The Secrets of Segmentation Success

By Dave Friedman
Companies are spending big bucks to get people to visit their Web sites. But for many, conversions are low, abandonment rates are high and site visitors are unsatisfied. Dave Friedman offers segmentation and content targeting tips that will bring traffic to your site.

For many businesses the Internet has become a primary avenue for customer interactions and brand expression. Companies are spending big bucks to get people to visit their sites, creating interactive and engaging personalized content. But for many, conversions are low, abandonment rates are high and site visitors are unsatisfied.

Online segmentation and content targeting can significantly improve business performance. While multifaceted, the process is straightforward:

* Segment your market and/or customer base into “buckets.”
* Select the segments that will generate the highest value as your targets.
* Develop specific content, offers and navigation for targets.
* Leverage targeting rules to dynamically deliver a contextual online experience.
* Track and analyze behavior of visitors to your sites.
* Analyze this behavior to inform your segmentation strategies.

Segmentation is the process of dividing your market into a manageable number of distinct groups with common attributes. These divisions allow online marketers to target segments for relevant offers and promotions.

Once the segments are created, you can create targeting rules to drive specific content and navigation to segments based on campaign goals or business objectives. These rules are associated with specific areas of a Web page and eventually drive automated delivery of the right experience to the right segment at the moment of highest impact.

The basic rule for effective segmentation is to focus on a limited number of high-value groups. Dividing your market into many small, less distinct segments can be difficult to manage and may dilute your resources. Similarly, taking a phased approach and focusing first on high-value real estate rather than site-wide integration ensures faster time to impact and provides time for testing and improvement. Strategies that target the “low hanging fruit” will pay off the most quickly.

Ongoing testing and refinement is required to ensure continual improvement of the performance of your site. Once you have a clear profile of a segment and have created targeting rules—”if a site visitor clicks here and is not a returning customer, present this offer”—you can begin testing everything from segment definitions and targeting rules to specific messages, offers and promotions. Remember, segmentation is an evolutionary process, not an end state. Failure is necessary and expected.

What’s the payoff? Online segmentation and content targeting can make your site more relevant, your marketing campaigns more effective, and help engage your customers and prospects in a richer, more forceful dialogue. It can also improve direct response metrics, convert visits into sales, improve the messaging behind a brand, and give you more insight into your marketplace and customers. As your customers move through different life-cycle phases, segmentation can also help sustain customer loyalty.

Segmentation impacts profits by increasing the total number—and average value—of transactions, and helping identify both new possible niche products and profitable premium customer segments. It also allows you to address different customer needs without expanding your product range by using different bundles, incentives, and promotions. Studies show that companies with propositions that are tailored to specific customer segments increase their profits from 5% to 15%.