Segmentation. Personalization. Customization. One-to-one marketing. Some people use these terms interchangeably, but the two underlying concepts — personalization and segmentation — are actually quite different from each other. They are, however, not mutually exclusive. You can use both simultaneously, and to optimize your email strategy, you probably should use both.
The Difference Between Personalization, Segmentation
Segmentation involves defining a cohort or segment of your customer database and sending a message (an email, push notification, or text message, for example) that is tailored to that specific audience. You can create segments based on demographic data (e.g., age and gender), behavioral data (e.g., clicks and purchases), or deeper analysis (e.g., customer lifetime value or following the recency frequency monetary model).
On the other hand, personalization is about changing each message to suit the interests of the unique individual. While your basic message outline is predefined — for example, with a hero image, header, call to action and product tile — personalization changes the specific content within your message outline to match each user’s profile. For instance, personalization logic might add your customer’s first name to the header or leverage recommendation technology to find and render products a user is likely interested in based on their browsing history.
Related Article: 4 Methods for Hyper-Personalization That Get Results
Why the Definitions Matter
Understanding the difference between personalization and segmentation matters for a couple reasons. The first is cross-functional collaboration.
Your engineering team will need to understand the exact data you need, where to integrate it and by when. If you intend to personalize a message, your email developer also needs to understand the specific personalization you’re looking for so that they can write and test the email script correctly. Finally, your copywriter will want to know whether the message should be tailored to a specific audience (in the case of segmentation) or if the message should remain more general with key variables inserted based on the user (in the case of personalization).
Effective collaboration across teams is key to email marketing, and it requires getting your terms and requirements right in order to avoid confusion.
The second reason the difference matters is for testing and tracking results. One tactic may be more effective than another depending on the data and tools at your disposal. For instance, when the amount of customer data at the individual level is very limited, dynamic content (personalization) based on a user’s lifecycle stage may not render accurate results. In cases like these, it may be wise to segment based on broader data like purchaser versus non-purchaser or active email opener versus inactive email subscriber. Both tactics in tandem may outperform either tactic on its own.
You won’t know if one or both tactics is truly worth the lift, though, until you differentiate between the two and track their results. Then you’ll really have a business case for continued investment.
Common Challenges With Personalization, Segmentation
One of the main problems with segmentation is that, as you create more segments, your ability to effectively manage each one shrinks. In his book Strategic Database Marketing, Arthur Hughes argues that an ideal customer segment is large enough in potential sales to justify its own marketing strategy and that companies should not create more segments than they can manage.
In a highly collaborative environment, all departments track and think about the same set of segments that are predefined by leadership as having large significance to the business. Examples of such segments are first time purchasers, high CLV users, and customers at risk of churn. Following such an approach naturally limits the number of segments an email marketer has to track.
One of the main challenges to personalization is that it requires mature data strategies and integrations, and many companies lack alignment between their engineering and marketing teams. More specifically, poor data centralization, legacy technology, and inadequate measurement abilities are all barriers, as explained by BCG. Additionally, a lack of dedicated personnel, insufficient cross-functional coordination and project management, and a lack of a clear roadmap were also cited as top barriers to realizing the full potential of personalization.
Related Article: 3 Customer Personalization Paths for Brand Growth
Getting There: Personalizing Digital Experience Matters
Although the cross-functional lift to segment and personalize may seem seismic, it’s generally worth the effort. Personalization leaders will see higher profits — potentially two to three times faster than those businesses that don’t personalize their digital experiences. Moreover, in addition to producing revenue, segmentation also reduces spam complaints and unsubscribes and increases opens and clicks.
If the primary challenge behind your segmentation and personalization strategies is cross-functional alignment, it may be time for a talk — first with the team you’re struggling with and then potentially with leadership to confirm priorities and find win-win solutions.
Effective personalization may also require design thinking, as recommended by BCG, and the same goes for segmentation. Design thinking is non-linear and iterative in nature and empathizes with the user, focuses on the root problem, proposes new solutions, and continually tests.
Ultimately, it’s about putting the customer experience first. No one said your personalization and segmentation had to be perfect the first time, but these tactics certainly deserve some time and effort — and lots of iteration.
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