Online segmentation, what does it really mean?

By: Matthew Kelleher | November 10th, 2008

Segmentation is key, central, imperative. Whether it is simple activity segmentation, or detailed RFM based segmentation, behaviourally triggered or event based – if you are not segmenting you are behind the market and loosing sales/market share.

Fact. Does anyone disagree? Does anyone feel they have a long term strategy that will not require segmenting your online marketing in some form or fashion. I’d love to hear from you.

One of the key issues I have had in the last couple of years is defining what segmentation actually is. Does that sound dumb? It feels slightly dumb… To explain…

I spent 15 years being educated in offline segmentation … trends in RFM (recency, frequency, monetary) data allow marketers to group customers according to historical purchasing activity and predict future activity or, to some extent, ‘next step’ or propensity marketing. Lifestyle, demographic, psychographic and other forms of data can be mixed into this to achieve clarification.

But online marketers developed segmentation concepts outside this development path. Online segmentation can be defined as simply which home page link someone proceeds through and how they set off on their customer journeys. Browsers who click ‘offers’ are defining themselves as defined from those that go straight to the product page. Good web analytics provides the opportunity for ‘on-the-fly’ database marketing, driving automated and relevant marketing, most effectively through email communications.

So segmentation has become a multi layered beast that for some, including yours truly some of the time (!?), can be confusing and distracting. It requires me to suspend my previous conceptions of segmentation and boil my point of reference down to something more basic… segmentation is the grouping of individuals to drive relevant marketing. If I don’t, I find myself shouting ‘No, that is not segmentation’ and I think that would be incorrect.

So, for my own sanity, I have tried to define the key levels, which arguably sit under the “behavioural” banner.

Event based. A set of individuals who do the same thing on a web site and therefore become a segment of individuals
Browsing behaviour. A set of individuals who have shown the same behaviour, for instance browsing the same website sections or pages or using similar paths to the website.
Email response behaviour. For instance, active vrs inactive, clicker non converters etc
Online purchase history. Buyers/non buyers, onetime buyer/multibuyers, loyal or transient, brand engaged or disengaged.
RFM
So where will online and offline segmentation and online marketing meet? If online retention becomes the primary channel of customer choice, where will the power lie, in the offline or online database? Will anyone, in the foreseeable future, be able to truly develop the value of segmentation without merging online and offline data? And could this see segmentation developing down a specific route?

Author: Matthew Kelleher – Red Eye International Ltd