Here’s Why Segmentation and Customization are Critical for Successful Relationship Marketing
Last week, relationship marketing expert Elaine Gamble took us through the role of customer experience in successful relationship marketing. She says that customer experience excellence is key to unlocking the business potential of relationship marketing and truly differentiating your product in ways other than the typical sales pitch or feature-driven messaging. Check out her third post here.
For her fourth post in our Relationship Marketing series, Elaine shares how Pillars 3 & 4 – Segmentation and Customization – play a crucial role in ensuring customer centricity.
A key enabler of relationship marketing excellence is segmentation, defined as the process of dividing potential and current customers into discrete groups with similar characteristics to guide the development and execution of strategy. It is a universal concept that is embraced by most marketing organizations.
I would take this definition a step further on what segmentation is in practice: segmentation is part of strategy – a guide to demonstrate your customers are truly understood, grouping customers by how they are similar and different from one another and a framework for delivering your customer-centric promise (or what’s most meaningful in messaging, product, offers, etc.)
As we know, segmentation is conducted in various ways that include demographics, product preferences, and needs. It may also reflect lifestyle areas, values and “jobs to be done,” among others.
Digital data provides an exciting gateway to understanding and segmenting our customers in real-time and contextual ways. All of this provides relationship marketers with a rich foundation to truly connect, understand, inspire and build value together with our customers. We don’t need to guess, hypothesize or make assumptions about the richness of data available to us.
Many would say segmentation is a no-brainer. Isn’t it? Doesn’t everyone do this as part of business as usual? The results of a marketing survey could appear troubling.
Kantar consulting surveyed marketers to find:
– 40% of marketers indicated they do not have or know if their organization has segmentation in place
– 32% indicated segmentation is at least three years old
– Less than half of marketers surveyed indicate they are very satisfied with the segmentation in place at their organization
Why is Segmentation Important?
– Segmentation guides our approach to bringing relationship marketing value, the potential for collaboration that is the heart of relationship marketing excellence. We cannot execute to someone we do not truly understand.
– For segmentation to be effective, it is a marketing led initiative, a framework that is known, understood, and championed throughout an organization cross-functionally (across all partnering teams and touchpoints)
– Segmentation can be dynamic for a product/service. With the wealth of options a customer has for what is offered, when, via what channel etc., preferences can change and customers may migrate in their segmentation throughout a period; If your segmentation is old and/or static, this could negatively impact customer relationships and business results.
– Customizing a message by segment and establishing relationships becomes seamless with a rich, dynamic segmentation that adapts in real time to your customer; messages can be customized with more exactness and confidence, demonstrating to the customer that they are understood and valued. We are not trapped by having to guess or “hypothesize,” and can have more confidence that we are being truly “customer-centric.”
– Customers, especially your most loyal audiences (the primary focus of relationship marketing), may have higher expectations; so, it is not just a nice to do, but an imperative for retaining them and differentiating your company.
– The deep understanding enabled by a robust segmentation framework and supporting operational processes position organizations to have true loyalty and engagement, not just settling for “inertia” (or customers who stay because they haven’t had a chance to leave yet)
Segmentation Pitfalls to Avoid
– Avoid the annual segmentation that stays that way the entire year. Segmentation should be dynamic, within reason, evolving in real time to reflect and/or adapt to new customer insights.
– Strive for the optimal number of segments with both strategy, as well as execution considerations in mind. Organizations may have good intentions with having a high number of segments and customizing for each, but this can make execution across partnering teams more complicated and ineffective; this results in a poor customer experience and diminished relationship marketing impact.
– Customization in messages for all segments is a north star; however, customize within reason. As an example, if two segments are similar enough on most dimensions, the incremental business impact of customizing for each (to be very “exact”) may not justify the effort.
– Avoid being overly academic in segmentation approach; relationship marketing segmentation should be thoughtful, yet simple. This will also enable more efficient cross-functional execution of the relationship marketing segmentation (marketing, customer service, in-store, channel teams, etc.). Ask yourself would the customer easily understand the segmentation I’ve developed and assigned him/her to? This is a good question to ask when developing a segmentation recommendation.
Segmentation and customization are powerful tools for relationship marketing excellence. Using them strategically and thoughtfully will enable your business success.