories that go with different clothing wouldn’t it be wiser sending them two separate mails that identify with their preferences?
Yes, of course it will. In one mail, you will send your message to the “cool” color group featuring your products or clothing in that particular color palette. And, in another email you will send your message to the “warm” color group in colors that resonate with them. Okay in order to achieve successful segmentation with customer behavior, here are six best practices you should take note of below:
Best customer behavior segmentation practices
1. Stay organized
Before embarking on customer behavior segmentation, make sure that you have a plan. In other words, a strategic plan of how you intend to execute segmentation according to customer behavior. Regarding this plan come up with different segments and determine the ones that work or have proven to be most effective over time and run with these only.
2. Be ready to always fine-tune
Change like they say is a constant thing in life. This is no different with customer behavior. Therefore, you should be prepared to effect changes to segmentation whenever such need arises. To illustrate this, a customer may change his/her buying pattern due to a change in lifestyle or due to advance in age, etc. So to ensure that you get the best from your segmentation, do endeavor to monitor and update data.
3. Too many vs. too few
It is necessary to know the particular behaviors of customers, which can be calibrated and fed into the segmentation process. For instance, two key behavioral dimensions that ought to be tracked in order to get a better understanding of retail shoppers’ motivation include visit behavior as well as shopping behavior. But these two dimensions are not enough. You see having too few dimensions will make it hard for you to completely understand your customer, while having too much can cluster your mind. The solution is maintaining a balance between these two extremes.
4. Identify particular customer attributes for measuring
After you have succeeded in narrowing down behavioral dimensions, you should also specify customer attributes, which will measure the concerned behaviors of customers. Such behavior may be customers making more inbound calls than outbound ones.
5. Choosing the appropriate clustering technique
Choose the right clustering technique that will meet the objectives of your segmentation exercise as well as address data constraint challenges like missing values, et al.
6. Action ability
After identifying the different segments, you should endeavor to determine important actions for every segment that will move customers towards the desired behavior.
7. Use segmentation to gain clarity
You can make use of segmentation to get a better understanding of the behaviors your customers have been exhibiting. In this regard, it can help you address some customer behavior issues like: identifying behavioral profiles, knowing what business actions to take regarding different customers that fall into various groups among others.
8. Create an overlay of customer behavior with segments geospatially
Being able to relate customer behavior with the geographical locations of customers can seriously benefit your segmentation efforts. This is because any concentration of particular behaviors within certain ZIP codes or regions can be identified on a map and subsequently researched.
9. Track plus quantify ROI of segment migrations
Segmentation exercise doesn’t end with discovering customer behavior segments. In addition to this, there is a need to keep track of segment migrations as well as the effect behavioral migrations do have on revenue as well as on your company’s bottom-line.
10. Don’t be scared of experimentation
It is possible for your industry to have one or more unique customer behaviors. Don’t be scared of trying these out. You may well be introducing a paradigm shift in the way segmentation is being done. But more importantly be ready to try them out at least once for the sake of understanding your customers better.
Author Bio: Jason Phillips has shared this post. He is a freelance blogger and owns a small business. He has a deep knowledge of customer satisfaction, customer segmentation and customer intelligence in business.