Beating the Customer Drum with Segmentation
Posted by admin on August 27th, 2007At Inertia we diligently advocate customer intimacy—knowing who you sell to. A good idea is to understand your top 50 customers by volume, dollars and particular products. Predominantly, you’ll find these customers in your database based on wine club, general commerce or allocation purchasing.
This knowledge of your customers can result in even more targeted marketing and better customer service, both of which can be converted to sales and customer retention.
In this post I also want to tip you off to a pretty nifty market segmentation research tool (most of the information you can glean for free) that you can further use to understand your customers background.
First, simply, market segmentation is:
The process in marketing of dividing a market into distinct segments that behave in the same way or have similar needs. Because each segment is fairly homogeneous in their needs and attitudes, they are likely to respond similarly to a given marketing strategy. That is, they are likely to have similar feelings and ideas about a marketing mix comprised of a given product or service, sold at a given price, distributed in a certain way and promoted in a certain way.
A market research software company called Claritas provides a good amount of online data that can be used for small businesses to understand their customers based on destination zip code. Their “for purchase” software tool is called PRIZM NE and it defines every household in terms of 66 demographically and behaviorally distinct types, or “segments,” to help Fortune 500 marketers learn about customer likes, dislikes, lifestyles and purchase behavior. The 66 segments are numbered according to socioeconomic rank (which takes into account characteristics such as income, education, occupation and home value) and are grouped in two different ways:
* Social Groups: 14 groups based on urbanization and socioeconomic rank
* LifeStage Groups: 11 groups based on age and presence of children at home, as well as socioeconomic rank
The benefit here is that unless you’re Proctor & Gamble you don’t need to buy this software, a lot of the topline information is provided online for free.
Now, before I ask you to do a zip code search, it’s going to be helpful to familiarize yourself with the 14 social groups found at this link.
Now that you understand the broad ranges of the demographic categorization, let’s go to this web site whereby you can do free zip code searches.
So, let’s do an example, say you’re an Oregon winery and you have a couple of great customers in Naperville, Illinois with a zip code of 60564 that buy your $35 Pinot Noir.
By going to this zip code search site, you can now glean that those in this zip code are made up of the following demographic market segments:
1) Country Squires
2) Executive Suites
3) Kids & Cul-de-sacs
4) Movers & Shakers
5) Winner’s Circle
A quick study of each of these is going to give you lifestyle traits as well as income and a general feel for overall affluence based on household income.
Generally speaking, this information can only be used as a guideline for understanding and marketing to your customer, but if you know that your buyers, based on zip code demographics, are likely educated, affluent, drive a luxury vehicle and vacationing at resorts, then tackling this sub-set of your total database with a custom library program offer becomes all the more interesting doesn’t it?
August 28th, 2007 at 2:20 pm
Thanks for the info. I think it’s really important for wineries to have a target market in mind, both for current labels and those in development. I’ve seen, and worked for, wineries that do the shotgun approach,try to be everything to everyone, and also those who are absolutly certain that everyone is just like them, the whole world is their target market. I don’t think either work particularly well. The truth is not everyone will like your wine, label, package, pricing. You have to decide who it is you want to sell to and make the wine, packaging, pricing, website, etc. match that market. (If it were only that easy..) But, it’s often hard to articulate what your target market looks like and get everyone to sign on to one vision. I can see that I’m going to be spending a few days working on our target markets with the Caritas market segments.. - Thanks
August 28th, 2007 at 3:48 pm
Thank you for the market segment info. I think many small and starting wineries forget the important step of deciding who their target market is before making the wine, designing the label and pricing the product. Sometimes we think that if we like it, the whole world will too. It comes then as such a shock when it doesn’t fly off the shelf. The defined market segments that Claritas came up with will help to articulate who we think our customers are, or should be, so that we can better target our wines.
August 29th, 2007 at 10:28 am
Hi Genevieve,
Thanks for the comment–and excellent viewpoint on how to use it. I’m glad you’ll make it actionable, for sure. But, even for the interested marketer, it does provide insight into different demographic slices of consumers.
You may want to find 7-9 of your desired target and do a focus group, too. I’m guessing that exercise would really be an eye-opener.
Thanks again, Genevieve.
Jeff