Segmentation = Happiness Ian Lurie

This is an overview of segmentation: What it is, why you need it, and how to use the new Advanced Segments tool in Google Analytics. It’s based on a presentation I gave at the 11/11/08 SEMPDX HotSeat. A grand time was had by all.

A segment , in analytics terms, is a subset of your audience, defined by just about any criteria. Examples of segments, on and off the web, include: All people who click on the ‘buy now’ link. Everyone who drives a small car. Hockey moms (if you believe that sort of thing). Everyone who stays on your site for more than 2:00. Everyone who visits your ‘features’ page. If you can track it, you can use it to create a segment.

A segment , in analytics terms, is a subset of your audience, defined by just about any criteria. Examples of segments, on and off the web, include:

All people who click on the ‘buy now’ link.

Everyone who drives a small car.

Hockey moms (if you believe that sort of thing).

Everyone who stays on your site for more than 2:00.

Everyone who visits your ‘features’ page.

If you can track it, you can use it to create a segment.

Wait! Don’t leave! I can already see you nodding off: More analytics hocus pocus, blah blah blah. Why should you care? Segments are important . Here’s a real-world example of failed segmentation gone horrifically wrong…

If you’ve traveled by air recently, you’ve heard the agent say “That’ll be $15 for your first bag, please”.

Someone at an airline looked at the balance sheet and said, “My GOD, do you realize that we’ve been getting people’s luggage to their destinations (mostly) for FREE?!!!. We need to charge for that!” And with that, they high-fived each other, thinking their financial problems were solved. Everyone checks bags, right?

Wrong. Everyone didn’t just start paying for their checked bags. Instead, most travelers switched from taking a single carry on…

To carrying just about everything they owned onto the plane. That’s led to more flight delays, aggravated passengers, frazzled flight attendants, and higher costs .

It’s too soon to tell, but it looks a lot like the airlines spent $35 to earn $15. Why did they make such a huge mistake?

Airlines It’s tempting to make assumptions.

But the truth is that the airlines have lots of smart people working for them. They just failed to see how their audience was segmented with relation to luggage, and assumed nearly everyone was a captive, checked-bag flier:

When the reality is that only a small portion of their customers check big bags. And only a small portion of those travelers have the manners and brains to check bags that are too large to be carry-ons.

This is a classic segmentation error: Lumping your whole audience into one group, and failing to see the subtle divisions within that group. Had the airlines looked beyond their profit/loss margins, they would’ve divided their audience into business travelers, tourists and weekend travelers. They would have immediately understood that bag check fees weren’t the answer because only one small segment of their audience was really forced to participate. The rest could really screw up the works.

Internet marketers make the same mistake all the time. We assume that a customer in New York will buy the same way a customer in Kansas City does. Or we assume that a customer visiting our site at 9 AM is the same kind of buyer as one visiting at 1 AM. Or, we assume that customers driven to our site from paid search are the same as those driven to our site from organic search.

Have you ever had your client or boss walk into your office and say “Hey, since we’re #5 in the organic rankings for “widgets”, let’s shut down the paid search campaign for that word? We’ll save some money.

That could be a huge mistake, if you don’t understand the difference between your paid search and organic search audiences. Here’s how you can check using Advanced Segments in Google Analytics... The rest of this presentation assumes you have a Google Analytics account. If you don’t, you should get one. It’s free, you know…

If you don’t already, you’ll soon have this little ‘advanced segments’ link visible in your Google Analytics reports. Click it…

… then click ‘Create new custom segment’.

That’ll get you to this page. Simply drag-and-drop the criteria (dimensions or metrics) from the left-hand side to the right. In this case, I’m going to drag ‘medium’…

… and pick ‘Matches Exactly’ for my condition. Google Analytics then shows me a helpful list of possible options, relevant to my dimension. I’m going to choose ‘cpc’ (cost per click).

You can create complex segments by combining different dimensions. Here I’ve used an ‘and’ statement to exclude a specific keyword from my segment.

Then I’ll create another segment for ‘organic’. Note that you can click ‘test segment’ at any time to see how many visits will appear in that segment – I know that my segment will include 20,901 visits:

Save the segment and go back to your report. You’ll see an ‘Advanced Segments’ link at the upper right. Click it…

… and you can pick the segments you’d like to apply to your report:

The result tells me, very clearly, that I can’t afford to shut down paid search yet. Organic search is improving, so I may someday be able to live without CPC. But not yet:

That was a very simple example. The possibilities are nearly endless. I could check for: All visitors with screen widths larger than 1000 pixels, matched against paid and unpaid search. All visitors from paid search who stay on the site longer than 2 minutes but don’t buy. Or time-to-purchase for paid versus unpaid search.

You could do all this without using Advanced Segments. But you’d have to do a lot of cutting and pasting into Excel. This is easier, plus you save your segments for later use.

One last note: Segmentation is a tool not a report. You apply segments to reports to recategorize and analyze your data.

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