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Using Predictive Segmentation To Optimize The Customer Lifecycle

We have reached a place where the ability to deliver a superior buyer and customer experience is becoming the path to differentiation and establishing a competitive advantage. And that relies on relevance, personalization, and truly understanding prospects, buyers, and customers.

One of the most important tools in delivering personalization, at-scale and creating a “wow” customer experience is the effective use of audience segmentation. Up to now marketers have relied less on data and more on hunches to create audience segments. Now, with access to a far greater volume of data, companies have the ability to understand their customers and target audiences better than ever before. And utilizing this data in conjunction with predictive analytics allows marketers to create much more well-defined audience segments that are backed by data and not hunches.

Predictive segmentation, which is a form of predictive analytics, uses AI to examine customers or target companies and automatically identify and create meaningful segments based upon strong correlations in data points and variables. It’s a tool that not only provides better segmentation but also facilitates improved personalization, messaging, and engagement. All of which leads to a better buyer and customer experience.

Identifying The Most Valuable Segments

With enough historical data on customers, predictive segmentation models can identify as many as ten or more viable audience and customer segments. Given that most organizations won’t have the resources or the need to develop marketing strategies for this many segments, pinpointing the most valuable segments to focus on is critical.

Marketers must look at segments that have been identified through predictive segmentation and be able to answer several key questions:

1. What segment(s) represent the largest percentage of our current customers?

2. What segment(s) consist of our most and least profitable customers?

3. Are certain segments more representative of companies and markets that are aligned with our growth strategy?

Answering these questions will help identify the most valuable segments to target.

The Role of Primary Market Research

While data provides the foundation for building powerful audience segments, primary market research is a critical component that brings context to the insights gleaned from predictive segmentation. Once audience segments have been identified through predictive segmentation, conducting interviews with customers and even non-customers in those segments helps shape a better understanding of the key challenges, business drivers, and probable use-cases in each of those segments. This exercise will shed light on the differences and similarities across these segments and subsequently drive more effective messaging and go-to-market strategies across each of these segments.

Impacting The Entire Customer Lifecycle

Predictive segmentation should not just be used to drive top-of-funnel growth. But instead should be viewed as a powerful tool that can positively impact all phases of both the buyer journey and the customer lifecycle. When applied the right way it will improve an organization’s ability to more effectively; acquire, grow, and retain customers. And it’s a tool that should be used by line of business leaders in marketing, sales, customer support, and even on product teams. The insights predictive segmentation provides positively impacts these functions in numerous ways;

1. Greater personalization: The most obvious business benefit predictive segmentation provides is the ability to provide a greater level of relevance and personalization. This stems from possessing far better insights into the differences in behaviors, and business drivers in different segments, and the subsequent ability to speak to those differences when engaging with buyers and customers across segments.

2. Improved messaging and engagement: Developing an understanding of the differences in business drivers and behaviors of buyers and customers across different segments gives sales, marketing, and customer support teams the ability to develop more relevant and impactful messaging and engage buyers and customers in a more meaningful way.

3. Ability to identify the most profitable segments: Improved engagement across the customer lifecycle is not the only benefit predictive segmentation can provide. By analyzing both average customer lifetime value and profitability across segments companies can focus both their acquisition and retention efforts on the most profitable segments resulting in greater efficiency and a higher average customer lifetime value.

4. Better retention and expansion revenue strategies: The ability to better understand differences in customer needs from one segment to the next means companies can more effectively engage with and support their customers. This leads to a better customer experience and a subsequent increase in retention rates. This understanding of the differences in customer needs also means companies can offer more relevant upsell and cross-sell offerings and increase expansion revenue.

5. Discover new market opportunities: Predictive segmentation helps companies not only understand who their best target customers are but also identify segments that offer previously unrealized growth opportunities.

6. Understand what product offerings different segments prefer: This of course ties back to developing an understanding of the different needs and business drivers across the identified segments. Once companies have the knowledge of what those segments are and what the needs are within those segments they are in a position to more effectively position their product offering and propose solutions and services that will best meet the unique needs of buyers in a specific segment.

In an era where creating a superior buyer and customer experience is becoming increasingly important, companies must find a way to deliver a greater level of personalization and relevance across all phases of the customer lifecycle. And the ability to utilize predictive segmentation to help facilitate those efforts will provide business leaders with tremendous insight into what motivates their customers and target buyers and how they can most effectively engage them.

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