Understanding Why Micro-Segmentation is Critical to Digital Experiences

Posted on by Heidi Unruh

It’s not easy for marketers to rise above the noise and connect with potential customers in today’s heavily digitized landscape.

Consumers are bombarded with advertising and marketing messages on every channel, yet they simply want experiences relevant to them on a personal level. But how do marketers go about delivering truly relevant content? Understanding your customers is the first step to achieving success and the best way to do that is through highly targeted segmentation—down to the micro level—that generates a personalized digital experience.

While delivering personalized content can be hard to get right, there’s no denying its importance. In fact, “Gartner predicts that organizations that excel in personalization will outsell companies that don’t by 20 percent. Segmentation is also a key step toward meeting consumers’ demands for more relevant experiences. Meanwhile, at least 42 percent of marketers believe they are not very good at segmentation for digital experiences.”

Research of more than 200 marketers found that one of the success factors attributed to digital experience leaders is delivering personalized digital experiences in real time supporting Gartner’s prediction, yet only 51 percent of digital experience leaders can deliver personalized experiences in real time today.

Customer segmentation vs. personalization
According to David Krajicek of the American Marketing Association, “Segmentation is strategy. Hyper-personalization is execution. Most fundamentally, segmentation comes before hyper-personalization in the marketing and insights process—way before. Segmentations inform positioning and marketing strategies and defines the human landscape that products will inhabit.”

More on Targeted Segmentation:

There are four main categories of segmentation:
1. Demographic Gender, marital status, age, income level and level of education.
2. Geographical Location data, such as country, state, regional area, city and neighborhood.
3. Psychographic Values, attitudes, and beliefs based on social status, personality type and lifestyle.
4. Behavioral Loyalty to a brand, purchase history and purchase intent.

Diving deeper into data
Once you have the broad categories sorted, continue refining them into smaller and smaller segments, known as micro-segments. Accurate micro-segmentation is critical to delivering digital experiences that truly resonate because it enables you to get a clear picture of what each tiny sub-group within the scope of your larger audience needs, what they value and how they behave. Advanced customer segmentation uses cross-channel behavioral insights and data from internal and external sources to discover, understand and define audience micro-segments. These micro-segments are validated in real time through digital experience analytics and other data sources.

Micro-segmentation is the future of marketing. Here’s why. Imagine you sell accessories like backpacks and panniers to bicycle commuters. Are all bicycle commuters the same? Clearly there are some common needs, but some have long commutes, some have short. Some live in rainy climes, some live in sunny locales. Offering your expensive breathable rain jackets to someone with a short commute in Arizona doesn’t make much sense. But then you may want to break it down further, based on past purchase history, gender, age and dozens of other factors until you have the perfect set of criteria. Get it right, and you’re unstoppable. Get it wrong and customers decide you don’t get them and go elsewhere. In today’s social world, the customer has all the power and micro segmentation like this is your best option for survival.

Getting started
To get started, the best practice is to consolidate data from silos across your organization into a single comprehensive database with real-time updates across channels, journey contexts and touchpoints. In this way, you can use the richest set of user data possible to better identify high-value micro-segments and from there deliver personalized experiences.

Going a step further, you’ll want to think about building audiences that have the most value for your organization or represent a huge untapped opportunity, such as:

● Frequent buyers Visitors who have made X number of purchases in a certain time frame
● Coupon responders Visitors who have redeemed a coupon in making a purchase
● Highest spend in a specific category Visitors who spent the most in an individual category, such as apparel, electronics, home décor
● Cart abandoners Visitors who spend time on your site filling up their shopping cart only to never check out
● Discount lovers  Visitors who always search for sales, lowest prices and promotional discounts

Dynamic messaging and recommendations
Not only do these segmentation strategies feed the creation of dynamic personalized content, but also behavioral messaging and recommendations. Recommendations are a proven strategy for increasing visitor engagement, user retention and time on site. The idea is to inject product, content or email recommendations at critical touchpoints or drop-offs to optimize for goals such as conversions or purchases.

Also important is the ability to expand personalized recommendations across your channels and use hybrid recommendation strategies to maximize average order value. This could mean anything from time-sensitive coupons in emails and to social proof highlighted on the site to build trust to retargeted ads based on items abandoned in a shopping cart.

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