A Holistic Segmentation Strategy to Save Money and Boost Retention

Read time 3 mins

How do you solve the problem of retention and segmentation? 

To answer that question, we first have to ask: why is it a problem in the first place? 

The truth is, retention is such a tough nut for brands to crack  because it’s perennially viewed through the prism of spend and spend alone. 

If you’re using a version of a recency, frequency, monetary value (RFM) model, whatever way you slice it, you’re only ever looking at purchasing patterns. It’s impossible to see from that angle what’s driving those decisions and therefore, what segment different customers should sit in. 

For example: You’ve identified a group of customers who spend a modest amount with you over the course of 6 months. How do you get customers like these to become a more regular, reliable source of revenue? And how can you tell if it’s possible to boost the value they represent?

If all you have to go on is their spending history, you don’t really know how to pitch your retention offers and messaging, or if it’s even worth spending your marketing budget on this group at all? 

How Long Do You Leave It?

To look at the same problem from a different angle: If you want to measure the retention rate of this customer group over a specific period, how long do you give them to make another purchase before you start hitting them with retention messaging? If an occasional shopper hasn’t bought anything in a 6 month time period, do you make a decision to move them into the lapsed customer category? 

If and when you decide they’ve churned, you still might not know why they made the decision to stop spending money with you. It’s not always easy to tell if a lapsed customer is the fault of your marketing workflows or because they had a bad overall experience with the brand. 

Simply looking at the bare bones of purchases made won’t give you the answers you need. And if you don’t know why these customers are behaving in the way they are, you have no chance of developing a segmentation strategy capable of retaining more of them. 

To get a proper handle on retention, you need to understand your customers on a deeper level. To solve the retention problem, you need data. 

The Answer is Right Beneath Your Feet

The good news is that you already have a goldmine of data sitting right beneath your feet. Your customers are constantly sending you signals about how likely they are to return to your business. All you need to do is listen. 

Their willingness to share your brand, to talk to others about you (whether in person or online), to leave you a positive review, or to send you feedback are all telltale signs about how likely they are to shop with you again. 

Moreover, if you pay attention to how many referrals a customer makes, you get a better understanding of who’s driving the most value. 

In short, a retention and segmentation strategy that uses advocacy marketing methods gives you a powerful yet simple way to understand your customers, revealing the best retention tactics to adopt. 

Segmenting with Higher Quality Information

When you start incorporating advocacy signals into your segmentation strategy, the tactics you deploy for each segment become a lot more dialled in. 

One of the most important things you can do is layer in ECR data — the total revenue customers bring to your business when you look at the spending their referrals represent as well as purchases they themselves have made. 

ECR data lets you identify the true value of your customers and segment them accordingly (high/med/low ECR segments). 

You can then adopt the appropriate retention strategy to each segment:

• High ECR segment — Bring your big marketing guns and be prepared to show your gratitude. These are your most valuable customers, keep them engaged so they maintain, or even increase, their spending and high-value referrals.
• Med ECR segment — These are the customers who will respond best to timely messaging designed to push them into the high ECR segment.
• Low ECR segment - Don’t spend too much time and money trying to woo customers who will, in all likelihood, not be of long-term value to your business.

Once you’ve got the hang of ECR-based segmentation, you can add further layers of data into the mix with predicted ECR data and Propensity to Refer. 

• Predicted ECR tells you how much value customers will bring through purchases and referrals over the next 12 months. You can use this to fine-tune your approach to them, adjusting your messaging and incentives to nudge customers in the right direction.
• Propensity to Refer takes advocacy data and uses it to work out how likely a customer is to make a referral. Your segmentation and retention strategies will move this metric up or down over time, so Propensity to Refer gives you a benchmark from which to gauge the effectiveness of your marketing.

Hone your Retention Strategy with the Customer Advocacy Intelligence Platform

Segmenting customers based on rich advocacy data allows you to deliver a tailored marketing strategy that builds long-term loyalty, engagement and trust in your brand.

If you're already a Mention Me client and you’d like to speak to us about building your own segmentation strategy to drive more value from your customer base, speak to your CSM. For clients without a CSM, get in touch here.

If you're not a client but you want to get serious about engaging your biggest brand fans and optimising your customer retention strategy, Mention Me’s Customer Advocacy Intelligence Platform gives provides the insights you need to create sophisticated yet simple to implement segmentation strategies that turn consumers into active brand advocates. It's not about more marketing spend, but understanding and leveraging the underlying patterns that drive customer behaviour.