Can segmentation go too far?
I'm all for segmentation, but as I stand in line to board my morning flight and listen to the gate attendant call ten different classes of passengers, correlating to every conceivable precious metal-titanium, platinum...I think she even said iridium, I couldn't help but wonder if this was overkill. Segmentation is intended to help business sort and categorize customers for a variety of purposes, from planning marketing campaigns to designing the customer experience to forecasting business growth to measuring company results. But, unless you want customers constantly looking for ways to game the segmentation system, consider three tips to get the most out of segmentation without customer alienation.
Tip 1: Don't confuse customer segments with levels in your loyalty program.
This is the issue the airlines face. They dangle the next level of loyalty or the next customer segment in the faces of customers, maintaining a class system that rivals that of a medieval monarchy. While this might motivate some customers to stay loyal to the airline and strive for the next class, it risks alienating all customers as only a precious few ever really reach the pinnacle of all segments and reap the benefits. And all passengers know we are just one more merger away from being cast out of the upper class and back to the lower rank of air travel society. You want to segment me based on how often I travel, whether or not I pay full fare and the amount of fee income I generate? Fine. Go for it. But let it live behind the scenes, in the finance, accounting and marketing departments. As a customer, I do not need to know what segment I'm in and I certainly don't need to know the name, even if is a precious jewel or metal.
Tip 2: Segment only on what matters to your business objectives
Demographics are a way to classify people, but I would argue they make a poor means of segmenting customers. Most customer behavior is a byproduct of more than just their gender and the year they were born. Millennial--an often sought after group of people--are not a segment, but rather a group of people born within a thirty year span. Assuming that alone dictates their behavior is insulting and potentially detrimental to your marketing plans. I fault agencies and marketing leaders who perpetuate this practice or fail to push back when they see objectives, strategies and proposals tied to "winning with Millennials". Dig deeper. Consider the target customer's behaviors, lifestyle and beliefs and how those influence their decisions, probably more than their age.
Tip 3: When it comes to segmentation, maybe "less is more"
Everyone--from marketers to customers--thinks they want 1:1 personalization, but the reality is scaling segmentation requires marketers to aggregate individuals into groups that share similar traits and behaviors. While machine learning and marketing automation promise some degree of individualization, most marketing organizations lack a sufficient content library to actually support individualized engagement. And the jury is still out on whether or not 1:1 marketing drives enough value to justify the cost of data, analytics, content, technology and talent. Focus less on marketing to an audience of one and more on segmenting your audience into a manageable number of groups based on the attributes and behaviors that align to the desired customer actions and business outcomes.
I'm not convinced that the emerald, ruby and sapphire segments, each with one or two passengers on this particular flight, is an effective way to sort or serve the customer. While our fares may have been different, we won't know that and we'll all be sitting in the same seats and eating the some pretzels, yet feeling a little less appreciated than the group ahead of us.