Understanding Small Business Ownership Through Audience Segmentation at Infusionsoft

Infusionsoft 2014 SMB Owner ResearchToday Infusionsoft published their 2014 Small Business Market Survey, based on research conducted by Yours Truly. Their post and the full report share a wealth of insights, which I encourage you to check out. But I’d like to talk about WHY they did the research they did and WHY it’s different.

Infusionsoft serves small businesses — that’s their DNA and their mission. Historically they viewed their customers and prospects by industry, hoping to tease out their needs based on whether they were a life coach or a business consultant, a medical practice or an online retailer. Last year we worked with them to conduct an attitudinal segmentation of their customers, revealing that users view their marketing acumen and needs very differently. (You can read more about the 2013 study here.)

The insights gained from the 2013 study have proven extremely helpful to Infusionsoft in identifying the challenges that their customers and prospects face regarding marketing automation, and have resulted in a wealth of new programs and support initiatives to help them overcome those challenges.

For the 2014 study, Infusionsoft wanted to learn more about small business owners, why they became entrepreneurs in the first place, and how they feel about the experience, its benefits and challenges. This study is unique in a number of ways:

Audiences, Not Just Customers

Infusionsoft specifically wanted to hear about the experiences of not only their users, but also a large group of small business owners who have never used Infusionsoft. The 2014 study includes a group of over 400 owners of American small businesses who were specifically screened to meet this criteria. In this way Infusionsoft has not only learned more about their current customers, but has also gained insight into the larger community of SMB owners.

Attitudes, Not Just Demographics

The world is not lacking for research about small business owners. But few of these studies reveal the wide range of attitudes driving this population, instead focusing on aggregate data about their age, income, gender and other demographic factors. The Infusionsoft study reveals that attitudes, experiences and challenges differ widely within this group, but are not associated with most of these demographic differences. The attitudes hint at deeper truths about this population which are virtually invisible through the lens of superficial demographic descriptors.

Segmentation, Not Just Aggregation

Many studies attempt to parse meaning from aggregated data. In our study, for example, we saw that just over one third of small business owners say that they have considered closing their businesses. However, the attitudinal segmentation revealed that this figure was only 26% among Legacy Builders, while it was double that percentage — 53% — among Struggling Survivors. Without the segmentation, the issue of potential closure might be viewed as affecting a minority, while for one segment is a critical issue affecting more than half the segment members.

The study found many areas in which the aggregate data masks a critical goal, challenge or need among large groups of respondents. Simply put, aggregation masks the truth rather than revealing it.

Why Bother?

As a core part of their mission. Infusionsoft truly wants to serve the broader community of small business owners. Seeking to understand the real reasons behind entrepreneurship, and the associated challenges, gives them insight into an undercurrent within this community that isn’t visible on the surface. Armed with this information, Infusionsoft focuses its efforts to support entrepreneurs based on their goals, not just Infusionsoft’s assumptions about what those goals might be.

That’s better than “thought leadership”. That’s true audience understanding.

In Audience Segmentation, “I Don’t Know” is a Good Answer

Photo Credit: annapmagistra via Compfight cc

Photo Credit: annapmagistra via Compfight cc

Prospective clients for our audience segmentation research often ask how many segments they’ll have, and if we know ahead of time what defines them.

We don’t. We don’t know what characteristics will define your audience segments, what’s going to be important in the segmentation and what isn’t, or even how many segments we’ll find.

That is different than some approaches, in which either the segment descriptors are predetermined (i.e. women vs. men, income levels, customers vs. non-customers, etc.) or others in which the analysis takes specific respondents as “seeds” — i.e. representative of the kind of people that you believe make up each of your segments — and then finds out how many other respondents are like each of those “seeds”. This approach doesn’t do anything to validate whether the descriptors defining the segments are important or valid — just tells you how many people fit that profile you’ve established.

Because our work is designed to explore the attitudes out there as opposed to validate existing assumptions about them, our analysis doesn’t identify a “seed” — it basically throws all the respondents and all their ratings on the attitudinal questions into a big pot, and does a bunch of calculations to determine which groups of attitudes clump together among significantly large groups of people to be important.

When we’re done, each of the respondents in the survey is assigned a “segment”. Each segment is defined by a collection of attitudinal elements, and everyone in each segment has ratings for all of those elements that are similarly interrelated. In short, there’s a strong mathematical matrix of connections between the segment members and the segment attitudinal elements.

The name for the type of analysis we do is “Orthogonally rotated factor analysis”, if you want to look it up. It requires a substantial level of statistical expertise to parse out the appropriate number of segments, which is done using a variety of additional statistical techniques within the process, which is why the person doing this work has a PhD in statistics.

In the end, we are seeing what the data says — what is important in defining these groups, how much of the audience is in each segment, and how many segments make sense given the statistical analysis.

We also avoid introducing any unnecessary bias by ensuring that the segmentation analysis is conducted without the analyst knowing what the actual attitudinal statements are, and without knowing any additional information about the respondents (e.g. demographics, product usage, etc.) Literally the ONLY thing that goes into the factor analysis is the numeric rating for each respondent on each of the attitudinal questions we asked — the respondents aren’t identified, the attitudinal questions are indicated only by number, and no other data collected in the survey is provided to the analyst doing the analysis. So that way the decisions about the segmentation are based purely on mathematical considerations.

There are many, many approaches to audience segmentation, and lots of debate about the right approach for particular applications. We believe in seeing what the numbers tells us, and taking it from there.

Infusionsoft Publishes Audience Audit Segmentation Research

Infusionsoft Segmentation InfographicAs you might imagine, the majority of the research we do for clients never sees the light of day beyond their doors. Typically it’s behind the scenes, driving better marketing strategy — so you may experience the benefits of the work without ever knowing the data behind what you see.

However, occasionally a client chooses to share their data with a broader group, either to help their own customers better understand their strategy, or even to provide valuable information their customers can use in their own sales and marketing efforts.

One of our recent clients, marketing automation software company Infusionsoft, has published an in-depth report about the Audience Audit segmentation research we recently conducted among their small business customers and prospects. They call the study “The American Dream: What Really Motivates Small Business Owners” and have even created a nifty infographic to summarize key findings from the study.

Pop over to the Infusionsoft blog to read more, download the whitepaper and check out the infographic. It’s always great to see clients enjoying, using and sharing their data!

Question: Will Research Make Me Change My Brand Voice?

fragglerawker_03 on Flickr

fragglerawker_03 on Flickr

I got a great question from a prospective client today: “Our brand has a voice and a message we’re very passionate about. After doing this research into our audience segments, are you going to tell us we have to change that?”

My answer? Nope. We don’t tell you go do ANYTHING.

What we WILL tell you is what the audiences identified are seeking, and why, and how you need to respond to them IF you want to be their first choice.

That’s a BIG “if”.

Just because an audience segment is out there, with particular motivation and need, doesn’t mean you’re the right answer for them.

You might (for example) decide that their needs don’t match your brand strategy. Or that you can’t successfully compete with other options for their business (or don’t want to). Or that gaining that audience segment does little to support your goals — maybe they’re too expensive to convert, or they aren’t particularly loyal, or don’t spend much or buy often. Or maybe you just don’t want to serve them, because you don’t like them very much.

These are all completely valid reasons for you to pass them by, and focus on other audience segments that make more sense for you, and for your brand.

But without insight into who your audiences are, what they want and why, you don’t have the data you need to make an educated decision here. Without understanding these segments you can’t intelligently choose between them, and adapt your marketing program accordingly.

That’s all we do — give you data to work with. You decide what to do with it.