Social CRM, Communities and Customer Segmentation

I strongly agree with Paul Greenberg that Social CRM is all about looking for answers to the Social Customer. Social CRM is about turning CRM from the inside out to the outside in. This is easier said than done, and mostly easier written than said..

A couple of weeks ago I wrote about how Social CRM is about the relationships of your Customers (of which the relationship with your Company may be a part) and not primarily about the Company – Customer relationship. Today I would like to discuss Communities.

Communities are about people, not business functions

Communities, in respect to Social CRM, are mostly discussed in relation to business functions (like Customer support communities).  Communities are about people though, because that is what they consist of. Business functions is what a business needs or wants and is therefor a typical inside-out way of looking at communities. I believe it is of vital importance, if you want to be successful in Social CRM, Social Business or Business in general for that matter, that Communities in fact are people who share a certain passion, relationship, interest, need or whatever it is that bonds this group of people, through stronger and/or weaker ties.

If you understand that communities are about people that center around a certain interest or need, a whole new pallet of opportunities arise. I’ll focus around one specific element: Customer Segmentation.

Outside-in Segmentation focuses on Customer needs

Most companies segment their Customers the inside-out way. They make attempts to label specific Customers based on common characteristics in their Customer base. Mostly these characteristics involve things like Customer Lifetime Value (or revenue for the less advanced), demographics, transactions, product-combinations, purchasing behavior etc etc.. When we see communities as groups of people that share a certain passion or interest, we understand that labeling Customers on the above inside-out characteristics makes little sense, if it is not preceded by the Customer way of segmentation: By their needs and shared interests.

And this is where it gets more difficult. I think most conversations in the Social space will not tell you anything about this, unless.. Unless you find yourself a way to engage your community to do so, somewhere where you can see, observe and even engage in these discussions. People will not talk about this in so-called support communities, where they visit you to get some answers to problems they have in creating value from the products or services they bought from you. They will talk about their needs and jobs-to-be-done when among likeminded and peers.

Not all Customers have the same needs

So, should you build an innovation or co-creation community? I’d say, good idea, but then you are again focusing on your own business needs and function. When you truly put your Customers interest at the heart of your thinking, you would think of your Customers as people that share common interest. You would want them to share their passions and interests, and their experiences as they are trying to get the job they want to do, as to better understand them. And, since not all your Customers have the same passions and needs, you would want to segment your Customers according to these passions and needs. Because if you do, you get exactly what you want: Customers engaged into conversations, not with you, but with other people they share the passion with, and you can be one of them.

Now I would like you to shake off the idea of online communities (yes, you were thinking about those, not?) and think Customers segments and communities of people.

How would your CRM Strategy be different if you segment Customers into need-based communities?

If you understand which Customers share the passion and need, how would you go about treating them differently than Customers that don’t share those needs? How would you differentiate your product or services to better meet their needs? How would you design the service experience differently? How would you be able to better find correlations between sub-segments, by more traditional characteristics, and how would that help you better target new Customers? How would you be better able to design campaigns? Not easy questions to answer, but I bet you, if you listen really well, online and offline, you will find the answers. And I bet you that Customers will notice that you started talking their language, not yours, even if you want them to engage into your value proposition.

You will not make the difference for your Customers by implementing tools. You will make the difference by learning to think people, not functions, by learning to think from the outside in. And by leveraging that thinking to better design the end-to-end Customer Experience, focused on communities of people with shared needs. Try it, it’s fun!

What do you think? Does segmenting your Customer community by their needs make sense?

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12 thoughts on “Social CRM, Communities and Customer Segmentation

  1. Our idea is that customers are already segmented in the first place. The clue is to figure out where exactly your potential customers concentrated. It is a lot easier to cross sell your products on a community that is itself dedicated to a particular social media than having to scan your customers on the basis of their individual actions and behavior.

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  2. It’s not crm but people who need to transition from inside out to outside in by understanding that compassion, understanding, empathy and value are characteristic traits of individuals who work within an organization.

    In relation to customer segments we have to stop seeing things so static and begin to understand the dynamics of customer segmentations, of which the dynamics of customer segments is “demographic lifestyles”

    I use the term demographic lifestyles to portray the image of dynamic customers who think differently.

    Single moms is a demographic lifestyle, we can’t segment only the “single” and “mom” but we have to segment the transition of how they think based on that lifestyle and observe “jobs to be done”

    Customer segments are dynamics of lifestyles….

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  3. Hi Ned,

    Thx for stopping by :) And I fully agree with you. Specifically when you say that it should not be either – or, but supplementing both segmentation strategies..

    I have to admit, it’s well hidden in the post, but this is what I say at the end o fthe 5th paragraph: “we understand that labeling Customers on the above inside-out characteristics makes little sense, if it is not preceded by the Customer way of segmentation:”

    Great comment, a very good contribution to the discussion!

    Wim Rampen

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  4. Wim,
    I agree with your comment above that customer segmentation still plays a very important role in the marketing dynamics. I also like your view of the inside-out and outside-in segmentation pathways. However, my approach would be to supplement each other rather than folks focusing on one or the other.

    To go into a little more detail, there are multiple factors at play here. First, coming back to the inside-out/outside-in concepts, you are absolutely right that just looking at firmographics, demographics, transactions is no longer enough. One should also look at the customer’s context and pov. One of the ways to do this is by merging qualitative data to traditional mix of factors and then create the segment clusters based off that. For example, one can use qualitative “persona” studies to understand your customers better – their context, how they use your product/service, what is important to them, their pain points etc. and then merge that with the traditional profile elements (demographic/firmographic) and other transactional information (contributing to LTV). There are of course other ways one can achieve similar results but the bottom line as we all agree is that the customer’s side of the equation has to be factored in somehow.

    In terms of ‘fluidity’, one has to be careful in what they mean by this term. For most companies, I would venture to say that the customer needs are not really that fluid. It is more a case of that the real need of the customer is not met by the firm and so it appears as the customer’s needs have changed. In other words, if a firm takes the pain to really understand the basic needs of their customers they will find these to be more stable than expected. Now having said this, it is true that there is fluidity in customers picking and discarding brands but this again goes back to unmet real needs.

    And lastly, on use of social data I agree that interpreting social communication can be tricky. But in my opinion trying to interpret the communication or trying to see if the customer is bluffing is missing the point. If a customer broadcasts negatively about a product or brand, the firm should immediately respond in 1st person to that customer to understand the reason(s) behind and try to correct the situation. If things really work out and they can turn the situation around they get a happy customer for life. It would be silly (imo) for a firm to take those negative comments and build a predictive attrition model and then wait to see if the model is correct in predicting customer attrition. [Btw, Barry – I have the deepest respect for you and my comments are targeted towards the social situation & analytics and not you :-) – I just happen to pick on the example you had in your comment].

    Also, just to make it clear I am not saying social data is worthless for analytics. On the contrary, it is extremely valuable if used wisely. Social data can be used in predictive models to understand if there is a pattern between certain social responses and a particular profile or how the incidence of a set of social response has impacted channel behavior etc.

    Anyway, there is a lot more to talk about on segmentation and social analytics.

    Thanks for an interesting convo. Enjoyed.

    Regards,
    Ned

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  5. Hi Kelly,

    Thx for bringing the discussion to my blog & thx to Prem for pointing you here :)

    With regard to your thought, and more so the thought by @raesmaa: Before we jump to conclusions that Customer segmentation has had it’s best time, I think it is important to understand what purpose segmentation serves.

    In my world Customer segmentation is not only relevant for marketing purposes, it actually is the first and utmost relevant element of a business model. Like I stated in my “what a social crm strategy is all about”-post, a strategy framework consists of three major elements: Who (is your Customer), What (is the job they need/want to do) and How (are you going to help the Customer make that happen)..

    Thus in my opinion, without a clear view on Who your Customer is and what it is they are trying to achieve, you will not develop the right value proposition.. What I’m saying is: customer segmentation is at the heart of your value proposition, and this segmentation should have consequences not only for the design of your product, but the design of the Customer’s experience/journey throughout their lifetime. Furthermore, like I outlined in the post above: Customer segmentation should no longer be based upon inside-out elements, but on the job customer are trying to do or the passions they are pursuing.

    Contexts play an important role in the jobs people are trying to get done, and is part of the segmentation criteria. Context can highly influence the Customer’s journey, perception of the experience and the desired outcome. (just think of how different contexts can influence your job of getting dinner and the outcome you desire of having dinner).. As a consequence it is something you should design a solution for in your value proposition.

    With regard to fluidity: any design these days is required to take variance into consideration. In other words: you need to be able to adapt to changing contexts. But, if you design for Customer segments based on Customer’s jobs and desired outcomes, you will find that these are quite stable. The ways these jobs are conducted may not be as stable, but in essence that does not affect your segmentation, does it?

    I hope I do make a little bit of sense.. let me know if I do and if I don’t and share your ideas, please.

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  6. If you in fact can segment by need & context, then I think by definition, the segments will be fluid.

    Using social data can be tricky in that what the social customer communicates in terms of intent may or may not translate into action. Simple example (a hypothesis I’m trying to prove right now): a social customer tweets their dislike of an experience or product. That customer broadcasts that they will never buy the product again. Does that statement actually correlate to that customers action. And what is the predictive value of those statements in determining potential customer attrition.

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  7. My thanks to @prem_k for suggesting I read this post.

    I was wondering out loud how consultants would approach creating segmentation structures differently now, do to social’s impact on customer knowledge. And on knowledge about customers. This is invaluable as a springboard to new ideas, Wim.

    Another perspective was offered by @Raesmaa, who shared that segmentation now longer applies to her at all, only context. Is the next logical step entirely dynamic segmentation, with no core structure – only fluid changes in groupings based on need & context?

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  11. Wim – I love this post. It resonates with my customer research bent, and gets to the heart of what I’ve been attempting to accomplish in my day job.

    I’ve been doing customer segmentation for a very long time, and, about 20 years ago, came across my first epiphany in trying to integrate customer research with internal definitions. Since they disagreed, this became a campaign on my part to change our internal definitions.

    Since that time, I have always tried to bring the voice of the customer in and to re-engineer the internal view of the customer to match a customer centric viewpoint.

    The journey can be (and often is) long and painful, but is an absolute must!

    Great post.

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