Create Profit Through Effective Segmentation

May, 2006

As database marketers, we are firm proponents of customer/prospect segmentation. We have helped implement numerous segmentation systems, either from a customized approach (where analytics drive the identification of clusters) and we’ve also helped our clients tailor their data investment to include an off-the-shelf segmentation system (such as Prizm or Personicx).

We believe in the driving goal behind segmentation-that is-a better understanding of your customer groups will improve your marketing efforts, and, ultimately, make you more money. However, our experience has shown that the (often costly) investment in segmentation is not always the wisest. And, the main reason for failure is that there was no strategic or tactical plan to reap the benefits of the new segmentation.

We’ve found that if the focus is on increasing profits when you are developing segmentation strategy, you’re almost guaranteed success.

To illustrate the point, here are two examples of segmentation projects that absolutely had a positive impact on profitability:

• Retention Efforts: We performed segmentation to understand which customers were most profitable, and then focused retention dollars only on those customers who were not only likely to defect, but who were also highly profitable.
• Improved Acquisition: We performed segmentation to identify distinct customer groups (or segments) that buy very differently-with different motives, demographics and financial characteristics. Then, we acted on these findings. Offers and creative messages were tailored to meet the needs of each group. For example, we found one segment that predominantly was made up of families, and our client included a photo of Mom, Dad and the kids in the mail piece. Just this simple change made the piece resonate with the recipient. They related to the message and they responded at higher rates than the control.

RRW Consulting has put together our “Advanced Segmentation Game-Plan” that provides practical ideas and a game-plan to help you create, employ and then act on segmentation results. Let us know if you’d like a copy.

Of course, if you’d prefer to chat with us directly about your segmentation and targeting strategies, just call us at (503) 206-5255, or visit our website: www.rrwconsulting.com for more info. Also, we’ll be speaking on this topic at the Direct Marketing Association of Southern California (DMASC) Marketing Expo (coming up on May 17th). The title of our presentation is: “Squeezing Profit Out of Every Customer Relationship-Using Intelligent Database Management and Analytics”.