CRM Segmentation Strategy
You know this Business Truth:
How do we maximize customer retention? This has a lot to do with CRM (a loaded buzzword which has a multitude of definitions).
CRM is the strategy and infrastructure that enables your organization to learn about customer needs and behaviors in order to develop stronger relationships with them and increase customer value.
t’s more than managing customers and behaviors but it’s about the potential to change customer relationships with a company. It’s also more than a stand-alone project but a business philosophy:
- Understanding customer needs, aspirations, obstacles, barriers and gains
- Understanding which customers to keep and which customers to lose
- Decreasing customer churn
- Increasing the likelihood of ‘right response’ by a given customer segment
- Attract customers — both old and new — through more personalized communications
From operational efficiency pov CRM automates many of the business processes from marketing functions to sales and customer services. It’s not the same as ‘Business Intelligence’ as it’s not just about providing valuable information but taking actions to propel the business forward. (Note: CRM as a software application is not the focus of this article).
You know this Business Truth as well: Not all customers are alike — different customers have different needs
Grouping customer with different needs into subgroups of customers with similar needs and preferences — is essentially segmentation.
By segmenting we can understand:
- How differently these customers engage with the business?
- In turn, how the business can appropriately interact with different segments to positively influence the bottom-line?
- Which segments are driving the business?
Creating customer segments is a self-revelatory process via effective data mining. It’s important to ensure that segments are substantial, contactable, differentiable and actionable.
Customers who already fall into these segments are ‘existing segments’ and customers who have the high probability to become top segments are ‘potential segments’. Each of the above segments is valuable in maximizing customer value — as each has different needs that we can address distinctly.
Knowing your customer segments is valuable — but what you do with it is more important.
Improved targeting is great — but it needs the right creative messaging. It’s the creative that is addressing the needs of the segment — and of course we need the Lebron James of marketing, A/B testing, to further learn about these segments and how they interact with your business — and evolve the messaging for each segment with each successive insight from testing.
This is particularly true when you want to change the destiny of a customer segment — i.e. migrate an existing ‘Medium-Profitable’ customer also identified as a ‘likely-high-potential-customer’ to an actual ‘High-Profitable-Customer’ — or migrate browsers identified as ‘likely-buyers’ to actual buyers. Partnering with your creative team to come up with effective campaigns (beyond generic creative copies) will be key in taking the bread home.
The above is the status-quo (tip of the iceberg described above) — the stuff that everyone’s doing (though incremental improvements are a continuous process ), it’s great — it gets your business incremental dollars — we all get it — but is it the future?
Segmentation | Next Generation 2.0
“Why are some products far more successful than others?
If we can’t use marketing and lowest price — what else could fuel the success of the products?
Does the best product win?
Desirability is both we want-but-don’t have and we have-and-want-to-keep/replace.
Does quality drive desirability?
Who defines quality?
Objective measurement of craftsmanship and material?
Is it speed or durability?
Beauty? Strength? User-friendliness? How does definition of quality shift depending on product type or market demographics?
Even if quality is defined in an objective way — if we really like something we’re willing to accept flaws.
Quality can drive desirability. Desirability can drive perceived quality — it changes our perceptions of problems, if we love something we re-interpret them as not problems.
If ‘highest quality’ isn’t our answer and the goal is desirability what makes that happen?
Assuming we can ‘t out-spend, out-friend or out-trend the competition — — what’s left?
Sustained best-seller brands are recommended literally — Word of Mouth — only honest, non-incentivized comments.
92% say they trust recommendations from friends and family above all other forms of advertising.
70% say they trust online consumer reviews, the second most trusted recommendation above all other forms of advertising. 
Can you get data on users/customers who are recommending your business?
Can you then rank each recommending customer/user via algorithm based on custom thresholds forengagement (frequency & recency of social posts/tweets/tags about your brand), people reached(amplification rate), love received (# of likes, favorites, retweets, comments etc to the post made about your brand) and so on?
Can we organically (in a non-incentivized way) influence more of this behavior from existing recommenders as well non-recommenders?
Investments have been made by Coca Cola, Adobe and Phillips for creating more influence in similar regards. There are many vendors available that’ll get you the data you’re looking for — your analytics team will do their great magic and intelligently power your CRM with recommender data — now how can we effectively use this data to eat the cake?
Movie ‘Straight Outta Compton’ had this as their movie poster :
They initiated a slick campaign where any user can create their customer ‘Straight Outta ___’ campaign
and the world responded — this is a perfect example of how the campaign is organically prompting a response from users and hence, building the anticipation and awareness of the movie :
Effective data and algorithm leading to super-cool targeting coupled with equally strong creative campaign can boost your brands recommendation and share-of-voice and lead to sustained growth of your brand and make your customers and users feel awesome by appealing to the human emotion before appealing to the mind.
A great article by Jill Avery, Susan Fournier and John Wittenbraker “Unlock the mysteries of your customer relationships” states that we need to re-define the ‘R’ in the CRM
“Despite $11 billion spent on CRM — many companies don’t understand customer relationships at all. The business is simply not aware of variety of relationships customer can have with a brand. “ 
Relationships are more than up-sell or cross-sell opportunities but rather individuals looking for certain kinds of interactions — and this matters for customer retention.
Here are two scenarios:
Both firms had automated CRM systems with active customer data management — “yet their knowledge of purchasing patterns and demographics did nothing to prevent those misfires”
In Scenario A — business failed to understand that customer wanted more than just a basic exchange relationship. In scenario B — the business misses the fact that marketing facilitates other business functions such as customer service and legal and that it’s important for the customer relationship data from CRM needs to be integrated with customer service systems.
So how can relational intelligence improve interactions with customers and enhance profitability?
“First step is to recognize people have different kinds of relationship with brands — through a structured quantitative survey approach — relationships between customers in China, Germany, Spain and the United States for more than 200 brands in 11 industries were analyzed — — 29 distinct types of relationships were identified. This approach is unfamiliar to most consumer companies but it’s more eye-opening and valuable than the demographic, behaviorial or value-based customer segmentation that has been practiced for decades.”
What are some of these key-relationships — what are associated customer expectations and what are the rules of interaction?
The customer enters the relationship to obtain a good product or service at a fair price. The customer is looking fordependability and doesn’t want to have to think or do too much.
Example: A loyal customer sticks with a toothpaste brand.
The customer wants to work with the company as a valued and reliable partner to solve problems over the long term.
Example: A customer of a grocery delivery service provides a stream of sensible suggestions for improving service, and the company follows up on the ideas.
The customer wants to experiment with a new identity. He or she expects the company to provide excitement, fuel his or her passion during every interaction, and not encourage reflection or rational thinking about purchases.
Example: A customer of a watch company delights in — and purchases — a steady stream of new models with dazzling designs.
The customer is looking for intimacy and emotional support. He or she wants a two-way flow of honest communication and expects that the company won’t disclose personal information or take advantage of his or her vulnerability.
Example: A retail customer expects to be notified in advance of changes in operations or prices, or of other relevant business decisions, and the customer offers loyalty and understanding in return.
The customer is looking for sustained interaction but doesn’t want a close or emotional relationship. He or she expects that thecompany will not make demands or limit his or her freedom to associate with others.
Example: A beer lover wants to choose from a large selection of brews to suit different occasions and resists individual brands’ efforts to win his loyalty.
The customer enters this type of relationship to intensify feelings of self-worth. He or she demands that the company listen, anticipate his or her every need, satisfy every demand, and not ask questions.
Example: An online retail customer cuts off her relationship after a series of small service infractions that signal disrespect.
Great, how should this information be used to drive the business?
Let’s assume you have profiled each customer in one of the above customer relationships in your CRM, your business can now:
Drive more of desired relationships*
Some relationships are more desirable than others that drive profitability and contribute to earnings stability. Data exploration can lead to identifying most profitable mix of relationships and by having this awareness of the associated rules of interaction for the business to reciprocate with — your business can deliver on customer expectations to drive performance.
Case 1: Passionate customers who go the extra mile in informing your business ways to provide better product/service can be responded to by ‘recognizing them as honored partners who can influence new product and service designs’
Case 2: Traditional approach to marketing in the ‘watch’ business is to focus on selling one or two high-priced products to each customer over their lifetime. ‘Swatch reinforces customer flings with the brand by putting inexpensive, boldly designed watches on the market for one season.’
By understanding relationship along with traditional CRM segmentation — the creative campaign is empowered in exactly the type of interaction is needed to deliver on expectation — it no longer relies on send-relevant-products-and-hope-the-customer-buys-more mentality.
Shifting customers toward desired relationships*
If your business profits more from close relationships, strategy will be shaped to shift customer relationships in that direction. If your business benefits more from fleeting relationships instead, strategy will differ in that regards as well.
Here’s a great example of such shifting of customer relationships: ‘Many people enter into commercial interactions with certain types of companies — banks, cable TV providers, airlines, and corporate giants such as Walmart — expecting adversarial relationships. An understanding of that expectation is an opportunity for a reset. By incorporating singing and dancing into the onboard recitation of safety rules, Virgin Airlines tries to shift customers into a more positive bond with the company, such as a buddy relationship.’ 
Eileen Fisher found out the difference in relationship between fifty-something customers was very different with forty-something. ‘The younger women weren’t as comfortable sharing intimate details about their lives with sales assistants. They don’t want to be old friends with the company; they wanted a relationship that was more distanced and transactional. Sales assistant had to adjust their approach.’ 
This is awesome, how can we profile our customers according to these relationship types?
Briefly speaking, in traditional or next generation segmentation — data is your best friend and that’s why having a world class CRM & Analytics team is success-critical. The team will gather information that reveals customer feelings and expectations about the brand from:
- In-bound customer communication data (via emails, online chat sessions between customers and reps, and phone calls that contain relational signals)
- Listening to your social media and identifying users’ emotions.
Repository of internal communication data will be worth investing in and by effective text mining emotions and relationship signals can be extracted. For social media there are various vendors that conduct web-crawling and data-scraping to identify emotions/feelings/concerns/relational-information that will prove useful.
Badass Making Users Awesome — Kathy Sierra
* Unlock the mysteries of your customer relationships — Jill Avery, Susan Fournier and John Wittenbraker