Today's America: One Nation, Highly Divisible

The Joys, and Need for, Segmentation

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The foundation for the types of plays called by marketers and the strategies and tactics deployed to connect with customers and prospects begins with a complete and in-depth understanding of the consumer audience. The 2010 census reveals startling demographic shifts and changes that have a major impact on the attitudes and behaviors of American consumers, and consequently present the modern marketer with unprecedented challenges.

Changes in household formation and composition, consumers with access to a dizzying array of information and media, and today's economic uncertainties have all conspired to force marketers into reconsidering their targeting and engagement strategies. Some of the most influential changes are leading to what we call a "new American consumer." Now, more than ever, an updated segmentation foundation can serve as a common customer language across marketing channels for more effective customer acquisition, development and retention.

A marketer's message to consumers is heavily influenced by what is known about the segment demographically. Add to that knowledge data around consumer attitudes, behaviors, shopping habits and media consumption, and one has a fairly detailed picture of the person they're trying to reach. However, things change at a rapid pace and marketers who lack information about the current landscape risk delivering messages that may very well miss the mark.

Accordingly, marketers should re-segment target audiences based on a mix of current and in-depth blend of data. The insight derived from the data serves as the foundation for a new playbook that leads strategy for marketing campaigns. Take for example the various stages in the customer lifecycle model. Segmentation plays an important role in connecting with customers and moving them through the various phases.

Identifying target customers -- The rules that once applied to this step have changed as dramatically as the US population. Take for example the aging Baby Boomer population. This generation has several facets that require further in-depth segmentation. With nearly 20 percent of Baby Boomer households now part of a multi-generation household, further insight shows that 15 percent have adult children returning home and 5 percent are caring for aging parents. While technically part of one generation, modern day living conditions place each of these mini-segments in different consumer segments with potentially significantly varying needs.

Acquiring new customers -- A layered understanding of the target 's shopping behaviors, lifestyle, and demographic information serves as the base for customizing messages. Understanding media consumption and preferred communications channels of a target audience will help with delivering the message via the channels to which the audience is most receptive. This may require a multi-channel approach based on the identified factors of the target and their media preferences. A target segment comprised of upscale, suburban families is eminently more reachable via the online edition of The Wall Street Journal or other business and finance publications compared to working-class families in rural locations earning moderate incomes. Growing customer relationships -- Growing existing customer relationships is often about unlocking their next motivation to buy, and is done so successfully by treating each segment differently. As noted earlier, the Baby Boomer generation now contains several mini-segments with different needs, and motivations. What may have been an appropriate message strategy a few years ago may not be accurate today. The purchase behaviors of affluent, trailing-edge Baby Boomers in their peak earning years are vastly different compared to empty-nesting Baby Boomers who are on the cusp of retirement.

Securing customer loyalty -- Keeping customers is far less costly than acquiring new ones, but in a world of exponential growth in consumer choice and control, keeping them requires a far greater depth of insight than ever before. Thanks to rapid adoption and inexpensive technologies available, a shift in power has been transferred to consumers. Consider social connections, for example, which put a company's brand reputation in the customer's hand. Immediate access to reviews, information about products and services and an unprecedented amount of available choices means a company and its marketing team must fully understand and address the needs and wants of customers and deliver them faster and more cost-effectively than the known competition. The convenience of mobile shopping can be a key differentiator for attracting and retaining time challenged young couples who are starting families and living child-centered lifestyles.

Winning back lapsed customers -- It's often easy to detect when a customer has lapsed. However, there is seldom just one universal win-back strategy that works for all segments of a customer base. Relying on data to garner a complete understanding about what may have changed with a customer will serve as the best means for devising a strategy to reconnect and win back that customer. Status seeking singles looking to jump start their careers will pay much more attention to fashion related offers and promotions compared to mature workers who are in the latter stages of their profession.

Today's segmentation system needs to reflect the many socioeconomic changes that have occurred in the US marketplace. An effective segmentation typology takes all of this into consideration, thus yielding segments that are an accurate representation of societal and demographic shifts.

At a minimum, a well-designed segmentation system should improve a marketer's ability to bring important customer groups into focus, allocate marketing resources in proportion to the business value of specific customer groups and anticipate future behaviors of customer groups. Data providers with access to a multitude of tools can be a marketer's best friend. Tapping into data -- and more importantly the insights found within -- puts a company ahead of the competition. A willingness and ability to understand customers and prospects and adapt marketing strategies and tactics put a company on the road to building long-term and profitable relationships with customers.

ABOUT THE AUTHOR
Rick Erwin is the president of data & analytics at Experian Marketing Services. He has over 20 years of experience in the direct marketing industry and serves on the board of directors of the Direct Marketing Association.

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