How to Segment your Customers (5 mins)

Dec 18, 2008

Do you know the characteristics of your target market? Do you know what they value? If so, you’re well on your way to growing your business. Let Erica Olsen take you step-by-step through the process of segmenting your customers in this Whiteboard session.
For more resources on building your strategic plan, view the Essentials Guide to Strategic Planning.

Video Transcript

“Hi. My name’s Erica Olsen. Today’s whiteboard session is on customer groups. What is a customer group? Well, in marketing language or in, we’re talking about strategic planning language, we are defining it as segmenting our customers. Now we segment our customers, why? Because in a good strategic plan or in good strategy, we’re always working on growing the organization whether it’s for more money, to have greater social impact, to do more with less. Whatever it is we’re looking for growth. How do we grow? We grow by providing value. Value is defined as someone gives you money for something in exchange. Who are those some people? We call them customer groups, segments of customers. Let’s talk about how you create one. I’ve already created a customer group that we are targeting to come to attend what we would call maybe a green event or an alternative energy event. The event is targeted at displaying technology and ideas and education around alternative energy. There’s a lot of people who might be interested in that. We’re going to target a couple and let’s look at one particular example. Here’s the outline of the customer group that we are going to define. We first start with a name. We have started by saying, okay, we’re targeting environmentally conscience single professionals. All right, just pretty simple name, pretty descriptive.

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After we have a name we need to define needs and wants. Now needs and wants is pretty big. We want to get at the core need, so what’s a core need? Well, a core need of this group is really to reduce the carbon footprint. People are pretty interested in that, these people specifically, that’s their core need. Next, we roll to characteristics. Who are these people? Let’s see if we can define them well enough to shake their hand. Who are they? Well, they happen to be, interestingly enough, living in California and New York, first movers or adopters of technology, iPhone carrying individuals. And interestingly enough about 75% of this group happens to be male, and they also happen to be over 35. Now, that happens to be the characteristics based on some market research kind of building up this customer group. It would be a great idea to get some more research if you can do so into really define who your customers are. And we move a little bit further now to say, all right, we’ve given it a name. We’ve defined the needs and wants. We’ve looked at their characteristics, who are they, and then we have to stand in their shoes and say what is the value proposition that we’re providing to them with this event. And we wrote this value proposition. It’s a good example, not so much a tag line, just to say what is the value that we’re providing this particular group. And we stated as being in-the-know about environmental technology. That’s why people would attend.

Again standing in the shoes of these environmentally conscious professionals what would make them be interested in this event. That’s the value proposition. As it relates then to rolling into your strategic planning activities, we would develop goals around getting these folks to our event, very specifically, so what might a goal be? Let’s say one goal, good goal would be to reach 5% of this market through traditional advertising. That might be one goal. Another goal might be an attendance goal, so to generate an attendance of let’s say 10,000 people. Okay, so let’s look through this again. We’ve segmented our customer saying who are they. What are they called? What are their needs and wants? What are their characteristics so we know how to get to them? What’s the value proposition that we are providing to this group? And then what are the goals that we are setting in order to reach these people? What’s really important about this is to develop goals in the customer area of your strategic plan based on your customer groups. And my tip is don’t write customer goals without having customer groups even if you do this just a little bit because your goals and the growth from your plan will far exceed your expectations.”



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