DST SEGMENTATIONDefining Customer Types to Individualise

Customer Journeys

Why would you send the same email to one of your most loyal customers and someone who has only purchased for the first time last week? Why would you use the same media channel to a generation Y as a pensioner? You shouldn’t, but a lot of companies still do.

Splitting your customer and prospects into differentsegments allows you to:

• Set DIFFERENT PRIORITIES in allocating resources and budget to each segment based on the best predicted return for that investment

• Promote DIFFERENTIAL MESSAGING – content that addresses the different barriers and more relevant propositions that motivate

• Use DIFFERENTIAL CREATIVE – visual imagery, tone and style that resonates better with the different segments

• Select DIFFERENT CHANNELS – both in terms of media deployed and the vehicle of response being offered – when is it better to go digital – when will print win out? Who is likely to shop more in store, who prefers on-line?

Understanding better the different groups that make up your customer base will create a framework and a language for your business. It will replace pure gut feel about who the customer is with clear defined ‘portraits’ of different groups derived from data. It will enable you to recognise the ‘look-alikes’ amongst your prospects to assist in converting them to customers. And, most importantly it will move you towards much more personalised and eventually completely individualised communication journeys that are in step with each segments needs, wants, lifestyles, life stages and aspirations.

YOUR SEGMENTATION JOURNEYDST’s Segmentation expertise helps you align your business better around your customer and defines a roadmap. This ensures that you gain the benefits of a segmentation strategy quickly and easily as you move towards the goal of a completely individualised one to one marketing strategy. As your segmentation models and associated processes become more sophisticated, your communications will be become even more relevant and timely so that the content will affect the desired attitudinal and behaviour change.

SEGMENTATION OPTIONSWithin any given audience there will be specific segments which can be identified using demographic, attitudinal, life-stage and behavioural predictors. There are many different ways to segment your customers and each one will result in a different solution that will have very different implications for your business.

It is our job to help you identify these and determine which of these will be the most actionable and provide the best value for your business.

Approaches are not mutually exclusive and each one has positives that can be brought to bear in understanding your customers.

WHY SEGMENT?IN THE BUSINESS OF COMMUNICATIONS ONE SIZE CERTAINLY DOES NOT FIT ALL.

IMPROVING MARKETING EFFECTIVENESS ROI

2

Demographic

RFM/Value

Behavioural

Life Stage

Physiographic/Attitudinal

Over archingCorporate

Actual demographic data from the customer base or matched and appended data from external sources (such as Cameo, Acorn, or Mosaic).

Summary transactional data at an individual level across all buying points.

Detailed and rich transactional and engagement data.

Detailed and rich transactional and engagement data.

Qualitative or preferably quantitative research on a sample of customers. Mapping segments to your base using key ‘golden’ questions and/or demographic information.

Far-reaching models based on detailed information on individual customers rather than sample data.

Segments defined by demographic indicators typically using gender age, income, household composition. Useful for helping media channel choice and paints a broad picture of the audience. Useful for finding matched prospects.

Groups customers by how much, when and how often purchase. A vital first step for most businesses.

Defines customers not just in terms of how and when they purchase but what they buy and how they or engage with your brand. Helps define more relevant messaging content specific to each customer through different touch points.

Adding in a new dimension of sophistication by defining how established the relationship is with your brand – prospects, new customers, active buyers, those in danger of lapsing or needing reactivation. DST’s propriety model DST LifeStage follows this approach and is particularly effective for trigger based individualised communications solutions driving customer loyalty and engagement.

Helps understand how and why customers interact with your brand, but less actionable as difficult to apply at scale and allocate customers to a segment. Can be very useful to help describe and add colour to data driven segments and in creating ‘pen-portraits’.

Segments of customers that are so different and variable that they warrant completely different business propositions and strategies such that teams or even whole businesses could be built around these segments.these segments.

The table below summarises some of the various segmentation approaches.

Type Data Requirement Key Features

3

Defining a segmentation approach is a very important decision as it can have a significant impact on your business. It should not be taken lightly. It is worth taking the time to ensure that you use the correct method.

Our experienced analytic team will help guide you through this key decision making process to ensure the chosen solution meets your specific requirements.

THE DST APPROACHBELOW WE SUMMARISE DST’S APPROACH TO CREATING AN

EFFECTIVE, ACTIONABLE SEGMENTATION MODEL.

DEFINESCOPE

DEVELOPAPPROACH

EXPLORATORYANALYSIS

MODELBUILD

BUILD PENPORTRAITS IMPLEMENT EVALUATE REFRESH

• Define segmentation objectives

• Can we/do we have the budget to make the segmentation actionable?

• How will we evaluate the value of applying segmentation?

• Is everyone involved going to buy in and use it? How will it be used?

• How many segments are viable/manageable?

• Consider methodologies for segmentation

• What data is available internally or matching against external data sources

• What research is available?

• What do we need to find?

• How can we map sample results to population?

• Data preparation

• Variable creation

• Variable selection

INITIAL MODEL BUILD

• Initial segments

• Build test framework

• Build mapping method

MODEL REVISION

• Iterate model to improve accuracy

• Verify against audience

FINAL MODEL VALIDATION

• Final model build and validation

• Score audience

• Profile and describe segments

• Assign names

• Develop imagery

• Report back

• Deploy segmentation into communications

• Different priorities

• Different messaging

• Different creative

• Different channels

• Assess incremental shifts against objectives (attitudes, response, conversion) that can be attributed to segmentation over a control

• Re-assess model over time

• Revisit and extend data sources

• Consider sub-segments

• Refresh the segments - they do not stand still

4

Good segmentation models starts with clear, well-defined objectives. Without these, it is not possible to measure the effectiveness of the model and, even worse, can lead to ambiguous or superficial models that do not work when they are applied in the real world.

At the start of any segmentation project, DST always conduct a data audit that identifies, collates, and assesses the quality of all the data that is available to build the model. This vital step in the process helps us ensure that the data is fit for purpose and that no data sources are overlooked. It also defines the most appropriate segmentation and modelling approach (out of those detailed on page 3). When building a statistical model like this, a number of different versions are usually created and tested, with the top performing models retained for further validation.

The choice of final model will be based on a combination of the statistical output of the model and how well we believe it will work in real life (based on our extensive experience). The final model also has to meet our two golden rules:

1. SIGNIFICANT DIFFERENTIATION: real variation between segments actually exists and can be exploited through varying communications’ content, offer, media channel, etc.

2. RETURN ON INVESTMENT: the additional expense incurred by the individualisation and/ or differentiated content actually delivers a measurable and positive uplift in desired outcome - i.e. is worth doing?

PEN PORTRAITS A key stage of the modelling project is to give each segment a name that reflects their particular behaviour and to build up a picture of each one, a so-called ‘pen portrait’. These pen portraits are used to: inform the creative strategy, personalise the customer journey, and inform media channel. They bring the segments to life and give each segment a personality of their own that then informs their particular communications strategy as well as helping the segments become a part of your everyday business vocabulary. Research and demographic profiling information can help add colour to these descriptions.

Segmentation is not an end in itself – the models need to be applied into your communications strategy and across the whole customer journey.

MEASUREMENTDST always recommends developing an ongoing measurement framework against which the performance of your activities is evaluated for each particular segment. This framework includes re-evaluating the model regularly against the objectives to ensure the segments are still relevant, that each customer is assigned to the correct segment and we recognise when they may move between segments. Ultimately to ensure that the model remains fit for purpose over time through periodic refreshes.

5

SummarySegments allow you to define the creative content, messaging and

journey patterns for SUBSETS of a mass audience. Data and technology within

direct mail, email and the web now permits high levels of individualisation

based on specific known data – in effect further customising the segment into a SEGMENT OF ONE – true 1-2-1

COMMUNICATIONS.

DST CUSTOMER COMMUNICATIONSDST LONDONPARK HOUSE16-18 FINSBURY CIRCUSLONDONEC2M 7EB