There are numerous requests these days involving segmentation. With the onslaught of digital print and other media, companies are starting to take personalized communication seriously. One of the most common questions I am asked is what to segment on. Some companies just want to take a basic demographic approach related to consumers. Others are focused on transactional behavior of customers. A third approach has been to incorporate spatial data into segmentation. We use our GeoGrids for this since they are approximately ten times smaller than census block groups. Still block groups, carrier routes, zip codes and other approaches are often used in segmentation today. This approach tends to allow for the highest capture rate and still gives some relevance to characteristics of consumers. Other approaches include social media preferences; web clicks etc. depending upon what is available. One word of caution on segmentation is not to segment on a variable just because it has a strong correlation. I review this concept constantly with my staff to ensure that the segments make sense and have a valid meaning to the overall business.
So how do you choose which type of segmentation you will use? My typical answer is to segment on each of these as a pure stand-alone process. This approach will give you different angles for consideration and ultimately you have the ability to create a very complex matrix by layering the segments. Then you will have accumulated a variety of information. You can see what the person looks like, how they spend their money on purchases and what their tendencies are. The key to this approach is to not create too many segments for any given layer. Otherwise, you will be so granular that there will be little statistical significance in what you wind up with allowing you to only combine two layers of segmentation at a time. Creating a three dimensional view of customers will give you the strongest perspective of how to communicate, what to offer and whether or not a specific price point will be of interest to the individual. You have to gain a strong understanding of your customers before you can effectively create your business plans.
Once you have a strong grasp of customer segments by combining layers, you can also combine these with statistical models, marketing analytics, variable digital printing or multi-channel marketing communications. The technology is here. Now is the time to make the best use of it!!