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Designing advertising, services, products or doing media planning requires us to understand customers and target markets. The more we understand about behavioral preferences, attitudes, lifestyles and multiple other variables, the better we can do our jobs. Combining all sources of data: research, analytics, buyer segments in real time bidding (RTB) targeting engines, qualitative research.. its such a wealth of data that it has become too big to manage. Right now we need to be able to simplify and turn such wealth of data in to understanding and actionable priorities. This is exactly what segmenting should be all about.
Segmentation 1.0 is about creating customer understanding inside organization. The segments are actually stand alone pictures and stories about customers. These segments can’t be connected to data, which means that they steer creativity but don’t offer KPI’s, real business management tools or monitor market share changes.
Segmentation 2.0 is about more data driven and actionable segmentation. Dynamic interest grouping with online targeting tools allows you to calculate probability of click or purchase and adjust your investment/segment accordingly. Same method applies to existing customer analytics, which offers steering such as next best offer, likelihood of negative churn or the level of monetary value of different segments. It’s already about making data actionable. However, these technology specific, not market level segments.
There are two cases of Segmentation 2.0 that are now leading the way to 3.0 available in Finland. Finland is interesting because of advanced population register allowing you to do interesting solutions easier than elsewhere. However, these learnings will soon become internationalised.
The story about Finnish church is quite eye opening. Since 2000 the Finnish national church membership level has dropped from 85% to 72%. The Church is in crisis.
Church has been responsible for registering population since the beginning of organized society in Finland. Everyone who gets baptized start paying church tax as part of their national taxation. My personal church tax was more than 1000€ last year. Losing members means losses in church taxation and losing young people means losing their life time taxes calculated in billions.
Church needed tools to understand their members and ways of preventing churn. Actually the church needed to re-invent them selves. They needed segmentation. Jarmo Lipiäinen, head of Kotimaa’s sales and marketing recognized this challenge and took action. Member 360 was born. This segmentation divides people in to segments by their religious tendencies and multiple other lifestyle variables. This segment tag is attached to everyone in Finland, member or not.
Picture: Main and sub-segments
Picture: Example profile – Disconnected experience seekers
Making the segmentation applicable required tools. Jarmo Lipiäinen led the project and they created data visualization tools for parishes. You can now look at areas and understand what kind of segments are there and buy addresses to people from different segments. This allows church to speak to their members and prospects in language and perception they can agree with. Church is not just about religion, it’s a second layer of safety net for under privileged people and has multiple other roles in society . People don’t leave church only for religious reasons, they expect church to act for greater good and help people. Church stands for a lot more than God.
Since the Member 360 was introduced, now +100 parishes are using the tools and changing the way church works and is relevant to their members. Church is now rewriting their story, hiring service designers to design engagements and services for members. One experiment, internet priest with chat, was very popular among young people who were in distress but would never have reached out to church advice or someone to talk face to face. The role of church, the message and ways of being part of peoples’ lives is now changing fast. Church is learning member centricity.
Commercial 2.0 segmentation
Another initiative took place simultaneously on commercial side, Fonecta Buyer Classification. This toolkit looked at people’s lifestyles and buying preferences and was also connected to the entire population. On top of that, it is also connected to media buying tools and TNS research data. I have personally implemented multiple cases with buyer classification in travel, restaurants, hotels, telco and retail. Buyer classification has 8 main segments and sub-segments.
- Budget-Concious young adults
- Bargain hunters preferring finnish purhases
- Parsimonious Pensioners
- Brand-Focused thrill seekers
- Ordinary citizens
- Service-seeking couples
- Family-focused quality seekers
- Solid and prosperous elite consumers
The segments can be attached to your own customer database which allows you to see how many people there are in each segment, how they behave, how valuable they are, what do they buy. You can use this understanding to reach out potential new customers out there based on insights from your own data. Buyer classification allows you to connect internal and external realities with same segments and also monitor market development in numbers: who’s winning and losing what kind of customers. Business is not just simple numbers – won and lost, its very much about value too. The whole point of segmenting is about understanding where to concentrate your resources and optimize your profitability. You have to make choices, segmenting allows you to do make better decisions for those that matter most. This kind of generic segmenting attached to media buying and external data is a whole new game for business KPI’s and corporate management. It’s a possibility to connect creativity, resource allocation and business goals together
Human 360 – Next generation – segmentation 3.0
The next level is currently entering the market. Same segments are now connected to online behaviour too. You can now do online media planning by segments and use same segments in real-time-bidding. That’s a minimum standard in this day and age, but there’s more.
Member 360 and Buyer Classification were single purpose segments that could be adapted to other purposes but weren’t optimized for them. The next generation is about connecting multiple segmentation tools together:
- 1st You have your own core segmentation or generic segmentation that has been made for your business sector’s specific needs. This segmentation is used for business management and company wide KPI’s
- 2nd You have supplementary contextual segments for further insights: eg. Food, travel, technology, sports, politics, religion, fashion, housing,… you name it
To say it simply, the new generation approaches individuals holistically. People have different kind of passions and interests, capabilities and life situations. These contexts can be translated as passions and orientation. You can now approach people based on their orientation and you can analyze what kind of passions and orientations your current and potential customers have. You can also calculate scores for each segment allowing you to evaluate which approaches to your customers have strongest likelyhood of meaningful impact. Creation of business scenarios and relevant communications has never been easier.
Such insight can be used for creative planning, media planning, new service development, partner selection,.. well, designing the future of the company.
Segmentation 3.0 enable us to connect 4C’s together and create a corporate GPS for success:
Sofar Google has given a price for words with Google Adwords. This kind of segmentation will give similar price variation for people, it becomes the unifying currency in media buying. Some people have a much higher profitability potential than others. The future of media profitability will be dependent of reaching those audiences and people, advertisers are willing to pay most for. We are truly entering a new era in data driven analytics, planning, marketing, creativity and management. This development will have major impact on general management, mediabuying practices and entire creative industry. This kind of methods and tools will allow us to work miracles in unseen scale.
This development will further enhance marketing’s strategic role in management and strategy. Data will enable us to manage end-to-end processes better than ever
Author Toni Keskinen and Jarmo Lipiäinen have published “Journey with customer – from product centricity to symbiosis strategy” –book in Finnish 2013.
- Strengthening the CMO/CEO relationship: Interviewed CMOs report that they are strengthening their credibility with the C suite, and CEOs in particular, through best practices that include framing recommendations in ROI terms (beyond creativity and the marketing budget’s P&L); educating themselves and top management on how marketing can contribute to the company’s growth/business performance; documenting where marketing opportunities exist and might be captured; and highlighting risks while laying out how those can be mitigated. Successful CMOs are also building relationships with fellow senior managers and creating intra-company alliances based on their ability to demonstrate marketing’s impact on their co mpanies’ performance.
- Social marketing: Social media are not only transforming traditional principles of brand-building and customer loyalty, but altering human interaction fundamentals, says CMG. While CMOs are best-positioned within their organizations to lead the mission of understanding and mastering these complex trends, by virtue of their ages/backgrounds, few are “native social-media speakers.” Study respondents reported that they are mastering these challenges through “generational seeding”: Creating internal teams that include younger, cyber-intelligent employees. This also brings the benefit of developing a talent pool that should secure the organization’s future.
- Managing Millennials: Millennial-generation marketing employees are critical because of their inherent understanding of social media, but their insights are too often dismissed because of their inability to present such insights with “crisp logic and presentation cosmetics,” marketing chiefs pointed out to CMG. Investing the time and energy to “connect the dots” to develop this generation’s thinking can unlock crucial learning for CMOs and their organizations, the participants stressed.
- Demand creation: Successful CMOs realize that the ability to position themselves as the rightful keepers of the “innovation flame” – the critical, differentiating mission of creating the perception among consumers that a brand is delivering what they need/want even before they know it themselves – is extremely powerful, and the key to advancing their influence within their companies.
Behind CMO survey that is done twice a year is Christine Moorman the Director of The CMO Survey and the T. Austin Finch, Sr. Professor of Business Administration, The Fuqua School of Business, Duke University. Full study is available below: