History of Segmentation

DataBlog_150109_segmentation

Segmentation first arose as a marketing term one year before Sputnik 1 was launched into space. Wendell R Smith wrote in the Journal of Marketing in 1956:

“Market segmentation involves viewing a heterogeneous market as a number of smaller homogeneous markets in response to differing preferences, attributable to the desires of consumers for more precise satisfaction of their varying wants”.

Smith compared other product differentiation strategies to attempting to cut a layer of the marketing “cake” and knifing crudely across all parts of the market. Segmentation, meanwhile, he suggested was more akin to taking a slice: cutting vertically into one area of the marketplace and so producing: “a depth of market position in the segments that are effectively defined and penetrated.”

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These ideas went off like an A-bomb in the late 1950s and early 1960s.  The world of Mad Men was predicated on hitting consumers directly in their aspirations. Manufacturers developed ever more complex iterations of the product “range”. Consumers got used to being targeted from cradle to grave.  A nerdy boy reading a comic would find adverts from Charles Atlas inside, telling him he could overcome bullies by subscribing to his exercise system.   A young girl would find adverts for toy Hoovers. A teenage girl would find adverts telling her how to “Get your man and hold him” by wearing the right brand of cologne. A teenage boy would still find adverts for Charles Atlas, alongside adverts for pimple removing creams, fake diplomas and record racks.

Okay, some of those examples speak of a lost era, especially when set against the arsenal of databases, complicated algorithms and psychometric surveys we use today. Now that the process of segmentation has become as aggregated, convoluted and fiendishly complicated as cloud technology can make it, it”s easy to congratulate ourselves for reaching an apogee of sophistication. It”s also easy to think that this such segmentation is a modern phenomenon.

Yet while the techniques are new, the essential principles behind modern segmentation are not. If you believe that segmentation is the art of finding out what people want and giving it to them, you might even argue that merchants carrying salt to farmers who needed meat have always followed this principle. And following on from that, you could say that segmentation has been around since before humans even learned to write.

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Customers are for life, not just for Christmas

Christmas Segments from VisualDNAMany brands and retailers face Christmas with both excitement and fear. Excitement for the possibilities of peak, and fear that seasonal discounting may hurt the bottom line.

In the run-up to Christmas, brands and retailers traditionally spend on marketing and discounting via generic festive messages they hope will convert enough potential buyers to beat the competition. But budgets could be spent far more effectively if it were possible to understand customers and prospects – and the Christmas buying experience they’re after.

People engage with Christmas shopping very differently: some have it all wrapped up by December 1, while others are still rushing around like headless turkeys on Christmas Eve. There’s Bargain Hunters who scour the web for the best deals, Family Shoppers who browse and browse to find perfect gifts for their nearest and dearest. There’s The Early Birds who enjoy a clinical Christmas and The Bohemians: those who buy big for a shock and awe season.

Conventional data might reveal what online customers are doing, where and when but it glosses over the fact that every consumer – offline and online – is a living, breathing human being with a lifetime of experiences and a distinctive set of character traits which shape their behaviour. Personality plays a huge role in governing how people respond to products, brands, advertising, promotions, onsite design, selection, pricing and much more besides.

If brands and retailers’ ultimate aim is to reach prospects on an emotional level – for Christmas or at any other time – then personality is vital information for advertisers to segment customers based on who they are, how they’ll shop, and what message will best resonate.

New approaches are now emerging that can provide a much broader picture of each online consumer, including insight into their psychology. As a result, a growing number of brands and retailers are now taking their first steps into a new world of market segmentation based on what truly motivates people and on what drives their purchasing behaviour. Researchers in psychology have spent decades building rich models based on the “Big Five” personality factors – Openness, Conscientiousness, Extraversion, Agreeableness and Neuroticism.

[Read more…]

VisualDNA integrates with AdapTV, Advertising.com, DataXu, Krux & Rocketfuel

Last week we announced new integrations with AdapTV, Advertising.com, DataXu, Krux and Rocketfuel: meaning a wider number of DSPs and now DMPs can access our data. Coverage in Adotas and MediaPost.

 

 


VisualDNA in the news – Ed Weatherall in Retail Week

“Laura Heywood’s loyalty card feature highlighted the challenge of analysing multiple data sources for a single view of the customer: little wonder CMOs increasingly resemble CIOs these days.

For CMOs to have a chance of implementing their data insights these sources need to be brought together. By integrating our clients’ offline purchasing data with online behavioural data and self-declared psychographic data, we generate insights that can’t be found in any single data source.

With predictive analytics now making data more accessible and actionable for CMOs, big data will play an even bigger role in the battle to win and retain customers, so being able to actually use these data sources for marketing is key.”

Ed Weatherall, Director Business Development, VisualDNA

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VisualDNA in the news – Ian Woolley, DataIQ magazine

Ian Woolley, CCO VisualDNA, interviewed in the latest quarterly DataIQ magazine:

“We think the market will move forward with brand preference and emotive data”

Full digital edition here (requires registration)

View PDF: VisualDNA-DataIq-2013

VisualDNA in the news – Ed Weatherall at Figaro Digital

VisualDNA Business Development Director Ed Weatherall spoke at Figaro Digital”s Digital Marketing conference last week.

In a wide-ranging session “The Intent Economy – Revealing the Invisible Truth About Your Customers”, together with Call Credit”s Paul Kennedy, Ed outlined how offline financial data can combine with online psychographic data to help casino marketers go deeper than demographics to develop a more complete “single view” of their customers.

Watch video.

See also: “Boys wear make-up and girls go to the pub on their own. It”s now much more about the tribes people belong to – their personalities and aspirations. It”s belief systems that actually hold people together.”

Full Ed Weatherall interview on the Figaro Digital website  – Editorial Article: Up Close and Personalised

 

When VisualDNA profiled Mindshare at #mshuddle #infographic

VisualDNA in the news – Brian O’Sullivan in ExchangeWire

“With the silly season nearly upon us, advertisers are kicking off major brand campaigns and digital is more important than ever. Brands such as M&S, John Lewis and Argos are placing greater emphasis on digital for engagement and conversation. Delve deeper, however, and you’ll discover much of the Christmas digital budget is being spent on social media, mobile and ‘digital innovation’. What about programmatic?

Programmatic media buying has come of age. It’s here to stay, and with spend via exchanges continuing to grow, there’s opportunity to drive this growth even more, especially in brand spend where advertisers have ambitious briefs and budgets to match…”

Read in full on ExchangeWire

Girls love Google, Boys love BBC, why Richard Branson may have had an imaginary friend and a new face for Android. What VisualDNA learned when we profiled Mindshare’s Huddle #mshuddle

Above: The VisualDNA team (in lab coats) at Mindshare Huddle

Last week myself and two other members of the media team, Ed Weatherall & Kristen Anderson, attended Mindshare’s annual Huddle. I’d not been before and wasn’t sure what to expect from an ‘unconference’. Intended as a departure from the dry presentations you tend to get at regular conferences, we came up with the idea of creating a psychologists’ office where we’d psychoanalyze people using one of our quizzes. [Read more…]

Could big data help retailers compete with Amazon?

Credit: Thierry Gregorius via Flickr

On its 15th birthday, Amazon has announced its best-selling product list. For a company that started out as an online bookstore, it’s no surprise to see The Girl With The Dragon Tattoo and Fifty Shades of Grey on that list. Call of Duty reflects the company’s evolution into the online entertainment retailer, while HDMI leads and Memory cards reflect a company that has become the ultimate retail platform in a connected age where many customers are mobile-first and showrooming.

They’re the gold standard of online retail. Their mission “to be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online, and endeavors to offer its customers the lowest possible prices” is something I’m sure many board rooms have aspired to in the past, but Amazon have certainly delivered.

The impact this has had on the high street has been well-documented. Our Price, Comet, Virgin Megastore, Zavvi, Jessops, Woolworths went belly-up citing online competition as a major factor. But it’s not just about their first-class retail platform and super-low prices. They are up there with Apple, Facebook and Google when it comes to big data, customer insights and experience. Understanding the customer, and effective CRM to meet their needs, are critical for any retailer to prosper – and with its data set Amazon has become king of the hill.

As a relatively young company Amazon did not have to battle with a traditional way of doing business or adapt to the new world. As online-natives they have always had the edge when it comes to data, and have created a daunting prospect for any CMO asked to create a customer experience “like Amazon’s” without the vast amounts of customer data required to deliver. Where chickens are free range, organic, fair trade or basted and toilet paper comes with multiple pleats, aloe vera or a donation to charity – consumers define themselves through their purchases and it’s the brands that understand what is truly important will succeed – data helps CMOs to understand what motivates.

So we think predictive analytics will become increasingly important for CMOs – enabling them to plug gaps in their own data, and deliver these opportunities  by working with companies that spend their time in understanding consumers. We have found that using predictive analytics can not only increase conversions three-fold, by identifying ‘look a like’ customers from an ‘unknown’ population – but can be used to use to personalize and optimise their site experience for loyalty.

Since it is now virtually impossible for any brand to compete on the functional – product features, delivery speed and costs – it is more important than ever for CMOs to use the power of their brand. By understanding the motivations, aspirations, attitudes and values of their customers there is a real opportunity to create relevant experiences that drive loyalty.

Consumers will not be best-served by a Model T Ford retail landscape where “you can buy from any retailer you like, as long as it’s Amazon”: so big data, and the insights that come with it, will be increasingly important.