Segmentation is the new norm for marketing and critical to any successful loyalty program. Being able to break down large pools of people into smaller, focused, actionable groups is no longer “nice to have,” it’s necessary for your loyalty program to be competitive.

Don Norman, Director of The Design Lab at UC San Diego said, “market segmentation is a natural result of the vast differences among people.” It’s these differences that marketers need to identify and act upon in order to deliver the personalized marketing communications that consumers not only crave but have come to expect. Long gone are the days of mass marketing programs and “dear occupant” mailings. Now, consumers anticipate detailed marketing efforts tailored to their tastes, preferences, and history instead of to the masses.

The Problem with Static Segmentation

A recent Forrester report found that marketers today have a segmentation problem — only 33 percent of companies using customer segmentation say they find it significantly impactful and, “the main reason companies fail is that they are still using traditional static customer segmentation approaches, without leveraging the breadth of customer data and advanced analytics techniques available today.”
In today’s fast-moving digital world, static segmentation isn’t the answer — you need to think beyond those starter segments and narrowcast further with micro segments like:

  • Geographics – Location (e.g. urban, rural, suburban, Midwest, East/West Coast)
  • Demographics – Gender, age, income (e.g. single millennials, DINKs, baby boomers, empty nesters)
  • Psychographics – Lifestyle, social or personality characteristics (e.g. liberal, conservative, socially active)
  • Behavioral – Spend/consume habits, products/services predilections (e.g. early adopters, tech enthusiasts, price conscious, big spenders).

But, these categories are only a starting point; the world of segmentation is as vast as your technology and customer-base will allow for. As Harvard Business Professor Clayton Christensen put it, “real life consumers usually don’t go about their shopping by conforming to specific segments. Life happens and life’s messy, so rather, consumers take life as it comes. The fact that you’re 18 to 35 years old with a college degree does not cause you to buy a product.”

Big Data and Machine Learning

Big Data and machine learning are playing an impactful role in moving beyond static segmentation by helping brands understand customers’ ever-changing motivations and preferences. According to a survey conducted by MIT Technology Review Custom in partnership with Google Cloud, 50 percent of organizations plan to use machine learning to better understand customers and 48 percent anticipate using it to gain a competitive advantage.

Machine learning helps uncover correlations between groups of data sets, comprehending exactly what the data is saying. This ability to see patterns and understand consumer behavior equips marketers with the information they need to better segment and target their customers.

Does the topic of static segmentation hit too close to home? Do you think you too might have a data segmentation problem? Download Stellar Loyalty’s Loyalty Report Card to learn more about segmentation strategies and quickly evaluate your loyalty program as a whole. You can download it below — and please give Stellar a call to schedule a meeting today.

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