Wilson Relationship Marketing Services' president discusses how to use customer segmentation to your advantage.
Customer segmentation is one of the most powerful analytical tools in offline direct marketing. It enables marketers and companies to identify distinct target groups for their products and services. Segmentation methods typically rely on specific customer attributes -- demographic, geographic, psychographic and behavioral -- that are collected on prospects and customers.
The art and science of segmentation has been evolving very rapidly in the last decade with more and more complex segmentation products such as Claritas' PRIZM NE, Acxiom's Personicx and Experian's MOSAIC. Each product has the U.S. household universe clustered into 60 to 70 distinct groups. Marketers can easily append this cluster information to their in-house customer lists to segment and identify the most lucrative target markets.
In recent years, customer segmentation, which historically worked very well in the offline world, has been rapidly gaining momentum online. Unlike offline, where marketing messages are "pushed" to prospects, in the online world marketing activities are geared towards "pulling" prospects from an audience of identified potential customers. To understand and identify the right targets, marketers need to know the key attributes of prospects and customers online just like in the offline world. As a result, customer segmentation becomes imperative online, whether the media channel is search engine marketing (SEM), banner ads on portals or email campaigns.
Tier-one search engines, like Google, Yahoo! and MSN, provide the capabilities for geographic segmentation. Using these tools the target audience can be restricted to a particular region. There are some limitations to geo-targeting since IP-address based geo-targeting is still not an exact science. There is still a need to employ tools to attract search users with masked IP-addresses, or those flagged as outside of the target areas. This can be accomplished by setting overlapping national campaigns with fully built out portfolios of geo-appended key phrases using national search tools. By knowing the specific attributes of potential customers in different regions using one of the segmentation products (i.e. PRIZM, Personicx or MOSAIC), companies can deliver messaging that is highly targeted and speaks directly to these audiences.
Similarly, portals that provide online banner ad-serving offer capabilities for detailed online segmentation and precision targeting. Portals capture volumes of data on clickthrough activity from visitors which are analyzed in detail to understand their specific attributes. This insight allows marketers to offer highly targeted banner ads to distinct audiences.
There are numerous types of portals that attract large volumes of online visitors. Some are general content sites like Yahoo or MSN, news sites like CNN and CBS, or vertical content sites like auto.com and apartments.com. Each site attracts different types of audiences and this knowledge can be leveraged for detailed segmentation and targeting.
Online segmentation, whether conducted through search or banners, allows for very targeted messaging similar to the offline world. A company can set up website content so that what the visitor sees changes depending on how they are categorized. For example, a retailer that identifies age-specific online segments can deliver targeted messaging on products that are attractive to the youth market versus the more mature adult market. This way, just like in the offline world, every identified segment gets appropriate messaging that is attractive specifically to them.
Today, the same evolution experienced offline, from mass marketing to one-on-one marketing fueled by customer segmentation, is taking place online. The specific information content available for online prospects is not as elaborate as offline mainly due to privacy concerns. However, online is rapidly catching up with more and more sophisticated technologies for customer specific data acquisition and analytical methods which give way to detailed customer segmentation and precision targeting.
Dave Wilson is president, Wilson Relationship Marketing Services. Read full bio.