Join Doug Ladd for an in-depth discussion in this video Segmenting customers by usage, part of Marketing Foundations: Customer Segmentation.
- When was the last time you were on an airplane? Did you notice there's a group of people who were able to board the plane before you, and they had all the good window and aisle seats too? Or maybe you're a traveler who gets the benefits of being recognized as a frequent flyer. Frequent flyer programs are one of the best examples of segmenting customers by usage. There's a segment of extremely heavy travelers, who fly the equivalent of going around the world five times or more each year. There are others who fly often, but not quite as much as those super road warriors.
And then there are those who do not fly much at all, maybe just a couple times per year. What else can you infer about heavy users of airline travel? It's very unlikely that they're doing all this travel on their own dime. Rather, you'd be correct in assuming these people are traveling for business purposes. If you've ever had to buy an airline ticket on short notice, you've noticed that they're not inexpensive. Business travelers don't routinely have a month or even two weeks to plan out their calendars in advance.
If a customer needs immediate attention and they're on the other side of the country, someone likely will need to get on a plane and pay the price to get there quickly. The airlines have learned the business traveler who hits the road a couple times per month, that's their most profitable customer. When you think about it in this context, it makes a lot of sense why the travel industry has developed reward programs for frequent travelers. This is similar to segmenting by behavior, but there are some subtle differences. While behavioral segmentation often takes a little bit more reasearch and insight, segmentation by usage can often be done by performing data analysis.
This method has become so valuable, that you'll encounter it in just about every aspect of your life. Your cellphone provider knows how many texts you send, Twitter tracks your tweets. The department store knows how often you return things after you've purchased them. When you look around, you'll see more examples than I could possibly name. Since just about every transaction you make today has an electronic component, there are data being tracked to inform companies about your usage.
As a business, being able to identify your heavy, moderate, and light users will enable you to create products, services and programs to help you grow. Being able to identify the users in each of these groups can help you identify and then develop strategies unique to your business. You can create a grid like this one, to discuss with your team, and talk about the different options you have to provide better programs and services to your highest usage customers so they stay with you.
The idea is to look for ways to keep these customers loyal to your business or brand. For the moderate users, you can look for ideas to build stronger brand loyalty with them, or get them to use more of your products or services. For light users, you can investigate promotions and ideas to encourage them to try using your product in more situations, or in combinations with other products. You can also better target potential customers by working backward from your usage analysis. Here's an example, a maker of canned soups performed a usage segmentation analysis on their existing customers.
They learn that their highest usage customers bought 10 cans of soup per store visit. Then they looked at the demographics of those high volume purchasers, discovered they typically had five people in their household, it was a woman who did the grocery shopping, and she was usually between 35 and 45 years old. Armed with this information, they could target their advertising efforts to the media outlets where they could find this target group. Segmenting your customers and targets by usage can be one of the easiest approaches to take.
It can also yield some big results for you. What will you learn when you look at your customers through this lens?
- Segmenting by location
- Segmenting by demographics
- Segmenting by usage or other behavior
- Why segmenting is important
- Creating and using customer personas