Segmentation and Customer Lifetime Value
Posted by Kim Vaughan
It may feel impolite to not answer in the affirmative when asked if all customers have the same value, but let me ask you this:
Do all merchants or service providers have the same value to a customer?
I think not!
Companies that lack a customer segmentation strategy aren’t maximizing their customer lifetime value. Using a one-size-fits-all approach is not only like pouring money down the drain, but it also sours the customer experience.
Take this example: A customer who is only interested in buying a costume from you at Halloween is most likely going to unsubscribe to your email list if you send them continuous promotional emails. Instead of remembering you as a great “go-to” source for your random costume needs, customers will be left with a “bad taste in their mouth” with negative memories of you as that nagging company that wouldn’t leave them alone. And even more disappointing: a customer turned off by your unwanted persistence may decide to permanently opt out of giving you any future business to avoid the hassle of you hounding them.
So, what’s the solution?
SEGMENTATION!
To segment your consumers, you must have data. Use customer segmentation to distinguish a highly profitable customer with potential for future business from a highly unprofitable buyer with restricted potential. Also use customer analysis to understand how a customer values your various product/service offerings.
This classification is the beginning step of defining your customer buying behavior up-sell and cross-sell strategies and objectives. The goal is to identify potential customer value and try to maximize that potential.
Defining customer value drives your communication and offer strategies…no longer are you shooting in the dark, but your customer segmentation now identifies who, what, and how to communicate.
And being able to offer incentives based on the value of a customer makes marketing ever-so-sweet. Borrow a few dollars you’ll save on your lower-end, less fancy promotions and use those toward knocking the socks off your crème’de la crème and enjoy seeing your marketing efficiencies soar.
Often companies offer big incentives to acquire a customer but don’t give much thought to loyalty. Companies that don’t tap into that upsell potential may be neglecting the bread and butter of their market.
Understanding how much a customer is worth directs your focus, providing efficiency in spend, and enabling you to deliver the best buying experience possible. Consistently satisfied customers become loyal customers. Loyal customers can turn into advocates, an even greater influencer on your target than your company itself could ever be.
How important is segmentation to your current marketing strategy?
