Why Your Business Needs Emotion-based Customer Segmentation

Why Your Business Needs Emotion-based Customer Segmentation

An article published in the Harvard Business Review (HBR) recently citing fresh research tries to initiate renewed debate on the importance of customer emotions in a marketing ecosystem. It calls for enterprises to pursue emotional connections as a science, and a strategy.

Co-authored by Scott Magids and Alan Zorfas of consumer intelligence firm Motista, and Daniel Leemon of CEB, a best-practice insight, and technology company, the article says it is possible to rigorously measure and strategically target the feelings and emotions that drive a customer’s behavior.

The authors write, “Our research across hundreds of brands in dozens of categories shows that it’s possible to rigorously measure and strategically target the feelings that drive customers’ behavior. We call them “emotional motivators.”

The trio says such emotional motivators provide a better gauge of customers’ future value to a firm than any other metric, including emotional branding awareness and customer satisfaction, and can be an important new source of growth and profitability.

Emotional Intelligence

Emotional connections, emotional intelligence, emotional quotient, call it what you may, is not really a new concept. It’s been around as a hypothesis since the early 1990s, if not earlier.

It is to be found in the best-selling 1995 book, ‘Emotional Intelligence’ by an internationally renowned psychiatrist and author Daniel Goleman, so also in the ‘Goleman Principles’, both of which are famous and inspiration for leadership courses (‘Emotional Intelligence’ was named one of the 25 “Most Influential Business Management Books” by TIME Magazine).

To put it rather simply, emotional connection is the skill of empathizing with fellow beings, creating an overall positive experience.

Today, with the advent of new technologies including the ability to measure and analyze copious amounts of data using computers, more and more businesses are actively looking at EQ as a new tool to bring in new customers, increase loyalty, so also gain market share.

It is indeed a fact, as emphasized in the HBR paper, that up till now, most B2B or B2C companies were getting along by simply “guessing” their clients’ emotional needs but slowly, surely, this is changing.

What are your customers’ needs is what this science aims for, which is obviously also different from the cold, analytical world of big data.

Humans are big on emotions, we all know that. But occasionally, brands forget that. Brands can steal a march over others by using emotion-based segmentation. When a positive emotional connection with a customer is forged, a majority of the customers are more likely to stay loyal to the brand and spend more.

What is needed for this is for your company to adapt its personalization and engagement strategies. Emotional motivators act as great triggers in terms of consumer action and reaction.

Generally, there are four types of segmentation levels: demographic, behavioral, psychographic, and motivational. The most oft used is demographic segmentation wherein customers are clubbed together on attributes like gender, age, income, etc. But for emotion-based customer segmentation, psychographic segmentation is key market segmentation.

What is Psychographic Segmentation?

Under psychographic segmentation, you break down your customers into groups concerning their beliefs, values, and all the psychological aspects that influence their purchase behavior like lifestyle and social status.

The basic idea here is to know who your customers are as people, not just buying individuals. It is mainly conducted based on “how” people think and “what” do they aspire to their life to be.

You can divide your customers’ buyers into different units based on characteristics like personality, values, beliefs, lifestyle, attitudes, interests, social class.

This, along with other forms of segmentation, will help you market to them better. Understand ‘why’ your customers think the way they do. Also, why is it they are purchasing from your company?

For psychographic marketing to work the following factors must be taken into consideration:

• Why do your customers act the way they do?
• What do they value the most?
• How are you going to solve their pain points?

There are five psychographic variables based on which you can club customers: 

1. Personality
2. Lifestyle
3. Social Status
4. Belief
5. Viewpoint

For all of this, marketers need to collect psychographic data. The latter is subjective data as compared to say demographics and thus requires detailed investigation.

Do You Operate An Emotionally Intelligent Business?

The answer to that, to some extent, lies in the big data analytics model you may have deployed. If you can’t find it there, or have not, so far, deployed a statistical model to analyze your customers, there are two ways to turn your business into an emotionally intelligent one.

The first could be to implement a model that involves the construction of a “complete view” of the customer experience from start to end – from product development and marketing to sales and service -and all of the emotions a customer associates with that experience. That could lay the groundwork for a high Emotional Intelligence (EQ).

At the other end of the scale, enterprises can invest in big data analytics, or bring in outside consultants with a deep-seated knowledge of how to measure a customer’s Emotional Intelligence (EQ).

For both, the business needs to collect customer feedback at all stages of its buying journey. This includes not only formal surveys but inputs by way of online reviews, call center feedback, and feedback over social media, all of which can capture the various stages of a customer’s sentiments.

Walmart is a classic (and well-known) example of how emotional intelligence (EQ) can help pull in more customers or anticipate their needs. The global chain has two different teams that work in tandem – one, to better employee IQ, the other, to improve customer EQ.

But one not need be a Walmart to go about this exercise. Any company, at a very basic level, can initiate and implement a structured process to learn about its customers’ emotional motivators.

Understanding a client’s EQ will especially help companies in financial services, retail, and technology to draw up a detailed picture of their customers to retain the valued ones.

To give an example of the role a customer’s emotional intelligence (EQ) plays in his/her buying decision: It helps a car retailer to understand the purpose of a potential customer wanting to buy a car.

Is it for speed or utilitarian purposes? Will the car be a public statement for the buyer? Or is it just another buy for the spouse who needs it for her shopping? All these sentiments, when captured, tagged, and answered, will allow marketers to create appropriate messages targeting individual groups of potential customers, aligned with their wants.

Conclusion:

Emotion-based customer segmentation offers a powerful and insightful approach for businesses to understand and connect with their customers on a deeper level.

By proactively addressing negative emotions and resolving customer issues, businesses can enhance the overall customer experience and build a positive brand reputation. By considering the emotions and sentiments behind customer behaviors, businesses can gain a comprehensive understanding of their customer base and tailor their marketing efforts accordingly.