Why should customer segmentation drive your Strategy

Thank you, Sarah and Karim, for the introduction. I'm super excited to be here today. What a lineup so far.

For those of you who are just tuning in, my name is Tamara Grominsky. I'm the chief strategy officer at Unbounce. 

Today, I'd love to chat with you about how customer segmentation can help align and democratize strategy across an entire organization. Before I start, I'd love to pose a question. Could you name your company's best customer segments? Take a minute to think about it... Now, if you can answer this question, what would happen if I asked 10 of your different co-workers would I get the same answer? Chances are not every one of those 10 co-workers would be able to give the exact same answer. And this is common in businesses of all sizes. What we're seeing is that confusion across teams is not only creating disjointed experiences, but it's also creating friction among stakeholders. Let me give you a couple of examples. Imagine you had a marketing team and they are creating a huge lead gen piece for SMBs. Then we have the partnerships team and they've just signed a new partner in the automotive space and then a product team building a really great innovative feature for realtors. And then finally, the sales team have just signed a huge new deal with an enterprise sales team. Each of these different teams thinks they're doing an amazing job. But what we see is that they're all moving in slightly different directions and this is preventing them from gaining momentum. 

And so really, this lack of segmentation within their customer base is really leading to disjointment. So, perhaps they're building for small businesses, but they're marketing to large businesses or they have a short trial duration period, and the sales team knows that it's actually a long sales cycle. And worst of all, they're solving for a market problem that the customers don't even have. 

And so really, when we think about customer segmentation, it allows you to identify your best customers and then drive alignment and cohesion across different departments. You may be asking yourself, how do I even go about building segmentation? I'm going to walk you through a really easy model that you can use that any team could really do across the organization. 

It's called the MAP model. "M" stands for measure of volume. Here you want to identify different clusters of customers based on shared attributes. Then we have "A" for analyzed performance, and here you want to validate the business performance of each of those different customer clusters that you've identified, then finally "P" for prioritize potential where you will assess your potential to win the market should you choose to focus on those customers. 

Let's start with measuring volume. In order to do this, you really need to compile a data set that will allow you to slice and dice in a bunch of different directions. When compiling your data set, you want to keep it simple. You can truly just merge all of this data in an excel, but you want to make sure you have a bunch of different types of data. So I'd recommend things like geographic data, demographic data, behavioral or psychographic data. You might not have access to everything, and that's OK. Just get all of the data that you do have access to. You can always supplement your data using a tool like Clear bit as well, but it's not required. 

Finally, once you have all of this data in one place, this is when the fun starts and you're really going to start pulling, pivot, slicing and dicing and just trying to see where those patterns and trends emerge. What you're looking for is large clusters of customers that have a similar attribute. So perhaps this is the vertical of the customer, like there are a lot of dentists' or there's a lot of realtors or agencies, or it could be the location. It could be, you know, maybe the state that they're located in or the country they're located in. Either way, you want to start to ask yourself, who do I have a lot of. Now word of warning, though, you don't want to just turn up the volume because your largest group of customers isn't necessarily your best customers. And that's why we need to move on to step two. So before we move on to step two is what to prepare a bit of a segment hypothesis, we are choosing those primary customer clusters that you want to focus on and take interceptive. 

Now you're ready to validate the performance of those handful of clusters and how you validate performance is totally going to depend on your business model and the metrics that matter for you. A few that I do recommend would be conversion rate. So this could just be purchased conversion rate or trial to paid conversion rate, whatever makes sense for you, average revenue per user. Is this cluster of customers more or less likely to spend more money in your business than the average customer then things like churn and survivability. How quickly do you lose this customer or on the flip side, how long do they survive? And then finally, lifetime value, how valuable are they to your business in the long run? 

Once you have assessed this for each of your different clusters of customers, you're going to choose the one to three clusters that have the highest performance. And this is what we're going to take into the third step, which is prioritize potential where we're thinking about whether you can win the market. We want to consider three different factors. The first one is addressable market or just the size of that market. Does the size of that market match your growth ambitions? You don't want to choose a market that isn't large enough to sustain your growth. The second one is customer acquisition. Do you have scalable customer acquisition channels that you can just throw more money at? Or how expensive is it for you to even attract that customer in the first place? You want to make sure that you do have scalable channels and that it's affordable. The third one is competitive landscape. Are your competitors also prioritizing this customer segment? If the answer is yes, it doesn't mean you shouldn't go after the segment. It just means that this may impact some of the decisions that all of the different teams across the company will need to make when building products or going to market for this segment. 

Once you prioritize that potential, you can add all of these three steps together and hopefully end up with those one, two or three primary customer segments that everyone across the organization can focus on. And what this is going to allow you to do is it's going to allow you to all move in one direction. 

And so once you have your defined segments, you want to find a way to start democratizing that decision making that we talked about earlier. And there's really two things that I'd urge you to consider at this point. 

The first one is building lines of communication and, really, a source of truth about who those customer segments are. A great way of doing this is through voice of customer. Voice of customer is really an opportunity for anyone who's on a customer facing team to bring their perspective of what they're hearing from customers. This could be everything from customer support to customer marketing to product UX, product marketing, marketing as well, as anyone who's seeing feedback from customers or talking to customers directly. And what you want to do here is you want to create a bit of a rhythm for this. We meet once a month as Voice of customers and that works really well for us. And so at those meetings, we're bringing those different perspectives. You're saying, hey, I'm hearing really great things about this or I've noticed that this type of customer is providing this feedback a lot. And what you are able to do is you're able to, again, democratize access to that feedback across all of those different teams. But then you're able to action on that feedback together as well, which is incredibly powerful. 

Now, you don't want to just kind of verbally share during these meetings. You also want to centralize where you're storing this customer feedback. This could be as simple as something like an Excel document, or there's actually tools that you could use that capture the voice of the customers as well. Now, capturing feedback is really important, but also being able to action on data is important. And so in order to do that, you want to make sure that you're aligning on one definition of a customer. And this is going to be really helpful because this is what you're going to be able to then work with the data team to do in order to be able to capture this definition in the different reporting tools that you have. 

And really what you're trying to do across all of these different strategies is you're trying to remove that one gatekeeper. So when you don't have customer segmentation, when you don't have that clear view of who the customer is and the feedback that you're getting from the customer, what you usually have is one team that kind of holds all of this information close to themselves. And all of the different teams either need to go to them to get access to this information or what's more likely is what we saw earlier on where everyone kind of skips that trouble and they just choose their own strategy based on who they think the best customer is. 

Now, again, in order to remove that gatekeeper, you also want to create artifacts that are going to be able to guide decisions so that you're not going to have to go to that one person every single time to say, does this make sense for this customer or does this make sense for the customer? What I recommend is something called a segment profile in the segment profile is really that persona, our profile view of each customer segment. And it can include anything that you need to be able to understand that segment. A few important things that I usually include would be the core customer problems with that customer segment, their preferred value props, perhaps even their preferred features for your product. And this is going to allow everyone to have that same view of who that customer segment is. 

And then, of course, you're going to want to democratize access to that key info about those segments. So make sure that it's stored in a really accessible and easy way and then use those Voice of customer discussions to keep those artifacts updated and truly reflecting those customer segments that you have. 

And so you can start to see that instead of all of those teams focusing on slightly different customer segments, when you have these artifacts and these rhythms of business that really keep everyone connected, you're all going to start to focus and obsess about that one customer segment that matters most to your business, and what this is going to do is it's going to drive focus across teams and build momentum that you can't even imagine. And so in this case, you're going to be building for small businesses and marketing to small businesses. You're going to have a short trial duration because you've already proven that there's a short sales cycle for this customer segment and you're going to be solving for a market problem that you've proven your customers absolutely have.

That's it for me. Thank you so much for joining me today. I hope I've given you something to think about when it comes to segmentation and alignment. If you want to chat more about segmentation or strategy, please connect with me on LinkedIn. Back to you Sarah and Karim