Leveraging the Internet for Segment-Based Marketing

An emerging mass-marketing trend over the past couple of years is segment-based marketing. Though not new at all (the Direct Marketing Association was founded in 1917, and I am sure it existed in some form prior to that), the principles are being applied to mass initiatives more often than ever. The shift is fueled by marketers’ calls for greater accountability and efficiency, as well as continued emergence of digital communication channels that support segment identification and targeting. The Internet plays an invaluable role in this approach and demonstrates an ability to execute on segment-based marketing more efficiently and effectively than previously possible.

The concept of segment-based marketing is fairly simple: Identify your highest value customers, group them in clusters with similar attributes, and tailor communications to them based on the intelligence you possess. Not necessarily demographic intelligence, but behavioral and psychographic. What do these people need and how can you address it? What do they feel, and how can you speak to them in a way that resonates with their state of mind?

Most companies have a select set of customers who drive the bulk of overall revenue. By focusing specifically on those customers, a marketer can address their need states, maintain their loyalty, and grow the overall value of the relationship. The more you know about a person and/or segment, the more actionable they become.

The next step is extrapolating the data across other anonymous groups (e.g., users at a specific Web site) to find people who display similar attributes to those in your priority target segments. That’s right: profiling.

A few publisher solutions support this approach, most notably Yahoo’s Fusion Marketing, NYTimes.com’s wide-angle targeting, and an emerging offering from MSN called Motivational Ad Targeting. The thrust of these products is to follow their registered user base collecting information on their displayed interests, searches, responsiveness to offers, and other similar data. Once accomplished, an advertiser can purchase a segment such as “mobile audio enthusiasts,” or, in lay terms, a group of people who have viewed audio content, searched terms such as “car stereo,” and clicked on some sort of offer in the past 60 days.

The problem with this approach (disclaimer: we use and like Fusion, we’re also interested in MSN’s new offering) is the publishers sell their segments, not my client’s. With all that’s possible on the Internet, why can’t we get our clients’ segments to be the focal point?

We can.

We’ve been successful tying our client’s proprietary segments to these established programs. They’ve proven effective. Now, there’s another problem: I’m tied to a limited set of media properties if I want to execute data-driven, segment-based marketing.

Not anymore.

There are several optimization companies in the market, such as Poindexter Systems, that, as part of their approach, leverage all the anonymous data points available: IP address, bandwidth, geography, and so on. These data points are clustered to create segments that drive their optimization.

Sounds a lot like what we marketers do with consumers in our database, doesn’t it? We’ve been experimenting with bridging the gap between the anonymous and the known. We have done this on varying levels and are so far encouraged with the results.

One of our clients uses Claritas’s P$YCLE segments as the basis for its targeting. We’ve found it’s possible to identify anonymous data clusters with a very high probability of mapping back to our priority P$YCLE segments. This has allowed us to extrapolate to a much larger audience (i.e., the entire Web) our key target segments. Result? We align the right messages with the right segments to address their purchase barriers. This essentially enables our database strategy to be executed across the masses.

You’re probably thinking, “Yeah, but this is still being done against a third-party, manufactured segment, not a proprietary one like my client has.” You’re right. But we’ve done the exact same thing for custom segments, specific to individual clients. Results have been equally impressive. It’s poised to dramatically change the way online media is delivered (in our shop, anyway).

All this boils down to ensuring the right message is shown to the right group of people — the fundamental goal of media as a discipline. Increased refinement in targeting results is a significant increase in media efficiency and effectiveness. The ability to move this approach from specific vendors to the entire Web means we don’t have to sacrifice reach to execute true segment-based marketing. This has long been a promise of the Web, but it was never adequately delivered. It’s now coming to fruition — in a mass medium, no less.

Exciting times are ahead.