Insight, Analytics and the New Marketing
Segmentation – Dead or Alive?
Earlier this week Adage ran an article with the controversial title : “The Death of Consumer Segmentation”. It’s written by Draft FCB’s Michael Fassnacht. The article generated quite a few comments. Like many others who commented, I disagree with the following 4 assertions the author makes :
Segmentations are static and therefore less reliable :
There are different types of segmentations that can be used for different purposes. Strategic segmentations segment an entire market in a limited number of segments and are generally more static. They can be incredibly valuable tools for developing a brand positioning, broader go-to market strategies, overall creative directions, new products etc. Media segmentations need to be linked to the typical demographic profiles that can be used for media planning. They therefore tend to be more static as well. Relationship marketing segmentations are highly dynamic in that they use customer interaction data which changes more frequently. LTV segmentations are an example of this. If a customer buys a certain product, their LTV score and segment need to be updated accordingly.
Segmentations don’t work because consumers can belong to multiple segments :
The fact that one can describe a consumer in many different ways does not mean that segmenting them is a bad idea. It means that multiple segmentation layers are needed to describe one consumer. One should use the most appropriate layer based on what one is trying to achieve. Take the article’s example of the professional who turns into a boyish sports fan in the evening. If I am selling suits I would probably need a segmentation layer based on people’s professional occupation. If I am selling football shirts I’d look at a leisure segmentation layer.
Customers prefer to choose their own content :
I completely agree that self disclosed information is incredibly powerful and that we need to give consumers every opportunity to “self select”. However, that doesn’t mean we have to wait around until consumers choose to interact with us. Most marketers will still need outbound communications to achieve their commercial goals. As Kevin Horne (whom I have had the pleasure working with in the past) commented on the post : “If segmentation is dead then so is marketing.”
Everyone should do it the Amazon way :
We have been hearing the Amazon example for years now. One would think that by now every company would have Amazon’s powerful recommendation algorithms in place. This clearly isn’t the case. Amazon has it relatively easy. They sell books and the books you read reveal a lot about who you are. Every time you purchase a book from amazon.com you reveal your broad preferences, interests and even lifestyle. This is hardly the case for the fashion retailer who knows you have bought 2 pairs of socks and a T-shirt over the last 2 months … . I agree that recommendation rules can be very powerful. But having a high volume of transactions and a product set that lends itself to this technique makes it a lot easier.
In the end the article’s conclusions seem much less controversial than its title : segmentations will still be critical moving forward and they should be used together with self disclosed data and “Amazon – like” recommendation rules. It’s hard to disagree with that … .
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