adma forum 2009

TECHNOLOGY & SEGMENTATION MODELS

FEBRUARY 2009

ADMA BACKGROUND

New website should be based on the pillars of ADMA –

Protection

Promotion

Education

Membership.

SEGMENTATION

A market segment is a group of people or organizations sharing one or more characteristics that cause them to have similar product and/or service needs

IT IS DISTINCT FROM OTHER SEGMENTS

IT RESPONDS SIMILARLY TO A MARKET STIMULUS

IT CAN BE REACHED BY A MARKET INTERVENTION

It will continue to be critical in understanding the segment target for a particular product and relating the product's brand essence with the right communications strategy in a segment-specific manner.

content prolification

WHY DO WE SEGMENT

to save wastage (cube segmentation slides)

to save the planet (notes to Update green issue)

… .to save money

IMPACT OF THE GLOBAL FINANCIAL CRISIS MEDIA FRAGMENTATION NEW ENGAGEMENT MODELS TARGETING

IMPACT OF THE GLOBAL FINANCIAL CRISIS MEDIA FRAGMENTATION NEW ENGAGEMENT MODELS CONSTANT CHANGE

IN ADDITION TO THAT three circles of focus (online)

THE real problem

Static consumer segments have little value in a rapidly-changing environment

Consumers are never part of just one segment

By controlling the communications they receive, consumers have control over marketing activities.

it is a logical extension of the segmentation technology that became popular in the mid-80s. As technology advances, segmentation will become even more reliable based on actual purchase behavior as opposed to perceived social behavior.

UNPREDICATABILITY

I am challenging that belief based on three observations. The first is that the rather static definition of consumer segments is becoming less reliable in our extremely volatile society, especially in today's economic climate.

A consumer's lifetime value may have decreased significantly in the past six months, a fact not reflected by any segmentation method.

A person might be out of a purchase cycle for a particular product because of a significant household change (GFC layoff clippings)

Or into the purchase cycle of something previously unthinkable (a stroller, middle aged guy on a harley).

These life-changing events are becoming more difficult to predict because consumers live their lives on a much less traditional path than they did 10 or 20 years ago.

CONSUMERS ARE NEVER PART OF JUST ONE SEGMENT

Second, consumers are never just part of one segment. Rather, they feel, rightfully, that they belong to a multitude of segments.

They can be the professional executive in the morning, the boyish sports fan in the evening, the churchgoing father figure on Sunday.

All three are the same human being, but represent three different consumers and mindsets.

This individual belongs to three segments with different behavior patterns, product affinities and interests

and this probably changes depending on the time of day or the day of the week.

Some people move through several segment identities every single day.

Individual consumers may belong to different segments depending on the product category.

If you use deal-proneness as an example, a "bargain junkie" who only buys clothes at discount retailers may be willing to pay a premium when it comes to organic fresh produce. (manderina duck vs roselle markets, yardsales)

In contrast, someone who just paid a fortune for a designer handbag may not be willing to flip the bill for a four-dollar cup of coffee.

CONSUMERS ARE IN CONTROL

Finally, consumers are gaining more control of any marketing activity. And they like it. Yes, they like to receive relevant information

… but even more, they prefer to choose their own relevant information.

And in truth, it's easier to let them choose and decide what is relevant for them than to predict relevance based on any expensively calculated segment identity.

Andrew Ehrenberg, a marketing statistician proved that in most cases correlation between cross-purchase and repeat purchase could be modeled as though it was random (following the Dirichlet formula).

In effect this proves that segmenting is marketing mythology and about as effective as praying.

IF YOUR REAL GOAL IS TARGETING

IT’S A BIT LIKE FISH BOMBING

SO WHAT TO DO NOW

ENTER TECHNOLOGY…

RECOMMENDATION ENGINES

music

amazon

effectiveness of recommendation engines and algorythmic process

RELEVANCE AND OPPORTUNITY

two of the most successful product and retail companies, Apple and Amazon, are not masters of consumer segmentation but experts in building relevant products that consumers choose.

SOCIAL NETWORK GROUP SELF IDENTIFICATION

Facebook, MySpace and even Google are behaving similarly. They are enablers of self-segmentation and self-identification through group and interest identities

ASSISTED SEARCH

USER EXPERIENCE HONEYCOMB

SELF SEGMENTATION AT WORK

Build correlation clusters between purchased products and services, and serve them up as recommendations (Amazon, Apple's Genius feature).

Offer networking opportunity based on self-acclaimed interests (Facebook, LinkedIn).

Design and provide content or a deal-alert function that automatically informs consumers about something new or interesting in the "opted-in" interest domain of a consumer (Google Alert, Orbitz Fare Alert).

Enable sharing of consumer-generated content or feedback in the context of your brand (BlueCross' "Power of the Human Voice" campaign).

organizations are spending too much time focusing on their new found abilities and less time on where the rubber meets the road …the customer experience

HOW TO WORK OUT IF ITS WORKING FOR THE MARKETING DEPARTMENT