Is customer segmentation dead?

Richard Taylor

Richard is a senior digital strategist at Spinach, an integrated marketing and communications agency that champions a 'consentric thinking' approach, combining media, data, analytics, technology and creativity to drive business change and help clients grow stronger.

Ginni Rometty, the CEO of IBM, announced the death of customer segmentation five years ago saying, "The shift is to go from the segment to the individual. 

She might have been a bit premature for most marketers, but if customer segmentation isn't dead yet, it's definitely on life support.  

Not even Maxwell Smart would think the old approach of surveying people as they walk out of (or past) your physical store would work in this day and age. So what can we salvage from customer segments that still applies in today’s omnichannel world or should we forget about segments altogether?  

There are several popular ways to segment customers: Life stage, lifestyle and RFM (recency, frequency, monetary). There's nothing new about any of this. What’s new is the problem modern marketers are facing as the number of customer touchpoints increases.  

Do we need to create customer profiles or segments that accurately reflect face-to-face, e-commerce, social, chatbot, help line, and every other customer touchpoint? And when we are talking to people in all of these different ways, what constitutes a ‘typical’ customer or even a few ‘typical’ customers?

What makes a good customer?

Let’s start by tackling what makes a good customer.

Is someone a good customer because they like coming into your bricks-and-mortar store or would they provide better value if they only shopped online? What if they do both? How do you monitor their behaviour across all of the touchpoints to categorise them into a segment ‘box’?

While you're working that one out, you also need to think about how different generations approach omnichannel shopping. Recent research has shown that while millennials (22-to-37-year-olds) have learned to shop in an omnichannel environment, Gen Z (18-to-21-year-olds) and younger have never known anything else.


According to the president of Zentail, Daniel Sperling- Horowitz, these generations already influence how the older generations shop: "With a pulse on popular culture and propensity to engage with brands on social platforms, Gen Z are proving to be important influencers of purchasing decisions by older generation family members,” he states. “Put another way; parents and grandparents value the input of their in-the-know Gen Z children."

Whether they admit it or not, many organisations are still in the ‘crawl’ or early ‘walk’ phase when it comes to customer segmentation in their marketing efforts. Most of us see the result of this daily in our email inbox when we receive a retailer's mass message. Sure, it might have your name on it, but mail merges have been around for decades. For many businesses, real personalisation – where the products, offers, and even the pricing is specific to the receiver – are still a distant goal.

In Australia, the two largest supermarkets are the furthest along in terms of personalisation, but even they are only ‘running’. When will they be able to ‘fly’? Still, running is the minimum medium-sized retailers should be looking to achieve in the next two years.

To reach this milestone, brands need to put customer-centric thinking at the core of what they do. Our agency calls this ‘Conscentric Thinking’. It means seeing your brand through the eye of its customers. Make it easy for them. Empathise with them. It's their data that's letting you run your business efficiently so reward them for that with a seamless experience and relevant communications.

Getting started

If your organisation is still crawling – blasting out the same email to everyone – it's time to get up and walk, quickly.

Start with some filtering and running rules on your data. Then get ready to run because mass personalisation is the next stop and scores of your competitors are already there. Finally, if you're lucky enough to be one of the few who are running already, it's time to learn how to fly.

From a practical standpoint, the first step is getting your data ducks in a row. Just as 80 per cent of the work in any data analysis is data preparation, expect 80 per cent of the work in becoming customer-centric and data-driven to be integrating your data and making it available to meet the needs of your company as a whole.

To do this effectively, you need support at the c-suite level and access to data from across the whole business. Start with a data workshop with relevant team members from all departments to find out what data already exists within your organisation, and who owns it. You’ll probably be surprised at the amount of data, and duplication, that exists.

In short, customer segmentation isn’t dead. Instead, it’s fast transitioning from groups and personas to one-to-one communications. And as IBM’s Rometty said in 2013,

advanced AI analysis “spells the death of the ‘average’ customer". You better get ready because that day is right around the corner.

Tags: customer experience management, customer segmentation

Show Comments

Featured Whitepapers

State of the CMO 2018

CMO's State of the CMO is an annual research initiative aimed at understanding how Australian ...

More whitepapers

Blog Posts

3 marketing mistakes to overcome when courting prospective customers

Marketing that urges respondents to ‘buy now’ is a little like asking someone to marry you on your first date. At any time, only 3 per cent of the market is looking for what you’re selling, so the chances of your date randomly being ‘The One’ is pretty slim.

Sabri Suby

Founder, King Kong

Why are we dubious about deep learning?

The prospect of deep learning gives those of us in the industry something to get really excited about, and something to be nervous about, at the same time.

Katja Forbes

Founder and chief, sfyte

Why you can’t afford to fail at CX in 2019

In 1976 Apple launched. The business would go on to change the game, setting the bar for customer experience (CX). Seamless customer experience and intuitive designs gave customers exactly what they wanted, making other service experiences pale in comparison.

Damian Kernahan

Founder and CEO, Proto Partners

RIP holden

Max Polding

Marketing professor: For Holden, brand nostalgia ain’t what it used to be

Read more

Where does the claim that 2 million Australians have tested come from ? Anecdotal information suggests that this is way off the mark.

David Andersen

DNA-based marketing: The next big thing?

Read more

Thank you for the info , being part of a digital marketing agency in kerala , this proved handy and get to know with upcoming trends. htt...

Dotz Web Technologies

Predictions: 9 digital marketing trends for 2019

Read more

So who then is correct? The Research or The skilled Digital people.

Anene

Report reveals Australia faces digital skills shortage

Read more

The blogs are really appreciable and one can trust the knowledge and information provided in the writing.The article you do produce on a ...

Prince Arora

5 brand strategy lessons from Gelato Messina

Read more

Latest Podcast

More podcasts

Sign in