Expand Markets And Optimize Costs With Segmentation Strategy Part 1

Target Marketing Magazine published an article about customer segmentation.

Why Rethink?

Everyone talks about reaching the right consumer with the right offer at the right time, but how do you deliver? Many marketers do a great job capturing, tracking and leveraging customer data. They know what segments work and which don’t. But today, every marketer’s “ideal customer segment” is a moving target—and growing increasingly fragmented as consumer attention flits from medium to medium. In this environment, it doesn’t make sense to expect your legacy segmentation strategy to be as reliable as it once was.

The first question to ask yourself is: Are your existing segmentations meeting your business objectives? Everyone seeks higher response, but is that enough? What about net payment rates? Or lifetime value?

Looking Into—and Beyond—Your Customer List (Housefile)

Building a segmentation strategy that gives you the flexibility to operate profitably in a multichannel world starts with reviewing your housefile. Simple segmentations are readily apparent: actives and expires; payers and nonpayers; product interests and demographics. These descriptions are great for doing things like selecting list sources and segments for mailings. Descriptive segments are useful for customizing creative. For instance, if you are fielding an offer for political biographies, you use your descriptive segmentation to change the copy and featured book for the Republicans versus the Democrats you’re targeting.

Successful descriptive segmentations move beyond intuitive target groups by using statistical techniques to uncover correlations and segments that may not be readily apparent. Overlaying additional data can significantly deepen and broaden the resulting segments.

Four rules for developing descriptive marketing segmentations.

1. Mutual exclusivity. Groups of households or individuals should be homogenous and unique.
2. Business rules. Only consider segmenting based on variables that are appropriate and actionable for the entire available universe.
3. Actionable. A good segmentation provides basic guides for crafting custom offers and customer relationship management.
4. Statistical data discovery methods. Develop segmentation rules that identify data-driven variations in your populations.

In the next post we will look at what can be gained by enriching your list with demographic or purchase of other products information.