Where to find more great customers? 

Use existing information on your current customers to understand what drove their purchases and influence others to do the same.

Every marketer (and business) wants lots of high value customers. They are more profitable and can be relied on to repeat purchase. Finding a new bunch of best customers starts with knowing what your existing best customers key datapoints are.

The desire for deeper customer insight and the identification of high value customers are two of the most common challenges the team at Datamine solves. We’ve found that one of the best ways to locate and market to the highest value customers in your database is by grouping customers together, also known as customer segmentation.

What is Customer segmentation?

Customer segmentation groups customers together based on similar traits or buying habits, such as location or average basket size.  There are 3 types of segmentation: strategic, marketing and operational.

Strategic segmentation

Strategic segmentation delivers insights that help you shape your organisational strategy.

For example, business leaders may use customer segments to make decisions about store locations, staffing, stock levels or market positioning. Segmentation data could also be used to model potential outcomes, giving leadership teams clarity as they make significant calls or set new business goals.

Marketing segmentation

This approach uses customer segments to refine marketing campaigns and messaging. With segmentation data, your marketing team can create segments or personas based on behaviour, demographics and other information, and use these to guide marketing decisions. Each group essentially goes through a different customer journey, with relevant messages, channels, offers and message frequency.

Operational segmentation

This type of segmentation uses customer groups to inform operational choices. This means that customers in different segments receive different greetings in-store, service levels and even prices.

For example, a B2B business might give businesses above a certain size a dedicated manager, while smaller businesses speak to whichever sales assistant is on-site.

What are the benefits of Customer Segmentation?

Once you understand your customer segments, you can make strategic decisions backed by data, for example:

• Plan strategic initiatives based on customer dynamics
• Understand what drives customer behaviour
• Target communications based on actual behaviours
• Understand where to best allocate marketing budget
• Identify upselling, cross-selling and retention opportunities
• Identify gaps in current product offerings or skews in customer base
• Provide a common language for talking about customers and a rounded picture of each segment

Segmentations provide a framework and benchmark for monitoring the effectiveness of marketing strategies - the customer insights from within your data can be used across marketing, product and operations.

How Datamine implemented customer segmentation for an FMCG business

A large FMCG chain aimed to shift from a product focus to a customer centric approach, as well as improve the effectiveness of its marketing spend and its customer insight and understanding.

We transformed daily transactional data from over 60 stores into actionable marketing knowledge by merging and analysing it to create a customer centric view (delivered via a secure online dashboard).  We identified households and their ‘shopping basket’, as well as other critical marketing information, including:

-  Potential spend
-  Price sensitivity
-  Share of wallet
-  Categories shopped

The analysis identified the top segment of the retailer’s customer base in terms of spend and profitability. The customers within this segment were shown to be more likely than the base to:

-  Be high-income earners
-  Be tertiary qualified
-  Be self-employed, earn interest, dividends, or rent
-  Work in professional industries

Although this segment only accounted for 8% of the retailer’s total customer base, they accounted for 29% of its total customer spend.  As these high-value customers were already spending, the retailer focused on providing more relevant and timely offers to this group.  They ultimately achieved greater promotional response rates and a significant return on investment.

How to start customer segmentation?

Before starting your segmentation project, work out who in the business will benefit from it and ensure their business needs are being met by your project plan.  Buy-in from leadership and commitment to delivering the agreed outcomes will make the project successful.

Once you’re sure everyone is on board, you can actually begin the process of segmenting your customer base.  No matter how you approach segmentation, there are a number of consistent phases involved in achieving a successful outcome.  At Datamine, we work with your leadership team and the team who will benefit to ensure it's fit for purpose and designed to deliver strong results.  Our process has six steps:

1. Diagnose – first you need to know why you want a segmentation, including the aims and objectives
2. Co-design – We design the solution together, typically starting with a pilot project
3. Commit – We lock in the scope, investment, and intended outcomes
4. Deliver – It’s time to build the solution, bringing together technical specialist and commercial leaders
5. Embed – We embed it into your organisation so that your team can fly on their own
6. Evolve – We measure the results. If the objectives are not achieved, the job is not done and we continue to optimise. Segments should be reviewed and improved on an ongoing basis as customer habits change.

Read more about our commercial growth model.