THE BIG IDEA: How do you build a marketing program that attracts the maximum number of customers while simultaneously fostering loyalty? You start by segmenting your customers based on their commitment toward your business.
Let’s meet three very different customers: Susan, Lisa, and Stanley.
Susan is looking for a stylish, new fall sweater. She makes her rounds to Target, Kohl’s, JCPenney, Macy’s, Banana Republic, and H&M. Susan is a non-committed shopper. We call her a Nomad.
Lisa needs a new pair of running shoes. She first stops at Dick’s Sporting Goods. If she doesn’t find something she likes or if they don’t have her size, she’ll drive over to Gander Mountain or perhaps Sports Authority. Lisa relates to Dick’s first. We call her an Enthusiast.
Stanley needs a new smartphone. He doesn’t have to research which one to get, he just has to walk into his local Verizon store and pick up the latest iPhone. Stanley loves Apple. We call him a Brand Lover.
Susan, Lisa, and Stanley represent three very different customers for your business: Nomads, Enthusiasts, and Brand Lovers. All three are important, but all three are NOT created equal. All three should not be given equal attention in marketing or product development.
The Customer Loyalty Continuum
To help chief executives better differentiate between different classes of customers, we created the Customer Loyalty Continuum.
Visualize loyalty on a straight horizontal line with less commitment or loyalty toward the left and more commitment and increasing loyalty toward the right.
Nomads are consumers who are not committed to any business in your category, nor are they even exploring a commitment.
Enthusiasts are consumers who have a preference for one or more brands, but have not yet made a commitment to any one particular brand.
Brand Lovers are customers who are unapologetically committed to a brand, because in their eyes, there is no equal.
In essence, the Customer Loyalty Continuum places your customers on a gradient of love, like, and indifference.
Relational and Transactional Mindsets of Customers
You can also classify your customers based on their overall mindset. You have customers with a transactional mindset and others with a relational mindset.
Susan is an example of a customer with a transactional mindset. Transactional shoppers think first. They shop on convenience, price, and location. The commodity, rather than the brand, is the main factor that counts.
Stanley is an example of a relational customer. Relational customers feel first. They have an emotional connection to the brand. They will often purchase from the brand based on how they feel, rather than what they think.
Even in a downturn economy, Apple offers some of the highest priced products on the market, yet this doesn’t dissuade their customers from making repeat purchases. Rationally speaking, it doesn’t make sense. But emotionally, it does.
The farther you go to the left of the Customer Loyalty Continuum, the more transactional your customers are. The farther you go to the right, the more relational they are.
Relational customers are more loyal customers.
How to Best Segment Your Market for Higher Profitability
So how do you build a marketing program that attracts the maximum number of customers while simultaneously fostering loyalty?
You start with customer segmentation. Customer segmentation is the process of dividing your customers into specific groups with similar characteristics.
Common characteristics for customer segmentation include age, gender, interests, common needs, and priorities.
Customer segmentation can help identify target customer groups and underserved market opportunities. It can be used as a means to allocate resources for marketing and innovation initiatives. It can help you differentiate yourself from your competitors.
But what’s the best way to segment your customers?
The Cult Branding Method for Customer Segmentation
Businesses with a cult-like following tend to focus on their best customers, their Brand Lovers. They learn what drives their best customers’ behavior: what motivates them; what tensions and needs they hold; what they believe; what they aspire to be.
Then, they serve this customer group better than anyone else. Numerous studies highlight that chief executives of outperforming businesses tend to focus on knowing their customers. This customer obsession becomes an organizational focus.
In our work, we’ve witnessed time and again how when you apply penetrating consumer insights about a business’s best customers to a marketing program, staggering growth follows.
Does this mean you ignore the other customer segments on the continuum? Of course not. They are all important for your business.
But you can’t focus all of your marketing efforts on everyone, so why not focus the lionshare of your resources on attracting and serving relational, loyalty-driven, profitable customers (Brand Lovers)?
If you do, you’ll likely pick up more Enthusiasts and Nomads along the way.