The world has changed a lot in the last three decades. Heck, it’s changed a lot in the last three months. So why are you still building marketing campaigns based on customer segments, especially based on demographics — a practice that was popular at about the same time as parachute pants — in an age when personalized experiences are all the rage?
I’m not going to tell you that segmentation is a marketing placebo. If you send one campaign out to everyone, and then send a second campaign targeted to three broad segments, the segmented campaign will likely get a higher response. Around 0.2% higher. Is that really what the sum of marketing’s contribution should be: a 0.2% lift in customer engagement? If you’re satisfied with that, I would caution you there’s a slightly higher than 0.2% chance that your CFO is not.
Commerce was moving online long before the COVID-19 virus. In the last few months, however, we’ve set the digital transformation clock forward about five to 10 years. Everything is an online digital experience right now, from banking to buying groceries. This plays right into the strategies of digital-native companies like Amazon, Netflix and Spotify. And those companies are the bar by which other online experiences are being measured. If you’re not delivering personalized experiences and making relevant content recommendations on a regular basis, all those new customers who are now shopping online will take their business somewhere else.
You Can’t Get it Right if You Don’t Know What Wrong Looks Like
Right now, everyone is looking for comfort and reassurance. And marketers are no exception. Segmentation is comfortable. It reaffirms the importance of experience-based intuition and it just feels right. But it’s wrong when you have much better options at hand, such as machine learning and campaign automation. Understanding what makes customers the same isn’t personalized marketing. Understanding what makes them different is.
Let me give you an example. Frozen food companies that deliver by mail are hot right now. If I’m a business that sells frozen food, I may have identified single men over 35, affluent married women, and retirees with second homes as three of my most profitable segments for a new line of frozen steaks. Using what I know about these segments (basically, demographic data), I send them three slightly different email campaigns and wait to see if my clickthrough rates are higher than last month’s campaign. When the results come back, I see that 2.5% of recipients clicked on the offer. And I’m happy, because it’s higher than last month’s clickthrough rate of 2.3%.
But what I don’t see is that 5% of those recipients are vegan. And maybe another 10% show a strong affinity for fish and chicken rather than beef, based on the kinds of recipes they view online. I may be making a connection with 3% of my audience, but I’m disconnecting with 15% of them. Because I’m not looking at content affinities and online behavior, the customer journey is over before it’s begun.
Related Article: Which of the 3 Personalization Types Are You?
Your Customers Don’t Want Ads, They Want Personalized Experiences
Here’s the thing: customers don’t want ads, they want personalized experiences. They want marketing that feels like a personalized shopper or content curator. Think of the content offers that engage your attention. Maybe it’s an email alerting you to a new movie that Netflix has added or a song recommendation on Spotify. These experiences assist you, not annoy you, because they understand what you want. They’re not recommending a rom-com when you’ve watched six horror movies in a row, or recommending Taylor Swift when 80% of your music library is speed metal.
For years, marketers have been told that good marketing moves the needle, even if it’s just a little bit. That’s not true anymore. Winning isn’t getting 0.2% more people to click on an ad. Winning is delivering the next best experience, time and time again. It’s about pulling people through the funnel, from new to known, known to engaged, engaged to customer, customer to repeat customer, and so on.
To do this, marketers need new strategies like decisioning and orchestration. And they need new metrics that look beyond clicks to understand context: How engaged is a user? How will a specific offer affect customer lifetime value? These are the questions that marketers need to be asking themselves, because the answers will help them create meaningful engagement with customers that sets their brand apart.
So, if you’re still segmenting customers as we know it today, stop it. Instead, you should be thinking about decisioning, orchestration and affinity-based recommendations. If those are new terms to you, don’t worry, I’ll be covering each of them in my next blog.
To find out how to personalize your customer experiences and become customer-centric, tune into part two of this series, “If you’re trying to take control of the customer experience, you’ve already lost it.”