18

Jan

14 Ways To Segment Your Customer Database – Part 1

Diagram your database segmentationWhen times are tough, my mailing list business picks up. I’ve been a mailing list broker for 28 years, so I’ve witnessed a lot of business booms and busts. One of the first reactions (and I do mean REACTION) business owners and salespeople have is: “Oh no, business is down! We need a sale! Quick, let’s buy a list.” OK, I admit it. In the last 3-4 years, a lot of my list requests have been, “Quick, I need an email list.”

At the risk of rolling my own eyes, may I just say (once again, with gusto): People, it’s AT LEAST five times easier to sell an existing customer as it is to find a new one. In fact, it’s so hard to get new customers these days that I think the ratio is probably 20:1.

Let’s do some simple math (I promise…this will be very simple. That’s why I chose journalism over economics.) Let’s say you buy a mailing list and send a postcard mailing to 5,000 prospects. With mailing list, production and postage costs totalling approximately $.65/each, your cost is $3,250. Let’s say you get 50 leads and 3 sales from this campaign (very optimistic). Your cost per new customer is $1,083.

Now, let’s say you have a database of 1,500 customers. You are sitting on a business asset that’s worth at least $1,624,500 ($1,083 x 1,500). And while you’re focused on bringing in new customers, your competition is focused on taking away the ones you have. So why do so many of you knee-jerk into prospecting as a first defense to flatlining sales?

I submit that it’s because you don’t know how to leverage your #1 asset.

Don’t tell me how you send email promotions to your list all the time. Your customers don’t want your promotions! In fact, they’re sick to death of your attempts to sell them (have you checked your open rate lately?) If a few “spray and pray” emails is all you’ve planned for your current customers, then you’re going to be in for a rough year.

Deep inside your million-dollar database are multiple niche markets of untapped opportunities…if you know where to look. Niche identification–better known as database segmentation–is how you’ll find more sales this year. I came up with 14 different ways to segment your customer database. You’ll think of many more, once you get the hang of it. Here are my first 7. In my next post, I’ll give you the last 7. To be alerted when I publish the second list, click on the RSS button.

  1. Email address vs. no email address – OK, I’m not telling you to never email anybody. And you certainly are missing opportunities if you don’t have email addresses for good customers. As much of a pain as it is, assign sales reps, interns or a spouse to fill-in-the-blank email field for every customer. While it may be a short-term project to get caught up, it’s a forever project to keep them current. You’ll always be plagued by bounced emails, so develop the attitude that they’re a “customer service opportunity,” not a thankless job to pawn off on the lowest level staff member.
  2. Title – Job functions and and job titles can be critical in your buying process. After coding each contact’s title, run reports to discover new buyer trends. With so many layoffs and job consolidations, it’s not unusual to find that job roles are expanding. You may find new sales reasons for getting in the door. At the very least, you’ll be able to separate communication methods from one job function to another. For example, if you sell to purchasing, but human resources is your actual customer, craft separate, more relevant messages to each job function: send product specs to purchasing, but educational content to HR.
  3. Referrals – Referrals are like gold…isn’t this why we’re killing ourselves everyday? Code the referree and the kind soul who referred you. Referral partners tend to be very social and enjoy being in a position to help someone in their network. You must be able to identify these folks to build marketing campaigns that reward their gesture.
  4. Source Code – How did this customer find you? By tracking this information, you know where to invest more time and which activities to cut. Have a “stakeholder’s meeting” to define the ultimate list of source codes. Then lock down this list and do not allow freelance entries. By standardizing choices, reports will be more insightful. For example, you may currently have source codes for “called in” and “telephone lead”. Since they’re essentially the same thing, designate only one as the choice in the database’s drop down menu for this field. Change all the other entries to reflect this ID.
  5. ID/Status – Categorize contact types in this field. Use SIC Codes, customer vs. prospect vs. vendor codes. Again, never use an “ad hoc” entry. If a category becomes important to track later, add it to the drop-down menu choice.
  6. Networking – Staying visible costs time and money. Maximize your networking ROI by identifying who you meet where. For example, if you attend multiple Chamber of Commerce lunches, code them as Chamber – Chesterfield, Chamber – Clayton, Chamber – Kirkwood. This way you can market to *everyone* you meet at a Chamber meeting or just people you meet at a Chesterfield Chamber meeting.
  7. Inactive Customers – Once a quarter, red flag customers who’ve gone silent or you’ve inadvertently ignored. Reach out to them before they go to the dark side (your competitors!)

Stay tuned for my next 7 database segmentation strategies, followed by 14 easy database marketing campaigns you can implement with a segmented database!


2 Comments

Fred Kosanke
January 26th, 2010 on 2:47 am

Lori,
Great stuff here from you as always. What do you do in your spare time? — just kidding — keep up the great writing as it is informative, user-friendly, and timely as well as, I think, “right on”. It has served me well and I am certain that I am not alone.
Best wishes,
Fred

    Lori Feldman
    February 4th, 2010 on 5:28 pm

    Amen, Lee. I always say, “I hope I live long enough to benefit from all my OTJ experience!” Thanks for commenting. And thanks, Fred, for reading. I always appreciate your cheerleading :)

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