Is customer segmentation dead?

Richard Taylor

  • Senior digital strategist, Spinach
  • Website
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 2021

CMO’s State of the CMO is an annual industry research initiative aimed at gauging how ...

More whitepapers

Latest Videos

Launch marketing council Episode 5: Retailer and supplier

In our fifth and final episode, we delve into the relationship between retailer and supplier and how it drives and influences launch marketing strategies and success. To do that, we’re joined by Campbell Davies, group general manager of Associated Retailers Limited, and Kristin Viccars, marketing director A/NZ, Apex Tool Group. Also featured are Five by Five Global managing director, Matt Lawton, and CMO’s Nadia Cameron.

More Videos

Thanks for nice information regarding Account-based Marketing. PRO IT MELBOURNE is best SEO Agency in Melbourne have a team of profession...

PRO IT MELBOURNE

Cultivating engaging content in Account-based Marketing (ABM)

Read more

The best part: optimizing your site for SEO enables you to generate high traffic, and hence free B2B lead generation. This is done throug...

Sergiu Alexei

The top 6 content challenges facing B2B firms

Read more

Nowadays, when everything is being done online, it is good to know that someone is trying to make an improvement. As a company, you are o...

Marcus

10 lessons Telstra has learnt through its T22 transformation

Read more

Check out tiny twig for comfy and soft organic baby clothes.

Morgan mendoza

Binge and The Iconic launch Inactivewear clothing line

Read more

NetSuite started out as a cloud-based provider of Enterprise Resource Planning software or as NetSuite solution provider, which companies...

talalyousaf

NetSuite to acquire Bronto's digital marketing platform for US$200m

Read more

Blog Posts

Getting privacy right in a first-party data world

With continued advances in marketing technology, data privacy continues to play catchup in terms of regulation, safety and use. The laws that do exist are open to interpretation and potential misuse and that has led to consumer mistrust and increasing calls for a stronger regulatory framework to protect personal information.

Furqan Wasif

Head of biddable media, Tug

​Beyond greenwashing: Why brands need to get their house in order first

Environmental, Social and (Corporate) Governance is a hot topic for brands right now. But before you start thinking about doing good, Craig Flanders says you best sort out the basics.

Craig Flanders

CEO, Spinach

​The value of collaboration: how to keep it together

Through the ages, from the fields to the factories to the office towers and now to our kitchen tables, collaboration has played a pivotal role in how we live and work. Together. We find partners, live as families, socialise in groups and work as teams. Ultimately, we rely on these collaborative structures to survive and thrive.

Rich Curtis

CEO, FutureBrand A/NZ

Sign in