Inside Strategic Segmentation Blog Series – Part Four
The Ability to Reach Segments Differentially or Accurately
Written by Chris Diener, Senior Vice President, Analytics
Once you’ve aligned with your company’s strategic business priorities, made a plan for immediate action following the “3 in 3” rule, and used stakeholder interviews to guide the creation of strawman segments, the next step is to actually gather the data and build your segmentation survey.
How data is collected, what questions are included in a survey, and how it's analyzed will determine how well you differentiate and accurately target your market. Here in part four of our series, we explore how to avoid one of the biggest mistakes firms make with segmentation: failing to apply the right data to reach segments, accurately, and with the right products, offers and messages.
If any portion of your segmentation is based on outdated, irrelevant, or erroneous data, you can easily end up targeting the wrong customers or miss part of your desired audience.
Effective segmentation starts by grouping customers with similar qualities together. Once you have clearly defined each segment based on the best available data you have to work with, the next step is to determine how you will target those customers.
There are three elements to targeting:
Differentiated product or service offerings (see the vertical axis of Figure 1 below)
Differentiated messaging content – building awareness and communicating the value of your differentiated offerings
Reaching the right people in the market with the right message about the right product/service (see the horizontal axis of figure 1 below).
Figure 1
Blog series at a glance:
- Part 1 – Aligning your segmentation approach with strategic priorities
- Part 2 – The Importance of making segmentation immediately actionable
- Part 3 – Strawman planning and hypothesis generation to maximize segmentation impact
- Part 4 – The ability to reach the segments differentially or accurately (this post)
- Part 5 – Prioritizing action steps within each segment: TURF or Next Best Move
Differentiated offerings
One priority for the segmentation may be to determine what products and services to bring to market, or what new features or experiences you want to offer your target customers. Ideally, you want to create or adjust your mix of offerings to maximize your appeal to different segments. If this is a priority for your company, then care must be taken in the specific data you collect to uncover differences in product and brand promise, benefits, reasons to believe, elements of value, contextual drivers of value, and attitudes and perceptions that lead to such value.
The best way to directly address the priorities may require different kinds of data and analytic approaches - such as applying survey data, conjoint analysis, or discrete choice modeling.
One interesting project involved a fashion label for jeans. The objective was to segment the market within different distribution channels so as to create the most profitable product line within each. We employed a choice model to uncover how consumers valued different fits, style elements, etc., and were able to optimize the right line of products for each channel. With these optimized lines, we were able to identify the buyers of the different jeans and profile them in terms of attitudes, behaviors, demographics, and lifestyle elements. These insights provided all the information needed to determine not only the best product lines for each distribution channel but also how to market each in the most effective way
Determining the need for product differentiation and the organization’s current approach and structure will guide how to best implement the data collection. Without the right data – relevant to understanding how to create products that appeal to different parts of the market, and inform the specific product decisions – the segmentation effort will fail to gain traction and application.
Differentiated messaging
Message development is also a priority. Based on survey data, a segmentation study can provide marketing teams, as well as advertising and communications partners, with invaluable insights to better craft their messaging and campaigns. This includes how to talk about your products or services, which specific messages or brand promises are most appealing, and what usage contexts drive the most value for each segment.
However, knowing what to say, and who wants to hear it, is only half of the communications targeting challenge. You also need to be able to reach the right people with their most impactful messages.
Developing a robust data set for your segmentation
Sometimes, segments are created with an eye toward differentiated messaging and content targeting, without simultaneously ensuring the correct approach or channel to effectively reach those audiences. Segments will often look brilliant in terms of feeling “right” and management being able to understand and identify the segments attitudinally. Segments will differentiate very well on these attitudinal elements that will be the basis of creating messages. However, they may not differ meaningfully on more tangible factors needed to reach them differentially. Also, the right information that communications partners need will often be left out of the data collection process.
A key element in the process is ensuring that final segments differentiate on both targeting and practical reach elements. You need to know what to say, but you also need to be able to say it to the right people.
The challenge is staying “objective” in finding the right messages to target, while also considering the practical reach or effectiveness of that message depending on channel or medium, and whether it’s above-the-line or below-the-line marketing.
Above-the-line marketing: ad targeting
To effectively target your above-the-line marketing and ads, you need to clearly define your segments as smaller, more specialized groups of consumers that truly represent your most valuable customers. Defining segments based on specific interests, demographics, geographic locations, or lifestyles is one set of variables, but there are many other factors to consider as you define and improve your ad targeting. What drives my target audience to make decisions? What are their channel preferences?
An example of above-the-line marketing is a segmentation we did for a hardware retail brand. The core focus of the study was identifying segment differences based on service experience elements and attitudes. The resulting segments had to be targetable by the brand’s media partner.
We worked hand-in-hand with the media partner - measured the media behaviors and preferences by segment - while ensuring we seamlessly integrated with their existing approach. We then applied an analytic layer called “lookalike modeling” to fuse both attitudinal and media preference data.
Below-the-line marketing: database or online direct targeting
In addition to maximizing ROI for advertising media spend, segmentation is absolutely foundational to effective below-the-line marketing. This could include more passive channels such as messaging on your website, or highly personalized 1:1 marketing to individual customers.
We've all seen examples of poor marketing where brands are sending us the wrong message or offer, often because they’re relying on inaccurate data. When segments are clearly defined, companies can curate the content and experiences they deliver to target customers with incredible precision – by applying data on audience behavior or engagement across channels across hundreds of different parameters.
Below the line applications can be illustrated through a project we had with a hotel brand. The objective of the project was to create the best loyalty program and market it to their current base most effectively. The program itself could be multi-tiered and even within those tiers travelers in different segments would value the services/offers in different ways.
We surveyed current program members. We appended their behavioral data. While the main focus of the segmentation was on the needs, we were able to keep a high level of differentiation on the appended behavioral data and type their entire membership database with probabilities of belonging to a given needs-based segment. This allowed the brand to send out differentiated and better targeted messaging to each member of its database.
Why this all matters
To be effective, you need to go beyond clearly defining your target segments. You also need to formulate a differentiated approach to reaching them. If you place a higher priority on reach, that will impact not only how you collect your data, but also which analytics approach you apply. Knowing beforehand, how to prioritize your targeting objectives will save headaches and open even more opportunities to create value for your segmentation efforts and drive high-value marketing decisions.