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Segmenting for Success
by Pam Crumpler.

Pam Crumpler has a long history of data and direct marketing experience within the publishing and telecom industries.  Her publishing experience includes leadership positions with Meredith, Advanstar Communications and Medical Economics.  She may be reached at plcrumpler@gmail.com.

I'm a bit of a nut about customer centric marketing.  Truth is – I'm a CRM evangelist.  I believe any business that puts their customer front and center  will ultimately win.  It’s been proven in all types of businesses and certainly is no less true for publishing.

When full panic hit business in 2009, I became fascinated with businesses which seemed to be prospering.  Their restaurants were full, people filled their gyms, and sales of their products were holding steady in a compromised environment.  In talking with these business owners, the commonality was each really knew who their customers were, understand what their customers valued, and provided a quality product/service at a reasonable price.

Until recently, one of my favorite examples of CRM within the direct marketing industry was for a skin care company.  For years, I have purchased skin care products from this company.   They have high quality products which you can buy in retail stores.  But, if you use their website you can purchase bundled products at exceptional prices.

On top of the savings, receiving their products was a bit like Christmas.  I literally sat down to enjoy the process.  You opened the box to find your products individually hand wrapped, lying in a tissue lined box – just like a gift.  In addition, they always put that little something extra in the box – an oversized sample of something you didn't purchase but might want to purchase in the future, or a book, or a cosmetic case, etc.  It left me feeling good because the company packaged my products in line with the investment I made, I had actually saved a respectable amount of money by buying direct and I received that little something extra.

Unfortunately, as with all, the economy impacted their deliveries so that there is no longer any tissue paper, no longer hand wrapped products – but bubble wrap thrown in the box to secure items in one batch.  The little something extra – really is a little free sample. They took away the gleeful experience and made just another product delivery.  And frankly, my customer loyalty is not what it was.

The secret to successfully scaling CRM practices into any large organization is to really understand your markets.  My experience has translated this into implementing some type of segmentation structure to identify and understand customers – even if you serve a niche.  For publishers, this often means transitioning focus from sales channels to focus on specific consumers. It also means determining how to best integrate channels – online and offline – to reach specific consumers.

In 1996, I worked on my first research based customer segmentation and predictive modeling study.  The company invested hundreds of thousands of dollars in the project 5 times with 5 different vendors before we felt as though we had it “right”.  Not being a statistician, it was difficult for me to wrap my head around the quantity of responses we used to project the behavior/attitudes of millions of individuals.  Equally complex was trying to understand the correct way to use the information.  But in the end:  It worked.

As the years have gone by, the number of companies using research based segmentation/predictive modeling to drive marketing strategy has become almost common.  Equally common are companies using segmentation studies incorrectly in their market approach.

Although I've seen various attempts in establishing a structure, it’s generally the research based initiatives that prove to be the most valuable.  They become more valuable by aligning psychographics on top of demographics.  Through development of predictive models, this then provides marketers the opportunities to not only identify who their customers and readers are, but how to talk to these people in the most effective way possible.

In its most simplistic form, our targets identify people we want to talk with.  Obviously, the target may be identified in numerous ways, but generally it’s a source of names identified at some level of detail. 

Through a segmentation study, you will be able to identify the hot buttons which make people purchase your product.  Do people in a particular segment prefer communications through a specific channel, do they have particular hot buttons relative to your magazine or product, will specific creative images impact response, etc.  Bottom line, segmentation takes your communications to a multi-dimensional level allowing you to optimize your spend in acquiring or retaining customers. In its most simplistic form, this mean creative has a look, feel and message which appeals to the audience in Denver – which is probably not the same look, feel and message for the audience in Atlanta.
These segments can be identified by running the target names through a model to determine the segment in which they fit.  The same segment may lie across your various target groups as shown below.  If done appropriately, the segment will tell you how to best communicate with niches of people across your target. 

 

Segment 1

Segment 2

Segment 3

Segment 4

Target 1 

 

 

 

 

Target 2  

 

 

 

 

Target 3 

 

 

 

 

Target 3

 

 

 

 

Aligned with integration of online and offline marketing, this further provides marketers the ability to significantly improve response rates through vigorous testing.  A company I recently worked with realized a 35% improvement in customer acquisition through implementation of a segmented customer acquisition strategy.

The bottom line is the better we can identify potential customers, know our current customers and treat them appropriately, the more power we have in acquiring and retaining those most valuable to us with improved ROI.