Three top tips for effective customer segmentation
Almost anyone who works for a SAAS business will have encountered the vendor comparison questions. Maybe as part of an RFP, or an interview, or a sales call.
Working in personalization, I’m always a little bemused when I see the question: “do you offer customer segmentation?” although (thankfully) that feeling usually goes away with follow-ups like “what data can you use for segmentation”.
The reason I’m bemused by the first question is that segmentation is fundamental to personalization. You can’t have personalization without segmentation.
“Personalization is individualization,” comes the other side of the argument.
“An individual is just a segment of one,” I reply.
Data powers the evolution of customer segmentation
Segmentation is nothing new, but it is evolving. Segmentation can become more precise, more sophisticated and more impactful as the quality, variety and useful quantity of data increases.
Your segmentation strategy has to serve your business goals. Why are you embarking on a personalization program? What’s your pain point, and how do you anticipate using personalization as the solution?
We’ve blogged before about segments — and the importance of having a set of core (exhaustive and strategically important) segments, which you can supplement with opportunistic ones.
Geographic, demographic, psychographic and behavioral segmentation are all possible foundations, alone and in combination, for a segmentation strategy. If your brand is making a major push into new markets, geographic data will matter. If you’ve opened a new family-friendly hotel, demographic data is key. Psychographic data could be very valuable if your new fashion line is carbon-neutral. And behavioral data is what allows real-time personalization and more refined targeting than ever before.
In reality, all of these types of data will be relevant to your personalization strategy. So will the segments already in use for email marketing, by customer success teams, for ads.
From first-time visitors to VIPs: the essentials of behavioral customer segmentation
Your first-time visitor has no relationship with you. There’s nothing truly personal to personalize on. Geo, weather, language, referrer source, demographics, and psychographics… data from your website, their browsers, and information held offline or in third-party systems give you tools.
But, with every visit, and every interaction, you can enrich your understanding of site visitors using their behavior — what they view, how they browse, what they search for can all add immense richness and an understanding of their intent.
You can also take the opportunity to gather relevant information by asking for it with surveys.
Once you have more information you’ll be able to create segments that have real meaning and value for your brand. These could be VIPs, customers who’ve bought via mobile devices, last-minute ski-trip purchasers, Boston Red Sox fans. Your segmentation strategy, the lens through which you view your customers, will depend on your industry and your business.
Owning segmentation: it isn’t just an online game
I’ve already alluded to all the different teams and systems that play a role in segmentation. Single customer view projects have been an important focus for businesses in recent years. Some of them have worked. Others have failed. Some have created wonderfully precise segments that can’t be used or which are bound tightly to one system (often an email service provider).
With the advent of the GDPR, ownership and control of data is paramount, with many brands wanting to bring their segmentation in-house and continue using segments effectively across multiple customer touchpoints and channels.
It sounds like a “have your cake and eat it” sort of problem.
But, as I mentioned in the previous section, you can import data from other systems to use in digital ecommerce personalization and enrich your customer view. To deliver personalization in the modern era, you need to reach multiple channels and use data from multiple sources — including segment data.
Brands can — and many will want to — build their segments in their personalization platform.
Brands can also build their segments in an owned system, and combine it with online behavioral (and surveyed) data in their personalization platform
By owning segmentation once, centrally, you can federate it out to different systems.
Delivering personalization generates more data, you need to be able to get the relevant insight back out and update your internal segmentation systems. That way, all your systems stay up to date with the latest segmentation.
You can get your segments out from being stuck in their channels: combine them, use them and update them securely.
Key takeaways for anyone working on a segmentation strategy
Segmentation is an essential part of your personalization strategy. All the data involved can enrich your customer understanding, regardless of whether it is stored in the personalization platform or in your own systems (or both).
But wherever it’s stored, it needs to be useful. So my top tips are:
- Use segments that matter to your business and serve your business goals.
- Gather the data that helps you get to this point, and if necessary ask for more insight.
- Work with partners who can two-way sync segmentation data, for consistency and ownership.