Build an effective customer profile with the 4 pillars of segmentation

Who should you target with your marketing?

It’s a pretty fundamental question and one that will directly affect the ROI you deliver and the success of your marketing objectivesThere are many ways that you can answer this question but many will be highly tactical and ensure that your marketing activities operate in splendid isolation.

Instead consider the 4 pillars of all good customer segmentation and use them to build an actionable customer profile. The result that you will be that target the right customers for your business and deliver personally relevant customer experiences.

Pillar 1 - RFV

RFV is a segmentation approach that will give you a highly strategic profile of our customer base and where you should be focusing your marketing activities (ie. who you should be targeting). 

Unsurprisingly there are 3 constituent parts:

  1. Recency – how recently did a customer or group of customers interact with you? This is typically seen as how recently they transacted with you but could just as easily be how recently they engaged with you – downloaded content, contacted your help desk, clicked on an email.
  2. Frequency – how frequently the customer interacts with you. Do some customers transact with you every week but other only every quarter?
  3. Value – what is the value of different customer groups. Value can mean many things – sales, income, margin, profitability – each could tell you very different things about your customer base, where true value lies and where there is most opportunity.

Creating an RFV segmentation is the first pillar in any segmentation process. It will give you a high level of understanding of where to invest your marketing efforts and who you should be targeting.

RFV segmentation tells you who to target.

Pillar 2 - Personalisation

The purpose of any segmentation should be to personalise content for your customers, users or prospects: to make your relationship with them personally relevant.

To understand the role of personalisation and how you can make your brand relevant, there are 3 key ways to profile your customer data:

  • Lifestage and Lifecycle – the customer’s individual attitudes, disposable income and role of your product in their life will be dictated by their lifestage; the relationship that they want with you will depend on their lifecycle stage (from prospect to fan).
  • Location – where they are and what content will be accessible.
  • Communication channels – the mix of communications channels that your customers respond to will . How to interact.

Personalisation tells you how to target.

Pillar 3 - Propensity

So now you have a strategic segmentation (RFV) and a sound understanding of the personal profile of your customers. Implicit in the question of who to target is also the question of potential and what to target your selected audience with. How you quantify potential and the exact offer will depend on the nature of your brand. But typical propensity segmentations are:
  • Missions – what ‘mission’ is a customer on when they interact with you or your competitors? This could be impulse, habitual, event driven or a considered mission.
  • Basket – what products or categories does the customer buy and are any not currently purchased?
Propensity segmentation tells you the ‘What’ to target customers with.

Pillar 4 - Value

This is a core component of RFV but may well be something that you want to profile in more detail. Some examples of deeper customer profiles that you could include are:
  • Service usage – your cost to serve a customer and the relative profitability that this create.
  • Offer redemption – whether certain customers only purchase on promotion and the impact that this has on profitability.
Value segmentation tells you how much you should invest.

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