CRM - February 2008 - (Page 38)

CUSTOMER SEGMENTATION With segmentation, marketers have no choice but to listen to their customers. though, there are subgroups of individuals who will respond differently to different campaigns. “There are very few people who just throw things against the wall and hope it sticks,” says Richard Hren, director of product marketing at SPSS, a provider of predictive-analytics software. The fragmentation of the market today is so extreme that even if you wanted to target “mass” audiences, the task is literally impossible. Hren says that the average person is hit with approximately 5,000 advertising messages a day. Twenty years ago, an attempt to reach 80 percent of the American population could be covered by placing three advertisements on the three major television networks. Now, he says, it would take 150 to 200 advertisements to reach the same number of people. “Even if you mass market a product, you can’t reach [consumers] in a mass way,” Hren says. Instead, marketers end up buying just a portion of their intended audience. Making sure it’s the right portion is the trick. Fragmentation has led to such market disarray that targeting is now a chore. (See “Oh, Behave!,” January 2008, page 24, for more on the sorry state of behavioral targeting.) But this lack of efficiency has rubbed end users the wrong way, helping to explain why, for example, email blasts achieve such low response rates or never even reach the inbox. “Organizations have relatively low credibility with their customers these days,”says Denis Pombriant, founder and managing principal of CRM consultancy Beagle Research Group. “It’s the great American shoot-from-thehip cultural thing: Shoot first, ask questions later.” As a result, marketers often seem to lack authenticity.“The more you can rifle-shot your approach to your customers, the more authentic you’re likely to seem—and the more credible,”Pombriant says. Once outside their mass-marketing comfort zone, marketers quickly recognize the value of segmentation—some more than others. “Every business out there does some form of segmentation, it’s just a question of sophistication,” states Anthony Deighton, vice president of marketing at business intelligence software provider Qliktech. It can be money well spent. Segmented properly, a customer list can have significant shelf life and provide a significant return on investment. Matt Edmunds, general manager of collections at Massachusetts-based automated customer contact solutions provider SoundBite Communications, reports that analytics can help clients determine which customer segments want to be called when, and which variety of voice— American female, British male—they’re most likely to respond to. These efforts have helped SoundBite clients achieve anywhere from a 15 percent to 200 percent lift in customer conversions. Segmentation leads to personalization—or at least the appearance of it—intensifying B2C communication to foster long-term relationships and, ideally, long-term profitability. “The idea here is to make that customer experience for that homogenous subset of people maximally impactful,” Hren says. “Identifying those packets upfront allows you to really [spend] your marketing dollars in the best possible way.” Despite clear benefits, however, successful segmentation remains the hallmark of the elite. Only 30 percent of SoundBite’s clients, for example, utilize its analytics service, Edmunds says. Not surprisingly, these are most likely to be Fortune 500 companies, but Edmunds says he anticipates a rise in adoption soon. This belief also resonates in a recent Direct Marketing Association survey, in which 54 percent of direct marketing professionals—a surprisingly high percentage—report considering lifetime value in their marketing decisions. Also, your segmentation process should be consistently reevaluated. In the spirit of this month’s cover story (see “CRM Gets Serious,” page 22), we look at segmentation according to three levels of sophistication. THE NOVICE: HACK AWAY Starting simple is always best. “If you’re not doing anything, don’t try to boil the ocean, or whatever bad metaphor you’re looking for,” Hren says. There’s always time to get more complicated later, but jumping into it too quickly will only risk a corporate burnout. As Hren says,“It’s much easier to build off of small successes than it is to recover from a massive failure.” Successful companies are those that are able to realistically evaluate their needs and develop solutions that fit those needs.“You need to really identify the business problem and how you’re going to use [segmentation] first,” Hren says. Pombriant agrees: “It takes a little bit of time, a little bit 38 CUSTOMER RELATIONSHIP MANAGEMENT | FEBRUARY 2008 www.destinationCRM.com http://www.destinationCRM.com

Table of Contents Feed for the Digital Edition of CRM - February 2008

CRM - February 2008 Contents Front Office Reality Check Customer Centricity The Tipping Point The Loyalty Riddle CRM Drives Down-Market Out of the Gate: Marketers Rate ’08 Traits The Pulse Consultants Adapt to CRM’s Changing Landscape Required Reading Cover Story: CRM Gets Serious Contact Center Solutions Always On Rumble in the Office The Smallest Slice Tying Up Cable’s Loose Ends Burning Up the Paper Trail Sunny Skies for Knology No More Bumps for BlueRoads Secret of My Success Re:Tooling Scouting Report Pint of View

CRM - February 2008

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