Segmentation and Personalization Are Not Opposing Forces

David Krajicek
Marketing Insights
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Key Takeaways
  • Segmentation and personalization live in completely different realms of the marketing ecosystem and are more complementary than cannibalistic. 
  • Good business is about balancing the personal and the scalable. 
  • Segmentation and hyper-personalization can work together to create a perfect mix of micro and macro, strategy and execution.

Contrary to many industry experts’ beliefs, segmentation and personalization aren’t opposing concepts. Here’s what you need to know to ensure that they work hand-in-hand to deliver deeper insights.  

In the eyes of some researchers today, I imagine that the word segmentation is about as hip as a word like, well, maybe a word like “hip.” Start talking about segmentations, and you might be cast as a geek, an outlier or even a dinosaur. For my part, I am not even sure if “hip” is still cool—and I may be wrong about “cool,” too.

I do know that at pretty much any dinner party, mentioning mass customization or hyper-personalization will serve you a heck of a lot better than segmentation. But while segmentations may seem like yesterday’s news, I would argue that they have lost none of their relevance. In fact, with all that can be done on-the-fly today—capturing click-throughs, adjusting targets every second or two and personalizing even TV ads—it has probably never been more important to leverage the kind of contextual, strategic information that segmentations are so good at providing: Insights that today’s in-the-moment data streams simply cannot deliver.

Why does hyper-personalization seem so darned sexy right now? Because in best-case situations, it has a direct link to sales—the holy grail of ROI. If I know you visited a certain three or four websites and clicked on one or two ads, I should be able to serve you a slow, straight-arrow pitch right in your consumer wheelhouse—something you will hit out of the park with your ample disposable income. For a certain group of consumers, this transformation of data streams into revenue rivers will work just fine, but for even medium-sized businesses, this is not enough to pay the bills, or to keep high-visibility brands in tip-top health. 

In case anyone might wonder, hyper-personalization—and many other techniques based on digital data—are no substitute for segmentation. A casual observer might say that one can replace the other. If we know where people shop and what they buy, we must have them figured out, right? What could be more personal or valuable than that?

In fact, segmentation and personalization live in completely different realms of the marketing ecosystem and are more complementary than cannibalistic. While some might cast them as warring baseball sluggers—old school and new—vying for the same spot in the lineup, they are actually excellent position players that each have a role on a winning team.

So how should we view segmentation to best understand its strengths and how it complements, rather than contradicts or competes with, digital executions like hyper-personalization? Here’s what you need to know. 

1. Segmentation is strategy. Hyper-personalization is execution. Most fundamentally, segmentation comes before hyper-personalization in the marketing and insights process—way before. Segmentations inform positionings and marketing strategies, and define the human landscape that products will inhabit. Nothing can happen with a product until we know its intended targets. Once we have determined our strategically valuable targets and defined which can be reached through various platforms and executions, we can think about personalization. Personalization is a higher form of activation, one with sophisticated reporting and analysis, but it is still activation. 

2. Segmentation identifies possible customers for brands. Hyper-personalization is focused on those who have already expressed an interest. Segmentations start with the broadest field of consumers and may come up with product targets who are highly unexpected, as well as others that seem obvious. If we are looking at a new type of handheld media technology—let’s call it the “fraglet” because it is a fragment of a tablet—we will learn that teens and early adopters in a certain county of Connecticut are the most likely buyers. No big surprises there. But we may also discover that, given a certain price point, moderate-income commuters love the fraglet because it is light and fits easily in even small pockets. Kids, on the other hand, are a problem because they lack the motor skills to use the fraglet’s small controls.

Hyper-personalization will help us refine these targets and may even identify new ones based on who clicks on what via a website, e-mail or tweet. But there may be fraglet target groups for whom digital is only part of the communications strategy, or not used at all. We may choose to reach one user group through magazine ads alone, and hyper-personalization would not touch these.     

3. Segmentation focuses on motivations. Hyper-personalization is based on actions. One of the limitations of digital data, which is the core of hyper-personalization, is that it rarely can tell us why people do things. To show up in Big Data, consumers need to take an action—buy something, call someone, look something up online—then we can say where, when and how they did it. But the intentions, wishes or fears that lead to an action do not show up in Big Data, and this can be crucial information for brands.

Segmentations, done strategically, can zero in on the fundamental human needs that become motivators and drive actions. Some people may buy the fraglet because they want to look cool; others may wish to simplify their lives, replacing bulky devices with small ones. By knowing these motivations, we can also figure out what is likely to satisfy these different targets and when they may start to feel ill-served. If hyper-personalization shows us that a certain target is not responding, motivations should tell us why and what to do about it. This type of understanding is even more important in a world of many consumer touch points and interactions. It grounds our work.   

4. Segmentation looks to the future. Hyper-personalization lives in the present. When you understand what motivates people, you have a better chance of knowing not just how they will behave today, but what they will do in the months to come. Motivations tend not to change so quickly. The means for expressing and acting on them may vary widely—online NASCAR discussion groups, restaurants that serve craft beers, apps that help locate quilting groups—but the desires for like-minded community, for taste sensations, or for self-expression will likely be life-long.

To capture the future, smart segmentations also need to be informed by a deep understanding of relevant trends. Millennials follow in their boomer parents’ footsteps, so where boomers go, millennials will likely follow. The desire to “have it all” and indulge in status purchases may be followed by a need to simplify. If brands can anticipate that inflection point based on trends past and present, they can be poised to meet the needs that their targets have not even begun to feel. This kind of intelligence and foresight can only come from a foundational process such as segmentation. We need this information to personalize well.

5. Segmentation finds white spaces. Hyper-personalization rushes in to fill the gap. When you understand what people want, not just what they buy, you have the opportunity to know which of their needs remain unmet. In general, the digital data streams that companies use typically measure responses to things that exist; discerning the wish for something that is not there would be subtle, indeed. Until the fraglet has been produced and sold, it does not exist in the world of Big Data—which is the essence of hyper-personalization—but when we know that people wish for simplification, portability, and anytime access to their digital world, we can imagine something like a fraglet. 

One limitation of Big Data is the difficulty of bringing data sets together. We may have the image of pulling purchase information from here and location data from there to know a consumer completely, but the reality of making this integration happen is complex and often simply unmanageable. It makes practical sense to let segmentation and other custom approaches give us the core information that we then apply to our executions across platforms—hyper-personalization being just one.

6. Segmentation is invisible to consumers. Hyper-personalization can be painfully obvious. I had an interesting conversation with a friend of mine. He is a loyal shopper at a particular sporting goods store, and he recounted a recent experience in which he went online to this retailer’s website to look for a new tent for a father/son campout. Lo and behold, an e-mail from the retailer appeared in his inbox the next morning recommending a few other models of tents that he had neglected to check out. In some worlds, this level of efficiency and targeting would be seen as smart and even friendly, but his first gut reaction was a sinking feeling of being spied on by what he thought was a trusted friend.

The experience put me in mind of the stalking sales associate at a furniture or electronics store: I just want to look, but the associate always wants me to buy today so that he can have the commission. I get it: Everyone needs to make a living, and some folks would find the attention helpful. But the creepiness factor is inescapable.

Hyper-personalization also has a tendency to live up to its name in unfortunate ways. A little personalization may go a long way, but the “because we can” school of digital targeting can lead marketers into overkill. A familiar example is the roaming online ad, cropping up on every website you visit for a pair of shoes you purchased yesterday.

Segmentation allows us to go about the business of identifying targets without getting in their faces. It is smart and subtle. Obviously, digital marketing can be both, as well, but this requires a level of expertise and sophistication that sometimes gets trampled in the machine-generated rush to sell.

7. Not everything needs to be personal. As with other aspects of Big Data, there is a temptation today to personalize and micro-target simply because we can. With the quantities of information at our disposal in digital environments, it seems as if every experience should be customized and aligned with the needs of individuals. This reminds me of marketers who feel that they need real-time data just because they can have it. In reality, an onslaught of data can be even less constructive than the absence of information: Different users and roles require different types of data, and having too much or too little is equally problematic. 

Similarly, every marketing effort does not need to be personalized. In fact, personalization and other digital techniques can be costly and complex, and should only be deployed where they make sense. Consumers are individuals, but there are also flocks that fly together, and one of the marketer’s black arts is to identify and take advantage of those groups, and to avoid the unwieldy task of making a separate widget for every customer.

At the end of the day, there is no good substitute for a strategic understanding of markets and where targets lie. Good business is about balancing the personal and the scalable. We need to get sharper in our understanding of the most important customer needs and motivations, not just the behaviors that consumers have already exhibited. Segmentation and hyper-personalization can work together to create a perfect mix of micro and macro, strategy and execution. Let’s let them mesh as the partners that they were always meant to be. 

This article was originally published in the July/August 2015 issue of Marketing Insights​.


Author Bio:
David Krajicek
David Krajicek is CEO of GfK Consumer Experiences North America.
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Displaying 1 Comments
Susan Brock
September 17, 2015

Great article!

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