Precision marketing reaches the right customers with the right deal
By Fawn Fitter
Different customers respond to different sales strategies. The first step in driving your precision marketing is to use your customer relationship management (CRM) data and divide your customers into specific groups, and then customize your marketing messages for each group based on their needs and interests.
In Summary:
| • | Create customer segments based on behavioral traits that are relevant to your marketing goals. |
| • | Segmentation can create narrow groups of customers with the potential to spend more. |
| • | Use what you know about your current customers to attract new ones. |
A growing company might spend less initially to create a broad-based marketing campaign than it would to create precision marketing by dividing their diverse customer base into smaller groups and developing individual marketing efforts for each one. On the other hand, the targeted approach is more likely to succeed, for a higher overall return on your marketing investment.
Precision Marketing: Divide and conquer with customer segmentation
When you analyze your customer data, you will quickly uncover patterns—including details such as what, how much, and how often customers buy, and who they are and where they are. You can also choose to compare your customers to broader market data purchased from reporting services and market research firms. You can use this data to learn about sales leads, demographics in your sales regions, and sales records of other products. This will help you draw additional conclusions about which customer groups are desirable.
Your customer segments will reveal themselves when you combine these details based on your marketing goals. Say you want to increase sales in a specific geographic region. First, query your CRM database for existing high-spending customers in that area. Next, determine what other characteristics they share, such as what they buy, how often they shop with you, and to which past promotions they have responded. Then use the analytic tools in your CRM system, or a third-party solution, to analyze your CRM data and sales leads, and create a list of other existing and potential customers in that region who share those traits. Finally, take the list to your advertising agency or marketing department, which can use it to create a campaign targeted to that customer group.
Customers who buy infrequently or in small amounts, or who make up only a small fraction of your annual revenue, are also customer segments. Experts advise that you treat them similarly: include them in general marketing campaigns, but do not target them with specific messaging. For example, if you operate a pet supply store and send a monthly newsletter to all your customers, create a version with special discounts for the kennels that order several cases of dog food every week, not for the customers who come in twice yearly for a chew toy. No matter how tempting it is to try to increase their share of your revenue, these are low-value customers. Focus instead on helping medium-spenders move up the chain to become big-spenders.
Predictive models: How to make your marketing effective over time
After your company has conducted several targeted marketing campaigns, take the next step with predictive modeling. This technique further refines customer groups into smaller clusters and uses those clusters to predict how customers will respond to future campaigns. Eric V. Siegel, founder of San Francisco-based Prediction Impact, which specializes in predictive analytics, explains the process as follows:
| • | Compare the patterns that emerged in your initial CRM analysis to the actual response your campaigns received. Who responded and how? |
| • | Identify the most responsive customers—those who contacted you fastest, spent the most, purchased the new product, or whatever criteria your marketing department defines as a successful result. |
| • | Create another campaign with similar messaging, targeted only to this subgroup of customers. |
| • | Repeat, comparing each set of responses to the previous set. |
The smaller the group of customers in each campaign, the more you can refine your approach and messaging, Siegel says. After several cycles, the response data will separate the customers in the original group into several mutually exclusive smaller groups. (Of course, it might be practical only for a midsize company to go through this cycle two or three times.) For example, you might discover that the corporate customers of your catering firm fall into three groups. One orders lunches for meetings on short notice, several times a week. The second hires you weeks in advance to create full meals for big events once or twice a month. The third has a contract for coffee, pastries, and fruit every morning. Although each type might spend the same amount annually, they have very different needs and will respond to different marketing messages.
Your marketing department can then draw conclusions about why some customers responded and others did not—or responded differently, by spending far less, for example. Those conclusions might lead your company to generate new offers, new messaging, a new way to contact customers, or even a new product.
The limits of precision marketing
Although customer analytics can help indicate which customers are most likely to buy and suggest the best way to reach them, it might not be enough to close the sale. "You can't add X plus Y plus Z and automatically get victory—a customer who is more likely to try a new cosmetic may not also be more likely to try a new medical procedure," says Laurie McCabe, vice president of insights and solutions at AMI-Partners, a global consulting firm specializing in small and midsize business.
A growing business needs an ongoing relationship with each individual customer—and that requires experienced account managers and salespeople. It also means you need to adopt regular processes, such as surveys and focus groups, to gather information about customer needs and expectations. As McCabe points out, if a smaller company has fewer customers, each one has enormous influence and potential. If you have never asked your sales force what customers are saying, this is the perfect opportunity to do it.
Fawn Fitter is a freelance writer in San Francisco who specializes in business and technology. She contributes regularly to the Microsoft Midsize Business Center.
