More Segmentation Success

Last week, we presented a case study about a restaurant’s success using an off-the-shelf segmentation system created by Claritas.  Today, we’re presenting a similar Case Study that addresses how to utilize segmentation to increase your ROI. It comes to us from Experian via a DM News webinar. The Case Study looks at a few different firms and how they utilize custom segmentation systems to add to their profitability.
Correct Household Segmentation Boosts ROI

Choosing the right household segmentation can help increase your return on investment by more than 37 percent.

That was a key finding from a DM News webinar sponsored by Costa Mesa, CA-based Experian, a provider of analytical and information services to organizations and consumers.

“The data at a household level and geo-demographic level [are] very important,” said Cindy Eisenhard, vertical segment leader at Experian Marketing Services. “But the most important component is selecting the right segmentation systems.”

The webinar offered examples of several Experian case studies that used either fixed or custom segmentation, focusing on demographic information, attitudinal information or purchase behavior.

There are many differences between fixed- and custom-segmentation systems, Ms. Eisenhard said.

“Fixed systems have been proven in the marketplace,” she said, “while custom systems are validated based on method and vendor.”

She said fixed segmentation systems have more accurate projection to household-level, rich-psychographic and geo-demographic data and a direct link to media-planning tools such as syndicated days. They are most cost-effective, too.

One case study discussed a leading beverage company that needed to improve customer loyalty and marketing ROI. It selected an attitudinal, fixed-household segmentation system built from primary and syndicated research.

The segmentation system was able to identify customer loyalty and profitability, and the company received a 12 percent increase in customer loyalty – “its most valuable customer segmentation performance was even better,” said Regina Gray, vice president of analytics at Experian Decision Services, who also participated in the webinar.

The other case study discussed a pre-paid-wireless-phone service provider whose objective was to improve win-back and reduce churn by using a custom attitudinal-household-segmentation system to identify what motivates heavy brand users.

The results? The company saw a reactivation rate of 27 percent. It decreased win-back spend by half, and new customer churn was reduced by 30 percent, Ms. Gray said.

The final case study involved Advil PM. The brand used a custom geo-demographic household segmentation system to help target ads on AOL for its new brand launch online. The target was women of the ages of 35 to 64 who take over-the-counter medication for sleeplessness due to pain.

As a result of the system, Advil PM was successfully launched online using the same insight-driven targeted households.

In closing, Ms. Eisenhard reiterated the importance of choosing the right segmentation system for the brand.

She explained the importance of making sure that the segmentation system chosen is aligned to the primary need of the brand, actionable, clear to use, quick to implement and measurable.

“These are the key criteria to drive a successful segmentation implementation,” she said.

Now, clearly this webinair had an agenda (to help sell Experian’s off-the-shelf segmentation tools).  In our experience, customized segmentation systems ALWAYS outperform off-the-shelf tools.  Why?  Simply because custom segments are driven by the customer data they’re created from; they don’t have to ‘fit’ into one of the pre-defined segments that apply to any company, any industry.

And, you rarely find 50 segments (the common number offered by the off-the-shelf providers which is quite hard to manage). Instead, we typically find 6-8 distinct segments (of course, this always depends on the customer data).

The 6-8 segments, however, represent distinct clusters of customers.  Clusters with very different demographics.  With these defined clusters, you can then target your message and your offer specifically based on their characteristics.  When done correctly, this always boosts response.

The best way to understand the value of customer segmentation is to see a sample.  Just comment and we’d be happy to send you that sample. Or visit our site for more info.