Marketing to a segment-of-one means customising a product or service to each individual customer, however this shouldn’t be treated as a one size fits all approach.
“Segment-of-one is one of those aspirational terms that’s very difficult to achieve, and you need to be sure of the value of the outcome before committing to this strategy,” Qrious general manager Simon Conroy told Stoppress.
“If you’ve got the scale, the reason, and the ability to collect and act on the data, that’s fine. Facebook is a great example. They don’t talk about billions of Facebook members, they talk about having billions of Facebooks. So the segment of one is your home page – different to everyone else’s.”
So if you’re not Facebook or Amazon, where do you start with your segmentation? How do you decide what groups you should be looking at, or how should you segment your customer or prospect base?
“The obvious factor to consider is value,” says Conroy. Understanding where the buckets of value are for your organisation (80-20 rule) is a good place to start. If you overlay RFM (recency, frequency, monetary) in a retail setting, for example, that’s really useful. The idea is to put customers into buckets based on these characteristics and then tailor your interactions based on what outcome you’re trying to illicit from those segments.
“You can also get into some ‘need space’. What needs are your different product suites addressing for each of your customers? It’s particularly useful if you’ve got a different or diverse range of products you’re trying to sell.”
Segment-of-one is achievable in data-rich industries such as social media, where there is a constant flow of information. To fully utilise it though, you need to have scale and enough product breadth to differentiate for each individual. However, you can reach a point of diminishing returns where achieving a truly differentiated segment-of-one doesn’t make enough of a difference to justify the additional investment.
“Take the luxury car category for instance. If 20,000 people buy a particular brand, is there any point in having 20,000 segments with only a handful of model variants with which to differentiate? Conversely, with companies like Amazon, the breadth of products enables meaningful targeting across segments.
According to Conroy, segmentation needs to be more than just an academic exercise.
“Often people will take a mathematically pure approach and deliver something that ultimately the business either doesn’t want or doesn’t know how to use. The whole objective should be that the business changes its behaviour as a result of it knowing more.
“I know of many instances where a business has spent hundreds of thousands of dollars getting a beautiful, elegant segmentation model developed only to find that it is unable to convince the rest of the organisation to adopt it. They’re just not interested, either because they didn’t believe in it in the first place, didn’t buy into the methodology, or weren’t consulted throughout the process. You have to get the buy-in before the process gets underway.
“However, if you have the right buy-in, segmentation can be really powerful. If you’ve got a business with a lot of data, but you don’t really understand the different behaviour sets within your customer base, then a well thought through segmentation can fundamentally change the way you develop your products, how you go to market, and how you build your communication channels. That can be very powerful”.
- Graham Medcalf is a writer and former editor of NZ Marketing Magazine