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Data and the Whats and Whys of Segmentation

Quick. What kinds of data are needed for a successful segmentation?

Well, most clients I talk to about segmentation excitedly lead with the data they already have..."we have a TON of data...yes, yes, we can get it all...what's the rule for what data are good for segmentation and which aren't?...how do we tie it all together?...we really do have a lot, (sheepishly) do we really need it all?".  This focus on their data issue is quite understandable. Companies have spent a lot of time, money and resources getting their data house in order, and darn it they need to leverage it somehow. While, in fact, there really is a lot of valuable information in the data that many companies already have, it isn't always enough. In fact, I would argue that in some instances it only provides half the answer.

Let's start with what those data can do for you. First, they can provide a good basis for identifying groups of customers based on behavioral similarities, e.g. which groups have purchased this product (or products), how often they purchase, their average purchase size, how often have they hit our website or called into customer service, etc. Second, available data can often facilitate grouping customers based on their demographic likeness. For instance, for a lot of firms it seems to make sense to parse customers based on where they live, how much money they make, what kind of car they drive, how many kids they have, and so on. In a word, behavioral and demographic data like those mentioned above provide the answer to "what" - what do customers do, and what do they look like.

But is that enough? Surely people who buy the same things and who are in similar life situations must have the same preferences and behavioral drivers, right?  Well, maybe, but maybe not. Further, the answer isn't usually clear from the data that companies currently posses.  Rather, to understand "why" customers do what they do, available data need to be supplemented. One way to do this is by conducting quantitative survey research that focuses on obtaining attitudinal and needs-based information.  

With the picture complete - a firm understanding of what customers look like, what they do, and why they do it - a focused and appropriate marketing strategy can be developed and deployed.

Tagged in: segmentation

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