The importance of personalization in marketing cannot be over-emphasized. Research from Bold Collective shows that 80% of people will do business with a brand that offers a personalized experience.
Data from Evergage also shows that 99% of marketers believe personalization advance customer relationships.
Today’s customers want to do business with brands that understand their particular needs and have solutions well targeted towards them.
In addition to niching down, financial advisors can achieve a greater level of personalization by creating customer segments. Even after selecting a niche, customer segments can help you create more personalized messaging and solutions for every member of your target audience.
Niches and Customer Segments
A niche is a portion of a market that a business wants to target.
A financial advisor that targets dentists and doctors in California have carved out a niche out of the general market- people in California. Carving out a niche helps financial advisors build a brand and command greater value than competing on price in a crowded, generalized market.
Andrew Davis, filmmaker and director, said it best, “commit to a niche; try to stop being everything to everyone.”
However, “doctors and dentists in California” is still a big market. Marketing the same thing to them and in the same way will not help XYZ Financial Advisors attain the level of personalization essential in today’s business.
While a common career unites all the niche members, that’s not enough information to create personalized messages and campaigns.
There are doctors in California who make $100,000 and those who make $50,000; there are those who believe in active investing and those who embrace passive investing. Similarly, some will not open their email but open Facebook at every chance, vice versa.
Sending the same marketing message or treating them as a single lump of “customers” or “potential customers” is an invitation to disaster. Why send mail to people who don’t use it? Why sell a product to people who can’t afford it? Why sell ETFs to people who are risk-takers or individual stocks to passive investors?
By dividing your niche market further down to customer segments, you can even find more riches. The gold is in the niches, but when you combine them with customer segments, you will get gold, diamonds, and some silver to go with.
Four types of customer segments
Marketers have used four main factors to create customer segments:
Here, marketers create customer segments based on demographic factors like age, gender, income, location, education, ethnicity, etc.
Which of these factors will be suitable to create a customer segment around will depend on the data you collect from your research (see below). We don’t create customer segments just for the fun of it (and it can be fun, really).
You are looking for factors that do have an impact on your bottom line. Do customers across different age groups interact with you differently? Is there a pattern that appears from your data?
Perhaps it is educational or income level that differentiates how customers interact with your business. Is there a product that appeals to high-income earners and another that appeals to low-income earners?
Marketers also use psychographic factors like personality, values, attitudes, interests, and lifestyles to create customer segments.
One psychographic factor important to financial advisors is the risk tolerance of customers. More often, risk tolerance is more psychological than mental. Some people with the capacity for more risk (risk capacity) will not take much risk because they are risk-averse by nature.
You can’t treat the risk-averse and risk-seeking client the same way. Similarly, your customers will have different investing approaches- passive or active is a good place to begin. You can’t create the same kind of portfolio for your active-investing-loving and passive-investing-loving customers.
You can also consider other psychographic factors that affect the way customers interact with your business.
Behavioral factors include purchasing habits, spending habits, and brand interaction.
You can create customer segments according to how your customers make purchases and spend their money. What do they buy? How do they buy them? Where do they buy them? What does their purchasing process look like?
The most important behavioral factor is how customers interact with your brand. Do they interact primarily on social media? On your website? Through mail? How did they come into your funnel? Content or ads? How do they prefer to contact you? Phone, mail, social media, or website chatbots?
City, county, climate, and zip code might also be important factors. Are people from Sacramento interacting with your business differently from the Californians? In California, do people in Trinity and Serria County interact with your business differently?
Customer segments research
How do you determine which factors you should create your customer segments around? Research.
However, before looking at the research you need to do, understand that you don’t need to focus on one particular category of factors (say psychographics). A good financial advisor will consider every factor that is important, regardless of the category.
So back to research.
Where do you find the data to create customer segments?
- CRM data: The first place to look is your customer relationship management (CRM) systems. You will find some data points that can help you better understand your customers and which factors are important identifiers for customer segments.
- Analytics: Your Google and social media analytics can also provide important information about your customers to help in the segmentation process.
- Sales teams: No one perhaps knows your customers better than your sales teams. Get data and information from them.
- Customer surveys: When you are done with the available data, go in search of new ones. Invite your customers to complete surveys that will help you gather data about their interactions with your brand.
- Customer interviews: Interviews even offer a more personal feel than surveys. Get as many interviews (face-to-face or phone) as possible with your customers.
- Focus group discussions (FGD): You can also interact with your customers in focus groups.
Once you have the data, the next stage is to analyze them and derive business insights. These insights will help you create customer segments that will aid your personalization efforts.
From your data, you can identify the products that high net worth individuals are buying, the people interacting on Facebook rather than email, those who are passive investors, risk-averse, etc.
Benefits of customer segments
Why are customer segments good for your business?
Instead of sending a single marketing message to everyone, customer segmentation allows you to send relevant, personalized, and targeted messages to people with similar characteristics.
With customer segments, you are not sending emails to people whose favorite interaction platform is Facebook. You are not pitching individual stocks to passive investors or high-risk assets to risk-averse investors.
Lower marketing cost
The direct result of targeted marketing is a lower marketing cost. Whether inbound or outbound, the more targeted your marketing, the less expensive.
A similar benefit is in the product development department. When you have customer segments, you can create the right product for the right segment. You know the risk-averse investors and the passive investors, for example. Therefore, you know the product each of these segments needs.
You can create certain products for the HNWI and other products for the middle class. Similarly, you can create a product for the Millennials and another for the boomers.
Customer segments reflect an understanding of every customer’s unique features, needs, and challenges, which helps you develop the product that will best serve them.
Communication and customer relationship
When you know how your customers differ, you will know the best way to interact with them. You know those you should be getting on the phone with and those you should be improving your chatbots for. You know those who want regular updates about the state of their portfolio and those who might not care so much. You know the email people and the Facebook people.
Good communication is as much about the medium as the message. When medium and message align, you can maintain a better relationship with your customers.
Today’s customers are loyal to the brands that “get them.” Creating customer segments help you understand the goals and challenges of your customers. The more you understand those, the better the solutions you can provide. And when you provide solutions that they are “dying for,” they will live for you.
Personalization turns your customers into brand advocates. Satisfied, they become your best evangelists.
Dividing your customers into segments is a good way to know your most valuable customers and what is important to them.
Why is this beneficial?
There may be times when you need to make business decisions that will hurt some of your customers (if you need to drop some services for another, for example). Knowing which customers are most valuable can help you make the right compromise.
Personalization is at the heart of today’s marketing success. After choosing a niche, you need to create customer segments to better understand and meet your customers’ needs.
Gather data from your customers to understand the important demographic, psychographic, behavioral, and geographic factors that differentiate them from one another. Use the insights you get to create customer segments. Once you have them, create personalized messages and products that will serve the needs of each segment.
Another great thing to do after creating customer segments is to create buyer personas of each segment.
What are you waiting for? Start carving out your niche, creating your customer segments, and designing your buyer personas.
Do you need help with any of these? Contact me.