Segmenting Your Customers, Measurement and Faulty Information

A while back I received this in my inbox from the Center for Media Research - Blog Link....

A recent Compete survey (Source: Compete, Inc. May 9, 2008) on segment-driven marketing found that marketers are focusing their segmentation efforts in online and search engine marketing activities,

This is good. Segmentation can drive better customer value and revenue over time. Excellent, we as marketers are evolving, getting smarter...

...and while only 39% of US marketers surveyed believe segment-driven marketing is very important in their organization today, 84% indicate that it will be more important three years from now.

Yes, exactly. It will be and is..

Additional highlights from the survey include:

• 92% of respondents say they are using segments to manage their online advertising and/or search marketing
• 76% of respondents say that their segment-driven strategy will be ahead of their competitors in three years
• 77% of respondents are having trouble demonstrating real business results from segment-driven marketing

WHOA!!! Demonstrating results. If you can segment, why aren't we measuring? Real business results, can mean anything. To me it means.. "we're spending money and doing what someone told us to do, but we can't tell if it's working because we're moving too fast or don't care (possibly both)"

To me - there's a flaw in the measurement.. ok.. what else...

• 27% of respondents aren't seeing improved marketing results from their segment-driven marketing efforts

Ok, something is really wrong here. If 77% can't demonstrate it's working and 27% can't see improved results.... the other 50% can't demonstrate it's working but "say it is???" Wow I'm confused.

• Among the respondents, the most consistent obstacle to successful segment-driven marketing has been identifying the right segments

Now the "right" segments. What does that mean? Shouldn't you know what those segments are? Typically they start as your customers?

But, says eMarketer in an overview of the study, "...this is precisely where behavioral targeting promises to help, since the "right segments" are created by the users and their actions, not imposed on them."

Ok, enough. Behavioral marketing is not "the" way to define your segments. Yes you can see trends and start to understand them, but it should be the experiment - not the hypothesis. If you are trying to figure out your segments this way - you are losing and throwing away your money. And finally, profiling your customer data is not imposing anything. The customer has acted and by definition created the profiled set of actions based on their demos and psychographics.

Defining Your Marketing Segments

You Can Do This...

1. Start with what makes your company money. Not the best response. Note this is where most companies get it wrong. Most go for volume, orders, sales. Step back and look at revenue and contribution margin. Sales are short term figures that should be linked to selling, acquiring the right customers. If a certain purchase makes you the most revenue and it is part of your core competency, good. If acquiring customers on a cycle and keeping them for 11 months makes you the most revenue, good. These are your target customers - start there. Probably, they are 20 - 30% of your business. You are acquiring them along with other customers.

2. Profile High Value, Revenue and Low Value customers (with specific attributes) Identify who makes you money and who does not. When you can identify the people who make you the most revenue on one sale and those that cost you money you start targeting. This means mining your customer data for the information and if you don't have age, sex, interests, etc.. Get a research organization to profile them and ask your customers. Obviously then market around the losers and hit the winners.

3. As you profile the high and low value - you will find the customers in-between. Group them. Identify the middle ground of customers you will take and those you will pass on. You may only target 2 segments out of 5 and 5 is the most you should group to in the start.

4. You may give up market share? Yes, if you can afford it. This is where the middle ground is important - they will shape your share of the market. Do you want share or to maximize EBITDA? or both... greedy!

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