Mind the gap!

In a high-technology and competitive environment with increasing customer demands, it has become even more important to target the right customers with the right offering at the right time. An increasing number of companies have begun to work with targeted promotions to individuals, however the gained insights about customers tend to be disconnected from both strategic and tactical work, resulting in poor and conflicting marketing. Clearly, there is a gap that needs to be bridged!

The incompleteness of pre-defined segments
Historically, segmentation based on demographics has been used within retail to create an understanding for customers, to support decision-making and to create customer offerings. But is it really efficient to map customers into segments based on solemnly demographic data when customers are constantly on the move and tend to change behavior and preferences depending on the situation?

Just think about it, do you behave in the exact same way each time you visit a store?

Today, retailers have great access to data regarding customers’ buying behavior. But unfortunately, this resource s rarely used to its full potential. The insights about how customers behave are sometimes used to create targeted promotions. However, this knowledge tends to be disconnected from strategic direction setting and decision-making within the organization. This results in lacking marketing based on assumptions regarding customers and their behavior, which might have a negative impact on marketing activities, making them inefficient. Furthermore, this disconnection can be harmful to the company, due to the risk of communicating conflicting messages to customers, not aligned with the overall marketing strategy. There needs to be a clear connection between strategy and customer campaigns to ensure cohesiveness and reduce the risk of damaging the brand through inconsistent messages.

Great accessibility to big data
The digitalization of customer journeys creates great accessibility to big data, thereby a range of customer data. This opens for recognition of shopping patterns and demand trends.

To be able to create efficient marketing, retailers need to understand everything about their customers, including decision-making processes and their experience journeys. By combining different type of data and intelligent analyses, it will be possible to perform efficient marketing. For example, to target customers in real-time with predictive analytics, implying more relevant interaction and a possibility to differentiate from competitors and stand out in the continuously increasing media buzz.

The segment of one
In an ideal world, companies treat their customers as unique individuals, develop products that meet their exact needs and engage in a way that they want to communicate. Machine learning enables a combination of market segmentation, customer data and predictive analysis, creating an opportunity to get to know the behavior of an individual in a specific moment. Furthermore, algorithms enable researched and target product recommendations to customers based on previous behavior, which results in more efficient marketing actions and increased competitiveness. People have begun to talk about segmentation developing towards a “segment of one”.

So, is the “segment of one” tomorrow’s segmentation?

Probably not.

Knowledge about the behavior of all specific individuals is not enough when making decisions and for creating an understanding of the customer base within an organization. There is a need for an explanation model including both insights about individuals, relevant clusters and high-level customer segments.

A way to drive change and create common goals
Traditional segmentation will be complemented by dynamic analyses of customer behavior; however, segments may still be used to guide strategic direction.

If performed efficiently, customer segmentation can add value to organizations by for example: creating an understanding of customers, simplify the acceptance of internal strategies, support users in development and improvement of business and create reliance in language, analysis and customer data for decision-makers.

Hence, segments are a way to drive change and the people within an organization towards common goals.

Segmentation 2.0
In the long run, there needs to be clear connections between different aggregations of data, generating insights that create competitive customer segmentation. Marketing is more than the creation of individual promotions, it is also about decision-making and direction setting. Hence, marketing has three dimensions: an operational, a tactical and a strategic, which all need different types of insights regarding the customer base due to different purposes. This creates a need for the next generation of segmentation, “Segmentation 2.0”, with different aggregations of data for each dimension.

On a strategic level, high-level segments provide an ability to direct resources to where the best result is generated. Dynamic clusters based on attributes can, on a tactical level, create an understanding of why customers behave in a certain way and why to make certain decisions. Lastly, personal, “in the moment” offerings to each individual alongside predictive analytics can increase the likelihood of profitable outcomes and loyal customers.

Segmentation that creates value
Hence, for segmentation to be value-creating, customer insights need to be configured differently depending on the purpose of usage. On an operational level, the idea about the “segment of one” with targeted promotions to each individual is efficient. Whereas high-level segments based on attributes and updated with real-time data is needed to set a common direction for the company and to create an understanding for the customer base.

However, the set-up and configuration of customer insights are associated with high complexity and there are many parameters that need to be taken into account.

Cupole can support your company by analyzing your current situation and customer base and create a strategy for how to bridge the gap between the targeted promotions and direction setting. With a holistic approach, Cupole helps you to build an efficient and competitive marketing strategy aligned through all dimensions and ready for the new era – Segmentation 2.0.

Read more about what Cupole do here

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Positioning & Growth/Retail & Consumer Goods
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