What is lead segmentation?
Lead segmentation is the bread and butter of modern marketing. Why? Because if implemented effectively it has a tremendous impact on your bottom line.
Lead segmentation is the process in which you determine how to segment your leads, i.e. cluster your prospective customers, into groups of leads based on various parameters.
Types of lead segmentation
There are no right or wrong kinds of lead segmentation.
Different industries, different markets, and different brands use different parameters. The ones that have proven to work best for their particular products and services. And, ‘work best’ in this case means improving your buyer targeting strategy by understanding how your potential customer makes his purchasing decision. What moves them from potential to actual customer to — ideally — long-term brand advocate.
Because the ultimate goal of lead segmentation is of course to boost sales. To move products. To increase your profits.
As follows, I listed a few of the frequently used parameters for lead segmentation. In a later section, I will go over the ones I find to be the five most important categories to segment your leads.
Demographic segmentation uses demographic parameters to segment your leads. These include age, family, race, gender, education, occupation, nationality, etc. In the B2B world, demographic parameters would include company size, industry type, and other business-related factors. Demographic segmentation is probably the simplest way to seek to explain purchasing decisions.
Geographic segmentation is another way to look for patterns in audience behavior. It is closely related to demographic segmentation. It segments leads based on geographic parameters such as location, language, nationality, etc. The idea is that people have different needs, interests, and expectations that vary between locations. These locations could be seen as rather broad, such as continents or countries, or more localized such as districts or cities. If geographic factors are likely to impact your potential buyers’ purchasing decisions, you definitely should take them into consideration.
Behavioral segmentation segments your leads based on audience behavior. Of specific interest here are patterns of purchase decisions. These include but are not limited to the history of purchases, lifestyle, product consumption, and product usage. Of course, these parameters are interwoven with demographic and geographic parameters. People of a certain age group might favor a particular product which will be reflected in their purchasing history. The recent debate between Millennials and Gen Z about skinny jeans vs. baggy jeans is an example.
Psychographic segmentation segment leads based on parameters such as personality traits, lifestyle, values, and opinions. If you have read out previous blog posts on Marketing Communication and Human Desires you are very familiar with the psychological aspects of behavior. This kind of lead segmentation works well for products/ services that either affects people based on specific beliefs or ideas or that people are more drawn towards based on their personality traits. A fitness fanatic would not likely frequent a fast food establishment, so gyms may decide to offer fresh and healthy morsels at their locations.
Transactional segmentation seeks to group people based on their spending patterns. This kind of lead segmentation allows you to identify your most valuable customers and specifically target them with special offers and rewards.
The 5 best categories for lead segmentation
Before I lay out my picks for the 5 best categories for lead segmentation let me reiterate that there is no right or wrong way to segment your leads. You can over-segment, certainly, and that is one of the problems I will point out later. But, in general, the lead segmentation parameters that you choose should reflect your product/ service, your market niche, and your perfect buyer.
That said, the five categories listed below are the five parameters that I have found to be the most useful. Tried and tested, so to speak, over years of marketing.
First lead segmentation category: BEHAVIOR
By which I mean the actions that your audience can take that you can see in your systems (through tracking).
Are they opening emails and completing forms? What is their frequency for visits to your website? And how much time do they spend on your website? What pages do they tend to linger on, which ones do they skip? Are they watching any promotional video or webinar that you have listed?
If you determine that they are less interested, try to experiment to increase their engagement. For example, host a webinar, publish research reports, create videos, or publish informative and entertaining content on a blog. You could also give away free digital tools or ebooks.
Another option would be to fiddle with your UI. What is the feedback your customers have given you? Do they find your site difficult to navigate? Do they find the colors jarring or the text too difficult? Be responsive to your customer’s feedback.
Second lead segmentation category: GEOGRAPHY
I discussed the parameters you would use to segment according to geography in the text above. But, as a little reminder, this includes location, language, country, continent, and the like. This would also include such categories as climate or season. For example, you would not want to try to sell swim trunks to Australia during the American summer.
Also, for some products/ services, there might be a consideration of local vs. online only. As a preference, a certain segment of the audience might prefer to purchase from a company they consider local.
Third lead segmentation category: DEMOGRAPHICS
I discussed the parameters you would use to segment according to demographics in the text above. But, as a reminder, this includes age, income, education, employment, gender, nationality, etc.
Fourth lead segmentation category: NEEDS
This category segment leads by the similar needs and type of benefits people want. What is the interest that this audience has in your product/ service? What need are they trying to address? What is the benefit they are hoping to gain?
You can further segment by looking at different kinds of needs.
- Functional or practical needs refers to people seeking efficient and less risky solutions for their needs.
- Emotional needs come into play when people share their emotional reactions to certain problems. For example, in the beauty industry that would include teenage acne problems or eye wrinkles for the older generation. The diet industry is also reflective of these emotional needs.
- And then there are problem-solving needs which address solving problems for a particular audience.
Of course, the multiple categories of need-based lead segmentation can and do overlap.
Fifth lead segmentation category: RELATIONSHIPS
This is similar to the transactional segmentation that I discussed above.
I prefer to refer to it as relational lead segmentation because I see the focus on your company’s relationship with the audience. And, there are different types of relationships. It is not simply about identifying your highest value customers so that you could target them with special offers and rewards.
Rather, there are other audience types you are trying to reach. Are they prospective buyers? New customers or repeat customers? Would you consider them high-value customers? Maybe customers that have advocated for your brand before?
And what moved someone from a potential customer down the sales funnel to an actual customer, to repeat customer, and so forth?
Why do you need lead segmentation?
Lead segmenting is about creating a relationship with your prospects. With effective lead segmentation, you can deliver a customer experience targeted to your perfect buyer. It allows you to personalize your marketing communication to reach different types of customers.
By optimizing your marketing outreach in this way, you can spend less because you target your spending precisely to your and your perfect buyers’ needs.
By using effective lead segmentation you can determine the best messaging strategy for the best marketing channels for your particular product/ service and audience. No more wasting time and money and spreading yourself too thin. Knowing your target audience allows you to leverage these leads in better response rates.
Segment, Target, Personalize
The data you collect at each stage in the marketing and sales process facilitates granular segmentation within your database. Be thorough. Test, Track, and Re-test. You want the best available data for your lead segmentation.
This will empower you to run a targeted and personalized engagement with your leads, opportunities, and customers. This personalized engagement creates an environment for successful re-engagement, up-sell, and cross-sell opportunities as well. Long-term marketing relationships are your goal.
You need to be aware of some common errors, though.
Easy errors in lead segmentation
This first one is obvious, but it bears stating nevertheless. Lead segmentation can be a laborious process. The upfront work of doing this is time-consuming. But, the benefits are much greater and can be scaled over time.
Secondly, do not assume that every message is relevant to all your prospects and will work again and again. As much as everybody is the same in a segment, everybody is still different. This is a common mistake and should be considered before launching campaigns.
Third, less is more. By which I mean: don’t over-segment. You want to dial it in but for your leads to be viable, you cannot micro focus.
Fourth, the curse of knowledge idea holds true. By which I mean: when you work on something for a long time, you inevitably know a lot about it. That makes it often difficult to explain it to someone quickly and effectively. The result is that what is obvious to you, is not necessarily understandable to most people. This could result in your value proposition not being valuable enough to the people you are trying to target, or, the value proposition not being clear to them.
In short, you better practice your elevator pitch.
Another suggestion that can be extremely helpful: sometimes marketers from outside the company can be very useful because a) they don’t face the curse of knowledge and b) they can bring fresh eyes to your marketing message.