AMA 2016: Market Segmentation Critical to Discovering High-Value Sources of Growth
The more marketing changes…
I was reading the AMA magazine (May 2016 edition) and discovered an article – 7 Big Problems in the Marketing Industry. The first problem, Effectively Targeting High-Value Sources of Growth was described in detail, and 7 top marketers weighed in. An interesting and useful post, to be sure. Combined, there’s a lot of knowledge and strategy, there.
But let’s ask a different question: What are the commonalities of all 7 top marketers? Do they agree on approach to solving these top problems?
Yes, they do. But the problems seem to revolve around a very basic concept that has plagued marketers from the dawn of time: Advanced Segmentation.
The more marketing stays the same.
Hey, you’re not getting away from segmentation anytime soon. And if you’re not segmenting on each channel, including Social, Search, Display, PPC, Referral traffic – anything really – then you’re just not doing enough, and your marketing dollars are in danger!
Basic segmentation revisited
You probably all understand the basic concept of segmentation, and I won’t bore you with the details. (if you need a primer, Wikipedia nails it) — but, do you really know that deep down dirty facts and advantages of what segmentation gives you? Are you using segmentation creatively?
Analytics is my life, and segmentation is a key component. Advanced Segments in Google Analytics (championed by Avinash Kaushik and his call to all ‘Analytics Ninjas’) has been touted for over a decade.
But I find, working with many marketers, the concept of segmentation gets lost in all the demands and strategies. This is a big mistake. So, let’s get down to a little basics.
Types of Segmentation
- Geographic segmentation. 10583, Chicago, the US, or 230 Garth Road. Could be a postal code, a street, or an entire nation. For in store purchases of services, you could filter by those you can (geographically) actually drive to the location.
- Demographic segmentation. Male, 45, never married, college degree. Aspects such as occupation, age, and sex. Education level is also a very important piece of segmentation.
- Behavioral segmentation. Previous survey takers who purchase online Product X, monthly, but only from Amazon.com. More focused on how an individual uses your product or service, knowledgeable they are about it, and what their general sentiment is. We could be super useful in reaching out with surveys to the particular target audience.
- Psychographic segmentation. Active soccer moms that are focused on PTA activities. General activities off duty, special interests, and what people do in their free time.
- Newish: Cultural segmentation. This is becoming more and more prevalent, especially in the United States, with the steady influx of a Latino population. Lisa Valtierra, founder of Valtierra Consulting, states that while US Hispanics certainly share in traditional segmentation aspects of the general population, those aspects alone are inadequate to effectively understand this ever increasing, diverse, and economically important segment. She advises that taking into account the cultural nuances of any culture as they relate to and differ from the general population, would help create a much better understanding of the attitudes and beliefs that drive consumer behavior. Applying a model of acculturation based on nativity, language and time also remains inadequate since it implies a relinquishing of one’s heritage. What is more appropriate is that there is an overlaying of cultures – an additive effect, so to speak – that results in a cultural adaptation according to circumstance. Proper segmentation analysis can uncover these pearls.
So, why is segmentation so darn important?
- Segmentation = less marketing dollars and better testing. Simply put, if you have to throw your money at everybody, you’re going to run out of money really soon. Segmentation allows you to concentrate your money into a particular group of people (which you can test more thoroughly), which will have a higher conversion rate. This is just smart marketing.
- Faster market testing = faster speed to insight. Marketing iteration is the name of the game. You could also call it marketing automation if you want – it’s all about speed to insight. This is where analytics plays a H U G E role, during testing. Iteration is the speed at which you can glean knowledge from your tests, and then retest in different, more powerful ways. When you target specific segments, you can make better tests for that segment, alone. It’s easier to test this way – the data is clearer by far. The results of that is you get answers to what works faster – that means you can get an insight on a daily basis, instead of a weekly basis, for instance. That’s 5x-7x faster. The faster you can turn the testing over, the faster your marketing engine will go.
“Iteration is the speed at which you can glean knowledge from your tests, and then retest in different, more powerful ways.”
- Less competition = larger SOV. The more you segment, the less competition you have. If you’re going against all companies in your industry, you’re making a financial mistake. Less competition means lower bidding and larger Share of Voice within your segment, which in turn translates to higher Conversion Rate. The more specific your product is, the less competition you have.
- Targeted messaging = deeper engagement. Customers that hear targeted messaging tend to have higher engagement, provided you find what’s engaging to that specific audience. Engagement means higher conversion and customer satisfaction.
- Targeted messaging = brand building & social amplification. When you target the specific customers that really love your brand, there’s a better chance of them becoming a brand advocate. You could also consider them brand champions. By their passion alone, they become leaders of your product or service.
Segmentation and an ROI Example
Segmentation can be applied directly in a funnel conversion path. Follow this method: ABC – acquisition, behavior, conversion.
- 5% visit site (acquisition), 60% purchase (convert) = 3% CR
- 30% visit, 10% purchase = 3% CR
- 60% visit, 5% purchase = 3% CR
Now, since all of them seem to have the same conversion rate (CR) there’s really no difference from a success perspective, right?
But that’s not true. One of these pathways gives you a far better understanding of what your target segment really is. Can you guess which one? (answer below, no peeking!)
Note that there is a funnel effect going on. Each step is a point of ‘disinterest’ – where your specific audience begins to disqualify at every step.
Some creative examples of how to use segmentation.
Facebook ads are incredibly powerful in terms of segmentation.
We have seen great success with Facebook ads over here at Think Around Corners. Facebook has a LOT of segmentation data on its users. This leads to better targeting, and that saves money.
Recently, we ran Facebook ads that sold out an entire concert venue, taking their occupancy average from 65% >>> 95% (with just two weeks of advertising!)
“Recently, we ran Facebook ads that sold out a concert venue, taking their occupancy average from 65% >>> 95% in just two weeks of advertising.”
If I wanted to directly compete with a competitor, I could run an ad, and then segment those people who only like my competitions’ Facebook pages, or the interest. That’s segmentation in action. This could turn a million viewers into 1000 perfect viewers, ready to purchase your product.
AdWords is expensive; it’s how Google makes most of its money. AdWords is ruled by segmentation, broken up by the keywords people use; you can think of each keyword being a segment unto its own. Keywords clicked can be paired with Landing Pages that are rich in that keyword; you can directly link this to Quality Score in AdWords.
That means you need a page specific to each keyword – but that’s tremendously time consuming and prone to error. Use a segmentation tool like URL Params (in this instance for WordPress) – which means need one – and only one – page for ALL the keywords you’re trying to drive traffic for.
Struggling to connect with the right people? You could search LinkedIn easily. Use this and see what you come up with:
- Only people, not businesses
- CMO as a title
- Geographic target NYC
- Only 1st degree connections
How many people do you have? Try it again for your target audience!
BTW, this is great if you want to throw a survey out there to your peeps. And if you wanted to promote on LinkedIn as a select audience, this is the way.
Google Analytics and Advanced Segmentation
I’ll say it once but it’s really important: Don’t think just because you set up Google analytics that you’re going to be able to glean insights from it. You simply can’t do Google Analytics appropriately without customized Advanced Segments. If there was one capability to learn in GA, Advanced Segmentation is it.
Creating Personas for a Website
Think of tracking only one type of person throughout the entire site! For instance, if you have a button on your website that says, “Are you a Real Estate Agent?”, there is a distinct possibility that if they click on that, they are a real estate agent. Real estate agents have different personas than homeowners, and worthy of parsing when reading GA reports and dashboards.
Another example: Segmentation on culture: Spanish speaking visitors might be interested in only certain products or services, vs. English speakers. Different patterns of site usage might reveal deep insights.
Now, setting up Personas in GA might require an expert (such as us, it’s true!) to install, but it’s so worth it, because the data you glean from this segmentation shows you how your site can make more conversions and money.
What’s your story on Segmentation?
I bet everyone reading has a GREAT story with segmentation. Would you consider sharing your story in the comments section below? We love comments!
Keep on Segmenting!
Greg Cox has helped over 100 clients on over 150 projects attain rankings, traffic, and customers online (with a 5:1 ROI, we might add). He finds just enough time to wander through the forests, do some great cooking, and have some friends over for dinner.
* #1 is the best example of effective segmentation, because the target audience has been identified – 60% conversion (that’s 6 in 10 visitors to your website) means you have found a GREAT target segment, but you DO have to increase the quantity of visitors.