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The Power of Customer Segmentation and Panels

Plenty of people like hot tea. Many others love iced tea. Anyone for lukewarm tea? Didn’t think so.

Well, if you’re launching new products and expensive advertising campaigns without segmenting your customers, you might as well be serving lukewarm tea.

Too many companies develop products, services, features, and ad campaigns that attempt to satisfy the average customer or the average preferences of their customers. Here’s the catch: there isn’t an average customer.

At best, when companies try to serve the mean, they underperform. At worst, they fail miserably. These people will be much more likely to buy a product from the vendors who understand them, appreciate them, and market their products correctly to them. How do smart companies achieve this? Through customer segmentation research.

Generally speaking, customer segmentation can be defined as a market research methodology that divides a customer base into groups of individuals that are similar in specific ways relevant to marketing, such as product needs and uses, age, gender, interests, spending habits, etc.

Using segmentation allows companies to target similar customer groups effectively, and allocate marketing resources (product development, packaging, pricing, advertising, and so on) to maximize market share, profits, customer satisfaction, and loyalty.

Taking care of your most loyal segments

As an example, let’s look at how retailers can put customer segmentation to good use. Today’s retailers are focusing more and more on repeat customers who are loyal to their stores and their store brands.

Using loyalty card data, custom panels, and customer segmentation research, they are able to focus their product development and marketing/promotional dollars on the highest priority customers.

Here’s the advantage of this approach: by “segmenting out” the non-loyal, bargain-hunting shopper segments, retailers can improve the results and recommendations of their market research and in turn, their sales and profits every quarter. Why? Because the opinions and preferences of the bargain hunters are removed to allow for a more pure and perfect view of the most loyal customers.

Using the lens of customer segmentation, these retailers are able to create the products and promotions that thrill and delight their most loyal, heavy-spending customers. The best customers get exactly what they want and the retailer grows revenue and profits, a true win-win situation.

Customer segmentation and custom panels

Whenever possible, customer segmentation research should be executed in tandem with custom online panels.

For example, it is standard practice at FGI Research to build a custom panel for our clients and score it with specific agreements. Using the segmented custom panel, clients are able to continuously test new products, ad campaigns, features, prices, and other strategies and tactics within targeted customer segments.

iced tea segmentation resizedThis gets done very quickly, accurately and cost-effectively. Without exception, this approach yields products and marketing initiatives that perform at much higher levels. In many cases, this approach is a true “game changer” for these clients.

So if you haven’t made an investment in customer segmentation (and a custom panel), we recommend you give it strong consideration. Once implemented, you’ll watch your customer loyalty, revenue, and profit measures go up (and market research costs, missteps, and delays go down). Then, you can sit back and celebrate your success with a cup of hot tea, or an invigorating glass of iced tea.

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David W. Wilson
David W. Wilson
David W. Wilson

David Wilson has over 25 years of experience helping leading companies improve their marketing results using digital marketing, direct marketing, database marketing, consumer data, predictive analytics and marketing research.