Is personalisation and segmentation in marketing necessary?

Big brands think personalisation is the preserve of the cutting edge, big budget marketers. But no one should forget that all they are doing is replicating the personal service we, as customers, were once used to when we went shopping to our favourite small independent stores. The reality is it’s in reach of every company, whether small or large: SaaS allows us to do it at low cost, while the big vendors charge millions for systems that can’t possibly ever be fully utilised. The investment that is required is in the customer journeys, the content and the behavioural economics that goes behind planning the programme. Only that way can you drive massive, measurable financial returns.

But do customers actually like it?
Most people prefer to be addressed by name – we’re hardwired to respond (that's why you always hear when your name is mentioned on the other side of the room at a party). If you wish to build a relationship between your brand and a customer, then you have to behave as if the brand is an individual, and recognise the individuality of the person you’re trying to relate to. That’s all but impossible if you speak generically or impersonally. That’s not to say that’s how all marketing works: TV, for example, can work brilliantly to create brand resonance when it ignores the personal relationship between brand and consumer altogether.

So we need to segment our customers to personalise our marketing?
The two are entirely distinct. Personalisation recognises the individual, by identity, position in a customer lifecycle, attitudinal trajectory and behaviour (observed and forecast). Personalisation therefore allows truly individualised communications. Segmentation on the other hand is a ‘meta’ discipline, taking broad-brush strokes to datasets filled with people defined by characteristics; these could be behaviour, motivation, demographic profile, propensity etc. In other words, segmentation is about how you describe people and personalisation is about how you talk to people. Although each is different, it is important to consider both to achieve a desirable outcome from your customers.

By segmenting customers, businesses will have a greater chance of achieving success and thus creating a loyal customer. Segmentation is a no-brainer. There are two examples that come straight to mind to illustrate the power of segmentation. The first was a campaign for Virgin Holidays back in the early days of eCRM, this was the first time we ran an email campaign segmented simply by previous purchase behaviour and the (very simple) campaign generated £3million of revenue on the spot.

The second was a campaign for The Sun’s Dream Team Fantasy Football. Previous segmentation had been unproductive. We took a look, decided to approach segmentation from a motivational point of view and decided the two motivations were likely to be ‘passionate about football’ and ‘in it for the money’. This simple insight increased revenue by 93% in 90 days.

Very often, fantastic CRM is about simplicity and insight, not complexity. In our experience, segmenting customers into 6-7 segments will drive 90% of the value creation available, proving that in fact many customers like brands to appeal to them individually: by doing so it will increase the customer’s engagement with the brand, thus creating loyal, valuable customers.

The Efficiency Begets Effectiveness Cycle

We've just gone past a fork in the road. You know the one, a year of very reduced budgets, and a dawning realisation that a year without brand awareness is a dangerous place to be. Marketers are approaching the idea of restarting major spending with some trepidation, because the board is peering closely at ROI.

So brands are starting to spend again, though with huge - and proper - circumspection. While it's tempting to go all out and get brand awreness back by focusing on telly or online with virals and sexy, award-winning branded acquisition campaigns, true effectiveness requires that marketers begin at home, with the customers they already have. ECRM (Electronic Customer Relationship Marketing), with its focus on retention, is auditable in ways an ephemeral viral campaign cannot be.

And there's a second fork ahead, though I don't think it has much impact on the decision about marketing strategy. We're either approaching the end of the recession, or we've chanced upon the middle of one that's W-shaped. If it's the former, then there are already a number of brands that have taken on the salutory lesson and switched focus to low-cost, high-impact programmes delivered by cheap, responsive and trackable channels like email, web, social media and SMS. We've already seen remarkable results that show traditional media-led brand consideration declining sharply while eCRM bases rise against the tide. Those brands will prosper with high margins, where marketing spend is described by what's left over after overheads and profit. More marketing effectiveness means higher market share. TV advertising brands not only haven't been able to afford it recently, but when they return to it they'll be shouting louder at diminishing audiences with waning response.

If we're appoaching the middle peak of a W, this problem will only get worse. Brand advertising works when there's continuous stimulation, something that traditional media strategies cannot provide at trickling budgets. ECRM and retention-oriented programmes, which seek to provide continuous engagement through cutting out anything that is not relevant to a specific user's customer journey, can provide not only stimulation for cross-sell and up-sell during times when high street spending is necessarily low, but also data. And this data actually can be used for acquisition, perhaps counter-intuitively.

The major learning is centred around which segments work and which do not. Essentially customers are segmented by propensity to buy, then value (frequency of purchase, lifetime value and so on), with some information about advocacy thrown in for good measure. Taking these very basic measures, and running campaigns based on what you think will most effectively motivate increased engagement (relevant content, added value) and returns (cross selling through relevant promotions, upselling via added functionality), quickly points out which segments are most easily promoted from low value/low loyalty to higher value. This is invaluable knowledge. It tells you in the most direct terms what types of customers are easiest to get more from. It tells you who to target through acquisition campaigns. It writes your media plan for you - and it's one with little or no wastage. Following this path is a marekter's dream: efficiency leads to greater efficiency.

Whichever way the V or the W goes once all the receipts from the government's response to the american mortgage crisis are tallied up, eCRM-oriented strategies for retaining customer loyalty and building engagement are critical, because the days of the brand delivered glibly in 30 seconds are over.

Making eCRM Sizzle

ECRM is king. So why isn’t everyone doing it? OK, perhaps the rhetorical excuse for a diatribe about how everyone really must start doing it properly is a bit transparent. Actually there might be a perfectly rational explanation, no matter how much I might, as a passionate advocate of eCRM, be wary of it. The answer is very, very mundane.

We’ve recently been involved in two quite big pitches, for brands everyone’s heard of and almost everyone uses, both in transport. We’ve been drafted in as a wildcard – the brief’s been about making email marketing deliver revenues. We’ve come in and talked about strategy and how relationships, customer journey cycles and touchpoints affect frequency of purchase and average transaction values. We’ve talked at length about the processes involved in mining data, creating simple customer segmentation then rich, layered segmentation (starting with sponge cake and aiming for gateau, I suppose). We’ve described processes for selecting email providers, deliverability consultants, analytics. And we’ve talked about the results – millions in demonstrable incremental revenues, customer lifetime values that go up by 3% (read: millions of pounds), over the first couple of years.

Looking back over these two pitches, which we didn’t win (our normal win rate is around 75%), it’s clear why. These two clients wanted to improve their email marketing. Simple as that. What we should have talked about was how we improve email campaigns so they drive results. We should leave the data stuff as a functional but implicit element, same as usability, or build standards, or testing. We’ve been guilty of trying to explain the thinking, not the practice. In old speak, we’ve been trying to sell the sausage, not the sizzle. Sure, eCRM is infinitely more complex than just email marketing... there are plenty of big projects that integrate segment-driven microsites, emails, SMS and e-commerce, all in aid of making the customer the centre of a brand’s universe. But actually from some clients’ points of view they may simply want to take the next step in improving what they do already, and that may be taking a newsletter and making it more relevant through simple segmentation.

And if we do take this approach to those pitches where the brief really is for improving email marketing, then perhaps we can take these clients and move them on to eCRM by stealth. If we can start with quick wins – the kind that generate sudden revenues – then we can go on to justify spending time and money on strategic thinking, segmentation and online touchpoints. In retrospect, we’ve been guilty of a lack of patience, and it’s a trait endemic to the leading edges of the digital industry. So with (probably the vast majority of) clients new to eCRM, we need to start on ground that’s already familiar, in order to help transform the mundane into something that ensures that it’s the customer who’s king.