How to optimise your personalisation efforts with segmentation

Most companies are exploring personalisation as a marketing strategy, but many are finding it difficult fitting it into the marketing mix.  

Here is one interesting way to do it.

Econsultancy recently held roundtable discussions in Jakarta, Indonesia about The Rise of Customer Experience & Customer Journey, sponsored by IBM.  

Client-side marketers brought experiences from many different companies and industries and they openly discussed their success stories and challenges with the group.

One of the three tables discussed personalisation and arrived at an interesting way in which marketers can implement their customer experience strategy.

Why personalisation?

At the table, participants first discussed why companies were so interested in personalisation.

They determined that one of the marketer's most important roles was to engage with customers through the whole customer lifecycle.  

With so many communication channels available, though, it is hard for companies to grab and keep their customers' attention.

Attendees agreed that by personalising communications, marketers were far more likely to be able to maintain a high level of engagements, so personalisation was a very useful strategy for marketers.

Barriers to personalisation

But in order to deploy a new strategy, marketers need to convince management of its value. 

One participant noted that it was particularly difficult to do this with personalisation as implementing it is resource-intensive and expensive.

First off, personalisation requires creating a single view of the customer which means tackling the data silos in place at most organisations.

Next, marketers had to do some channel automation so that the personalisation initiative could scale to their whole customer base.

And finally, there is a non-trivial amount of data cleaning and testing required so that your efforts to greet your customer using their name does not fail spectacularly.

Participants agreed that even simple email personalisation can be difficult to implement with a large customer base.

How to overcome barriers

One marketer described, in detail, their approach.

First off, he suggested, marketers need to look at their customers in three segments which typically fall into a normal distribution, or bell-curve.  

The horizontal access is the size of the customers typical order and the vertical is the total revenue you get from the customer.

This allows you to segment your customers into three 'value areas' so that you can use the best strategy for that particular group.

Small customers: Content

Customers who only buy a small amount occasionally will on the left. Because their orders are small and infrequent, the revenue gained from them will also be small.

Because of this, it is not worthwhile to spend extraordinary effort on marketing to them.

Instead, as one participant noted, use a broad content strategy to keep them aware of the company and encourage them to buy more frequently.

Bread-and-butter customers: Automation

Customers who makes significant purchases regularly will be in the middle. This is the largest group of customers and the strategy is to get them to stay where they are.

Participants argued that offering discounts, offers, and special treatment were all useful ways to keep a company's mass market buying more.

Another suggested that marketing automation including recommendation emails based on past purchases are good strategies for this group.

Elite customers: Personalisation

Finally, on the right you have customers who have large orders, but only buy occasionally. 

Because they are not frequent buyers, the total revenue gained from them is not nearly as much as you get from bread-and-butter customers.

When they do make purchases, though, they 'move the needle' on revenue and profit, typically.

Participants noted that this is the group which should be the focus of personalisation initiatives.

Because one buyer's individual contribution makes a difference to the the top-line performance of your marketing, it is worth tackling the barriers to deliver a personal service to them.

Initiatives can be as simple as including their name and other personal details on all communications and as extensive as offering a concierge service with a unique contact number and named representative.

The purpose of personalisation for this group is to make the customer feel special, so extensive effort will need to be made to do so.

The ROI of such strategies, one participant noted, must still be measured and considered, however.

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