Customer Segmentation – The Key to Understanding What Matters

Author: Trent Davis, Director, Marketing

Posted On: November 3, 2020

Customer segmentation is a foundational marketing principle that has the incredible potential to focus your sales and marketing efforts on the customers that you’re best equipped to serve. At our 2019 distributor meeting in Phoenix, we spent time discussing how to win with the four dealer segments that we use here at Allied Air to better understand the market we all serve. You can use this same research to define your customer segments with a much finer point.

Segmenting your customers means to identify the shared behaviors and characteristics among your customers and grouping them based on those behaviors. Typically zeroing in on 3-5 segments is recommended – more than that becomes overwhelming and impossible to act on. We usually attach a memorable name to each group that captures their essence, like “optimistic climbers” or “radical traditionalists”. Then look at how to better serve the needs of that customer group, instead of a one-size-fits-all approach. Here’s how to get started:

1. Learn what the data says

Start learning more about who you serve best (and worst) by looking at what they buy and how.

  • Rank customers by sales – do patterns emerge?
  • What do they buy – equipment only, parts only, your full line? Do they buy high efficiency equipment or just the basics?
  • Payment method – are they on credit, or do they pay on pick-up?
  • Ordering method – do they buy online, over the phone, through text, or at the counter?
  • Engagement – do they participate in counter days, training sessions, or Red Carpets?

You should see patterns emerging, but there’s more to the story.

2. Investigate the "softer side" of your customers

Pull in a wider team for an exploratory session. This could be in small groups for an hour, or in a larger group for half a day. We recommend including your field sales, branch, warranty, and technical support teams in this discussion, along with anyone else in your organization that has a strong understanding of your customers and the wider market.

  • Ask them to describe the different types of customers.
  • Show them what you’ve found and ask them to describe the different types of customers they work with during the week.
  • Include counter personnel, branch managers, territory managers, warranty processors, and your distributor service representative in this discussion.
  • As they add color in broad strokes or about particular customers, supplement with the data collection in the first step.

Deploy a survey. You can ask your customers these same questions with tools like SurveyMonkey.

3. Zero in on the best segments

By now you should have a pretty good idea of how your customers behave and how they buy. Start grouping up some characteristics you want to use to segment. Maybe you want to group up customers who buy a lot, or customers who are “all-in” with you, or those who only buy parts and supplies. Give the segments names and write down what qualifies someone to be included in a given segment. Here’s an example:

Counter Warrior

  • Buys all equipment and supplies from us
  • Relies on the counter team for technical support, install guidance, and information on new products
  • One truck operation, sometimes has a helper
  • Skeptical about new technologies
  • Buys from us because we always have the products and information needed

4. Consider what's working and what's missing

Now that you know the things that matter to each of these customers, how they behave, and what they want from you, it’s time to see what’s working and what isn’t. Each distributor has its own unique value proposition, and you know it well.

Where are you strong and focused?

What’s your key differentiator?

What do they want/need that you’re currently not providing/doing?

How does that resonate with these segments you’ve identified?

If there’s a segment where you’re struggling, it often means there’s a mismatch between how you’re delivering service and what that segment wants.

5. Develop an action plan for your priority segments

You can’t, and shouldn’t, be all things to all people. Pick a couple segments at most that you’d like to serve better than anyone else in your market and compare what they want versus what you’re providing. These are your priority segments. If you see a tight fit, you’re probably doing great with these segments today – keep it going and look for plans to attract more customers who value the same things. If some critical pieces are missing, that’s your area of focus – zero in on building action plans specifically designed to close those gaps. 

You don’t need a team of McKinsey analysts to put segmentation to work in your company. Follow these steps to get started today and let us know how we can help.