How to Leverage Segmentation to Fuel Both Strategy and Activations that Drive Results

By Katie Currall, VP, Segmentation + Growth and Bonnie Matosich, Partner, Strategy + Innovation 

For modern businesses invested in their customer relationships, personalization is more than just a buzzword. It is a necessity.

71% of customers expect a personalized experience from brands, while 76% report feeling frustrated when they don’t receive one (McKinsey). Another 84% of consumers say the experience a company provides is more important than its products or services (ActionIQ). It’s no surprise, then, that so many business leaders come to us seeking market segmentations that offer deeper, more nuanced insights about their customers – their motivations, their behaviors, their unmet needs. And rightly so; deep human understanding is a cornerstone of innovative, customer-centric brands.

But it is one thing to know your priority segments deeply and another to harness that knowledge to spur action, growth and innovation.

When we talk with brands about their past segmentation work, we find that most fit into one of three categories. There are:

• Brands that don’t know how to activate a segmentation

• Brands that spend as much time and investment trying to activate their segmentation as they spent on the work itself, and

• Brands that are having some success leveraging their segmentation to drive growth across the customer lifecycle

Across this spectrum, however, there’s a shared perspective that growth from segmentation insights can and should be greater than it is. In other words, though we hear the problem in three different ways, these brands are ultimately describing the same problem: their segmentation isn’t delivering the value it should.

Without a roadmap to activation or traceability to concrete business outcomes, customer insights can languish, never realizing their potential. For example, companies often wish to map segments onto their customer databases post-segmentation, but without the proper questions and methodologies built into the initial research from the outset, this cannot be accomplished effectively. It is only when insights programs are designed to fuel action and activation that brands can unlock the full, dynamic value of segmentation.

At Material, we’re champions of an outcomes-focused, action-oriented approach to segmentation – one that places business goals, and the activations necessary to catalyze growth, at the center of the conversation from the start of the client engagement. Working backwards, we align our segmentation approaches with desired business outcomes, forging a direct link to the specific activations and actions that will best support them.

When built around future-state outcomes and activations, a segmentation becomes more than a tool to gather knowledge, stake out priority segments and develop personas; it becomes a powerful driver of growth. Consider a few common business objectives that we hear often, and how segmentation insights can provide the unlock to make them a reality.

A stated attitudinal/behavioral segmentation or category-level behavioral segmentation can provide insights to fuel precision marketing, inform content strategy and develop tailored messaging for specific target groups.

A segmentation of current customers by CRM data, past transactional data or clickstream data enables CRM personalization and overall customer journey touchpoint optimization to enhance retention and long-term spend.

Going beyond current or known target customers, a category need-state segmentation can provide insights on unmet category needs to uncover opportunities and spaces innovation with new products or services.

Applying this outcomes-driven approach, we’ve seen the impact of our insights work far exceed client expectations and growth metric targets. For example:

• A global education brand saw an 8x increase in media effectiveness after translating segments into addressable audiences and targeting tailored media to priority segments.

• Seeking new customer acquisition, an apparel and shoe retailer conducted a segmentation and persona development to inform customized offers and incentives for its loyalty program. The activation supercharged the loyalty program’s growth with 900,000 new members.

• A major convenience store brand leveraged segmentation insights to drive 12 million app downloads and a 5x increase in loyalty program participation, shattering annual benchmarks for usage in just a few weeks.

A segmentation without a clear path to activation and action is like a brand new V8 engine without a car to house it: powerful potential but missing the integrated system necessary to bring it roaring to life.

So, when considering an insights investment, it’s not sufficient to ask, “What can a segmentation tell me about my market?”

Instead, ask yourself: “What are my business goals, and how can a segmentation help unlock them?”

Interested in learning more about Material’s segmentation capabilities, and how we help global brands catalyze growth by turning insights into action? Get in touch.