Five Steps to Follow for Effective Customer Segmentation

In this clip, Allison Hartsoe, CEO of Ambition Data, covers the 5 steps that brands should follow for effective customer segmentation when segmenting their customers by CLV.

5 steps to maximize the value of your customers using CLV

1. Create mutually exclusive segments

The first step to effective customer segmentation is to make your segments mutually exclusive. Clean segmentation that allows for a clear category that each customer should fall under is important to distinguish the segments that your customer fall under at any time. There are some arguments for making customer segments non-mutually exclusive (meaning that a customer can be in multiple segments at once) but this definitely muddies the waters and doesn't give you a clear indication of where your customers stand.

2. Capture all of your customers within one system

Make sure your capturing all of your customers within your customer segmentation system. The goal is to have a 360 degree view of all your customers in one system so everybody is categorized. If customers live in different systems, you want to bring them all together and de-duplicate your data so you can get a clean view of your customer base.

3. Define split points

Setting your segmentation split points will allow you to classify your customers in your segmentation framework. This involves understanding the exact point at which someone would move between different segments. Is it a revenue threshold? Is it how recently they purchased? Defining these split points will help you better understand the behaviour of your customers in your segments.

4. Define and identify outliers.

Give yourself the flexibility to define and identify outliers and treat them accordingly. For example, you can have a wholesaler come through your ecommerce channel and purchase a ton of product. If your split points are based on revenue, the behaviour of this wholesaler might be entirely different from a single customer who spends a lot with your brand over time. By identifying outliers, you can determine if they require a different approach to the existing customers within that segment.

5. Remove internal test data

Lastly, make sure to remove any "test data" so that you can get accurate counts of all your segments. This can be overlooked easily as sometimes marketing operations teams will run a number of tests when launching  a particular campaign and forget to remove that test data after the campaign is launched. This will ensure that all the data and customers in your segments are real people and real data that you can build a strategy around.

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How to Segment Customers with Rubano