Segmentation

The Good Customer, and the Not-So-Good One

How do I classify my customers / clients? An interesting question that always arises in discussions of segmenting our client base. Whether it is types of customers, or good and bad ones, there is always a problem of drawing that "fine line". We usually know that we have clients who pay more than others, and we know that we should therefore treat them differently, but "how do we draw the line?" could become a tricky question. I prefer getting the answer from the clients collectively. I would like an approach that fits to my special case, and can be used over and over without having rigid lines differentiating between "good" and "bad" clients.
This is a simple technique where you just plot your clients on a graph, draw a line, and that's it!
First create a list of all your clients, and next to each one the average purchases they make, and rank them from the highest to the lowest.
Then, plot the results on a graph, and you will end up with a "long tail". Draw a line to separate the head and the tail, and you get a fairly good segmentation between good and bad customers.
long tail.bmp
The important thing about this technique is that it is flexible and scalable to any business, and to any number of clients. It can also be used for any time range. Also, you get rid of rigid classifications (a good customer is someone who buys more than $1,000/month). This way of classifying could become ridiculous in six months, since your business can grow and your clients' purchases also.
This classifications doesn't look at amounts, it looks at the relative positioning of your clients according to their performance with your business.

Website Navigation: You Lead the Way

Imagine you have a sports club, and from experience, you know that people come to do mainly two things; either to play, or to watch sports.
So you make it a policy that every visitor be greeted on the door, before entering the club, and they should be asked the golden question, "Would you like to PLAY or to WATCH sports today?"
The first visitor says that he wants to play. He is taken to the playing area, and asked a more specific question, "What type of sports do you prefer to play? Group or individual sports?" According to the answer he is then taken to the relevant place. After that suppose they choose to play basketball, you can then take them to the next game you have on schedule.
Then, and only then, will this customer be really happy to know what basketball shoes, balls shirts etc. you have to sell or rent! After you knew what he really wants, and after he clearly saw that he can participate in his favorite sport. The freezing water you give him during the game is worth thousands because it would be really well-timed and in need.
The second visitor that day answers your golden question with, "I would like to WATCH." You then lead them to the places from which she can watch her favorite sport. You ask a more detailed question such as, "Would you prefer to watch from the restaurant, the terrace, or directly from the court?" According to that answer you lead her to the most suitable place from which she likes to watch. Then, and only then will she really appreciate your presenting her with the menu. She was asked what she would like to do, connected with herself, decided the type and location of the watching experience, and is totally ready for what relevant things you want to sell her.
This is the power of proper targeting, and guiding the visitor to the place they really want to be in at this moment.
The same process should be done by the website. On each page, there should be two, or a maximum of three big buttons that clearly show the available choices to the user. A news site should probably have three buttons for example: Read, Write, and Discuss news. This is particularly relevant to sites with dynamic, and huge amounts of content. The user is typically faced with tens of links, from which they have to choose. You, as the website owner should categorize all these links and put each of them in one of the three predefined choices when they enter your home page, or any other page. The following page should give the user some further choices regarding their preferences, and then they can enjoy endless browsing when they find the type of content / activity they want.