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Connect with customers using 'segment of one'

13th Nov 2018
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A ‘broad-brush’ approach to marketing and customer engagement is no longer an appropriate way to connect with highly-sophisticated digital natives. Customers expect more from brands and as a result, marketers must find new and innovative ways of understanding and engaging their customers.

Research reveals that long-term relationships occur when a business becomes a meaningful part of a customer’s everyday life. Making their life easier and delivering what is promised both contribute to a business convincing the customer of their worth, and finding a place in their emotions. When someone senses that a company cares about or understands them, they begin to move along the engagement journey from interest to loyalty. This is the holy grail of marketing – connecting with customers over something that really matters to them.

In order to achieve this, marketing professionals need to truly understand their customers as a ‘segment of one’, rather than basic demographic categories. Marketing based on broad grouping by age, gender or any other parameter doesn’t go far enough anymore.

Understanding your customer

Twenty years ago, this would have seemed unattainable but ‘segment of one’ marketing or smart segmentation is now possible because of the rise of sophisticated data-driven marketing. It is easy to use the proliferation of new channels to collect data on customers across multiple touchpoints and understand a customer’s behaviour, preferences and expectations better than ever before.

By 2020, an estimated 1.7MB of new data will be created every second, per person – an incredible amount of data to sift through, yet complex algorithms and predictive models can analyse it to provide significant insight. This can then be harnessed to develop products, services and marketing which is timely and personalised and bring an end to consumers being bombarded by generic mass marketing emails, or ads on social media, that have no correlation with their lives.

Interestingly, EY found in its Global Consumer Banking Survey that basic segmentation is inadequate for banks because it doesn’t understand consumers from different angles. Instead, EY recommends dividing consumers into one of four segmentation buckets, assessing each person’s level of digital sophistication and financial acumen. These include ‘Digital Stars’ (people who prefer to manage aspects of their life with digital technology) and ‘Traditionalists’ (those who are least in control of finances and least comfortable transacting online).

Leaders in the field?

According to Experian, 87% of customers find it acceptable for brands to use their data to personalise interactions, but only if it’s relevant to them. Amazon and Netflix are often championed as the gold standard when it comes to personalisation. Amazon recommendations are said to generate an additional 10 to 30 per cent in revenue for the business and it uses algorithms based on search and purchase history to personalise every homepage. While this seems obvious, many other retailers are yet to adopt this “segment of one” approach and still just offer a generic homepage for all logged-in users, irrespective of age, gender, and behaviour. Netflix takes personalisation a step further and even adapts film covers so that a customer sees the actor or actress they are most familiar with.

Other examples of companies experimenting with this approach include Target, the second-largest department store retailer in the United States. Target assigns every new customer a Guest ID number, stores a customer’s demographic information and tracks their buying behaviour. Through observing certain purchasing patterns, Target’s marketing analysts were able to form a “pregnancy prediction” score, which allowed them to determine when customers might be in the early stages of a pregnancy. Target would then send the customer special deals on baby-related items. This is a fascinating example because it also shows potential pitfalls around smart, individualised marketing. Some customers reacted very badly to receiving pregnancy- related marketing and had a sense that the company was spying on them or gaining information on them that wasn’t even known by their friends and family.

Perhaps this case shows the importance of marketers demonstrating value when they interact with customers, not just unsettling insight. The key is showing you understand your customers without being intrusive.

Getting the balance right

A more light-hearted example of “segment of one” marketing is Cadbury’s personalised video campaign. Cadbury’s matched a Dairy Milk flavour to users based on elements from their Facebook profile, including age, interest and location. Once the user agreed to connect with the brand, a video was generated using photos and personal information from their Facebook account. Rather than coming across as creepy, it created a genuine connection between the brand and the individual, that the customer had assented to.  The campaign obtained a 65 per cent click-through rate and a 34 per cent conversation rate, showing the power of the personal touch.

One last thought on hyper-personalisation – one of the drawbacks of the Amazon and Netflix approach is that their algorithms are based on past behaviour. While this means their recommendations are usually helpful, the customer is not introduced to ideas outside their typical interests and comfort zone. One of the challenges for marketers is to attract new customers who might not yet have sampled a product or service so it is therefore important that marketing strategies seek to encourage customers outside of their normal behaviours and to try something new.

Segment of one marketing is transforming the way organisations engage with their customers. It has the potential to help companies forge a genuine bond with their customers and show they truly understand them. It can bring an end to customers being bombarded with marketing messages across multiple channels that are not relevant to them and usher in a new era of pertinent and focused marketing.

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