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Success Through Segmentation

How Marketers Group Audiences to Drive Higher Conversion Rates and ROI

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Each consumer has a story

Their age, where they live, how many children they have, the me-dia channels they choose. All of this intelligence comes together to provide marketers with valuable insight into consumers’ behav-iors, interests, demographics, lifestyles, and purchasing patterns. And perhaps equally important, these stories provide a connec-tive tissue to other consumers who share a similar lifestyle.

In this guide, we will look at market segmentation – the process of grouping consumers with similar demographics, behaviors, and lifestyle preferences – and examine how it can be used to pos-itively impact a brand’s marketing efforts by providing the book on their top performing customers. We will also discuss what is needed in order to implement a market segmentation plan and how to find the right strategic partner to ensure success.

55% of marketers are prioritizing more effective audience segmentation and targeting.https://www.adobe.com/ee/modal-offers/article-digital-trends-2019.html

55%

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Segment for Marketing Success

Trial and error. The spray and pray method. These marketing strategies are largely a thing of the past. With intelligence driven by consumer data that’s more accessible than ever, marketers are able to spend dollars much more strategically in order to con-vert customers and maximize ROI. One of the more valuable da-ta-driven tools that marketers rely on is market segmentation.

Put simply, market segmentation is the process of partitioning consumers into different groups based on location, demographics such as age and income, psychographic data like behaviors or life-styles, and media use. In grouping these or other relevant shared characteristics, brands are better equipped to focus on their best performing prospect segments. Here’s a brief example of how segmentation can work:

Let’s say a business is planning to send an email to an audience that it hopes to convert into customers. It wouldn’t make sense to send each person the same message because their interests, purchasing power, age and gender, among other characteristics, would vary wildly. A single message to this many consumers with different priorities will produce subpar results at best.

On the other hand, with audiences numbering in the hundreds, thousands, or even more, it’s difficult to send each person a unique, personalized message. This is where segmentation can make an immediate impact. Market segmentation splits the dif-ference in the above two scenarios by sectioning the audience into more manageable groups.

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Segment for Marketing Success Continued

There are many ways market segmentation can be implemented. Here are some of the most commonly used categories that are used to group consumers:

• Geographic: Cities, counties, states, regions, DMAs, and CBSAs

• Demographic: Age, gender, family size, ethnicity, income, and education

• Psychographic: Attitudes, values, personalities, lifestyles, and communication preferences

• Technographic: Tech ownership, use patterns, and preferences

Once consumers have been segmented by these or other rele-vant categories, brands are armed to tailor marketing communi-cations to each group based on their characteristics. This will help determine the optimal marketing engagement channels as well as maximize the campaign’s effectiveness in generating leads and conversions, and identifying the best performing segments.

However, before reaping the benefits of segmentation, organiza-tions first need to fully understand their best performing customers.

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• Currency: Out-of-date data can degrade your results. Update your key consumer information, such as name, address, phone, and email to ensure the profiling of your consumers is as accu-rate as possible.

• Deterministic and probabilistic: Deterministic data is ob-tained from authoritative sources and is known for accuracy, but can have a limited availability. Probabilistic data is more widely available, but can be associated with an individual only by inference. It’s important to be as close to the deterministic source of truth as possible to ensure the most accurate data.

• Sourcing and corroboration: Authoritative sourcing is essen-tial to data reliability in critical applications, such as accurately identifying and reaching consumers. Corroboration through multi-sourcing of data helps prevent inaccurate and duplicate entries. Ensure your data is sourced from top authoritative sources and corroborated through multiple sources to main-tain the highest accuracy.

There are countless data points and factors that can be useful to an organization. The better your data quality, the more solid your market segmentation strategy will be.

You may also want to consider identifying a consumer identity partner that can help you create a process to normalize, com-plete, and continuously update consumer data, and provide the capability to append missing data to all customer records, consis-tent with your marketing segmentation strategies.

The Foundation of Segmentation

An accurate and complete repository of first-, second-, and/or third-party data is essential for market segmentation. The more thorough and higher the quality of your consumer data, the more effectively you will be able to segment consumers.

Here are some of the characteristics of the customers in a data-base that are often used to successfully segment audiences:

• Age

• Gender

• Geography

• Income

• Family size

• Marital status

• Home ownership

• Education

Companies and marketers should also be sure that their data is current and accurate, as unreliable data can sabotage any effort. Here are some data qualities that should be sought:

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The Process of Segmentation

Once you’ve laid the groundwork of your strategy with the best possible data, you will need to build your segments and identify which audiences you should target, re-engage, or possibly sup-press. A qualified segmentation provider will guide you through this next stage by performing a complex analysis of your con-sumer identity information and unique KPIs for success.

By combining data points such as top customers by spend, fre-quency of purchase, or life stage, your provider will perform a detailed analysis of the groups of customers that are most im-portant to your individual goals. Once this analysis is complete, you will receive a report of top ranked clusters (groupings of con-sumers who exhibit similar characteristics) as well as how these clusters index against the national baseline.

In some cases, top clusters can outperform the baseline by 7-8x, indicating these segments are likely to be highly responsive with a strong propensity to convert. These valuable clusters provide you with the data-driven foundation to help you quickly:

• Pinpoint your best-performing customer segments

• Discover cross-selling opportunities

• Develop strategies to convert underperforming segments

• Find lookalike audiences for future marketing engagements

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The Benefits of Segmentation

In the marketing world, the Pareto Principle is often cited. This is more commonly known as the 80/20 rule, which suggests that 80% of sales come from 20% of a company’s customers.

And while it is certainly not an exact science, this rule serves as a reminder of the potential benefits of a more targeted marketing focus. Effective market segmentation allows marketers to do just that, and in the process, deliver benefits such as:

• More efficient marketing spend by targeting the highest performing segments and avoiding underperforming consumer audiences

• Improved conversion rates by reaching the audiences most likely to convert

• More effective personalization by providing the most rele-vant messaging to your key groups of consumers, resulting in overall higher conversion rates

• Increased customer satisfaction by understanding why con-sumers make a purchase

• Better understanding of media consumption to engage consumers in their preferred channel

20% 80%

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How to Find the Best Segmentation Partner

Once you have decided that segmentation is the right strategy for your organization, it’s time to evaluate potential partners. Choosing a vendor that understands your needs and challenges is crucial to successful market segmentation.

The ideal partner should be able to:

• Understand how to solve your unique business issues and how to meet specific goals

• Provide a value differentiator against competitive products and provide value for the investment

• Be able to project the results across a market area or the entire United States

• Demonstrate experience solving similar needs for similar cli-ents (for example, references and relevant case studies)

After identifying a potential fit, here are the questions that you should be prepared to answer:

• Do you have any data that can be used to profile? (History makes for a great teacher and starting point)

• What data elements can your organization provide for use in profiling? (For example, name, address, phone, email, interests, past purchases)

• What are you trying to accomplish with segmentation?

• How will you ultimately measure short and long-term success?

Choosing a market segmentation partner can be a daunting task, but thorough vetting and answering the appropriate questions will help simplify the process.

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The Final Step: ActivationOnce you have found a partner and have successfully segmented your audience, it’s time to get the most out of your new intelli-gence. To do this, you should be able to accomplish some or all of the following:

• Prioritize customer segments and target the most respon-sive/productive clusters

• Acquire new customers by targeting lookalikes of your best-performing audience segments

• Maximize conversion with meaningful messaging and offers (personalization)

• Identify and target untapped markets

• Convert best prospects with campaigns delivered via their preferred channel

• Cross-sell and up-sell services based on consumer lifestyle traits

• Drive strategic media buys to prioritized “hot zones”

Key TakeawayIf you’re considering market segmentation, you are likely among the marketers who won’t settle for the status quo. You’re looking for an edge in finding the best customers as well as enticing them to return. Once you have compiled the necessary data and estab-lished the KPIs for success, you will need to find a partner who can help you achieve those successes. From there you will be well on your way to maximizing your brand’s conversion rates and ROI.

Ready to get started? Perform a segmentation analysis

with Infutor today!

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WHY INFUTOR?

Infutor is the expert in Consumer Identity Management, 100% fo-cused on enabling brands to know everything they need to about consumers, to instantly make informed marketing and risk decisions.

Our experience linking trusted data sources results in solutions that identify, verify and score inbound consumers, on demand, with as little as a single identifier; link customer data; update/add missing identifiers and enhanced attributes; and enable increased digital campaign reach through higher onboarding match rates.

Infutor gives brands a secure, privacy compliant foundation to im-prove inbound engagements and outbound marketing reach, and to minimize fraud and collections risk.

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