home Customer Experience, Digital We’re targeting you – personalisation vs segmentation

We’re targeting you – personalisation vs segmentation

Personalisation is one of the most important aspects of creating a great great customer experience. Today’s customers expect a personalised experience when dealing with brands. Highly personalised customer experiences driven by data analytics about current customers are difficult for competitors to imitate.

The challenge lies in: who are we actually trying to personalise for? All too often personalisation is confused with segmentation and vice versa.

Personalisation refers to an organisation’s ability to adapt the customer experience to the specific needs of the individual. It raises a series of questions that a brand needs to answer such as:

  • Who are we targeting? Who are the individuals we are trying to reach?
  • What are their needs and wants?
  • What are their emotions and how does this affect their decision making processes?
  • How do we interact and respond to them via each marketing channel?

For a large enterprise to understand the individual needs for each of its customers (who may number in the millions) – the challenge may seem almost insurmountable. But the benefits of meeting this challenge can be significant. Research from marketing analytics company Segment, highlights personalisation delivers the following benefits:

  • Increased, leads, sales and revenue
  • Improved engagement and loyalty
  •  Improved reputation and brand recognition

According to McKinsey Personalisation at scale (in which companies have personal interactions with all or a large segment of their customers) often delivers a 1 to 2 percent lift in total sales for grocery companies and an even higher lift for other retailers, typically by driving up loyalty and share-of-wallet among already-loyal customers (for whom data are more abundant and response rates are higher). Personalisation can also reduce marketing and sales costs by around 10 to 20 percent.

Segmentation versus personalisation

People often confuse the terms segmentation and personalisation or use the terms interchangeably. Segmentation can help or lay on the path to creating a personalised experience but it’s not the same thing.

Segmentation is about breaking down a broad audience into smaller more manageable groups based on shared interests, needs, behaviours or demographics. It became a popular marketing strategy in the nineties, where companies could target particular groups of customers with offers and promotions that were more relevant to those target groups.

Brands used segmentation to identify their more profitable or potentially more profitable customers and tailor products, services and marketing campaigns to that segment.

Personalisation is a strategy that leverages data and digital delivery channels to deliver individualised communications and services to current or prospective customers. Where segmentation is about identifying groups with common traits, personalisation is focused on the single user. Rather than being simply a marketing strategy, personalisation requires broader understanding of the customer and the role of the entire organisation in meeting customers’ expectations.

Data, analytics and insights

To offer a personalised customer experience needs access to quality and relevant data. More importantly it requires the ability to act upon that data in real time or as close as possible to real-time at the moment an interaction or conversation is taking place with a customer.

Personalisation can be used to recommend products or services based on past purchasing behaviour. As an example, Netflix recommends programs to customers based on what they have watched in the past. Amazon uses predictive analysis to constantly examine customer behavior and offer a personalised ecommerce experience. They look at past purchases, details about the items they buy, whether they’ve liked or reviewed the product.

More and more sophisticated strategies and techniques are constantly being developed and deployed. According to Dan Arra, VP customer success of Altocloud, predictive analytics can be used to track and better understand individual customer journeys, allowing potential roadblocks to be removed.

The challenges

The key to successful personalisation is data. Despite substantial progress in data management and quality over recent years, enterprises still struggle. The biggest challenge is in terms of gaining insight quickly enough from existing data and data management tools. There are also issues around data accuracy, the amount of data, as well as assessing which data is relevant and which is not.

Compounding the data challenges is the proliferation of customer interaction channels. Connecting the data from different customer interactions across different channels is extremely complex and difficult. To offer greater personalisation means investing in data management and data analytics capabilities. This is not cheap and the skills required are in short supply.

Even though personalisation presents a range of challenges, it also offers a range of significant opportunities for those who get it right. Improved customer experience, more revenue, and greater brand integrity are all strong drivers for brands to invest. It’s one of the top CX priorities in the coming years and something that organisations who neglect its importance will do so at their peril.

Mark Atterby

Mark Atterby has 18 years media, publishing and content marketing experience.