Consumer Identity in a Segmented World

05.21.18

by Ivan Bojanic, Senior Integration Architect, Gongos, Inc. & Nancy Walter, Integration Architect, Gongos, Inc.

A team of talented insights managers can inform product lines and marketing campaigns based on consumer segments, but if they don’t accurately reflect the individuals within, it’s all for naught.

Human identity has always been a fluid and complex commodity, but never more so than in the age of technology that allows for digital connectedness and extreme mobility. No longer are the communities we’re born into the sole force that shapes our attitudes and behavior. Rather, we have the freedom to choose and reframe who we are, who we want to be, and what matters most to us.

While this presents limitless opportunities to humans, it creates a formidable challenge for organizations. They need to move beyond thinking of consumers in clusters and groups, and embrace them in all their uniqueness.

Identity and the Peril of Labels

Segmentation has long been marketing executives’ go-to tool for organizing and prioritizing customer groups based on a mix of specific attributes, behaviors and attitudes. But relying on a limited number of segments to guide product development and marketing communications may no longer be all that is necessary to provide organizations with the competitive edge they need.

In other words, connecting with individuals is becoming table stakes.  Humans are hard-wired to respond to personalization, and this physiological finding is illustrated through bottom-line success. According to McKinsey, personalization can reduce customer acquisition costs by up to 50%, increase revenue by up to 15%, and boost marketing spend efficiency by up to 30%.

Segmentation’s value is in distilling large populations into smaller, more valuable groups. But as we look into the future, the next evolution of consumer understanding will recognize that the face of identity is morphing from association with groups, to something more individual. For instance, today’s consumers are more likely to reject labels associated with politics and faith, while still engaging socially and spiritually. The percent who accept the label “environmentalist” has dropped 34% since the early 1990s – even though environmentally friendly products and services have ballooned since then, and 3 out of 4 of us support protecting the environment. The problem, it seems, is the label.

This means that the temptation to standardize offers and messages to fit a group’s perceived needs is no longer effective. Ninety-nine percent of all retailers say their loyalty program performance is at or above expectations – but 71% of shoppers say those programs do not generate loyalty.

Many businesses are responding to this reality, with customized products and personalized messages, and special “just for you” offers, but many others do not yet have the tools, knowledge, or inclination to celebrate their consumers individually.  Only one in four businesses prioritize personalized promotions, recommendations or offerings, while just over half offer personalized loyalty rewards.

This brings the substantive nature of segments into sharper focus. Picture a segment-based customer service matrix that assigns frontline employees a talk track designed around a caller’s presumed needs. Will this generate a personalized interaction that’s truly aligned to the customer’s unique situation? Or, will this caller become one of the 77% of US consumers who are retracting loyalty earlier than ever before, migrating to a company that’s willing to learn who she is?

Beyond Segmentation

Fortunately, segmentation offers a foundation to understand and provide dimension to consumer attitudes and behaviors. Yet with today’s data analytics and customer journey mapping, businesses are moving ahead in establishing “segments of one” – offering a truly personalized path to engagement. These future-focused organizations are:

 >> Creating the right connection. Business loyalty leaders learn from consumers by investing in a mutual relationship that builds connection and deepens understanding. These businesses prompt engagement with the brand through social media, forums, contests, events, and co-creation of products and services with consumers, while their best consumers provide insights through increased purchases, direct feedback on products and advocacy.

Fostering these connections make consumers feel valued through genuine offers, communication and experiences – including unexpected interactions that activate powerful emotions, such as Mastercard’s #PricelessSurprises campaign that has surprised nearly 100,000 customers with spontaneous gifts.

>> Collecting the right data. Move beyond the narrow tunnel of traditional metrics like sales and brand equity, based on patterns and preferences learned through real-time data. Starbucks captures data from 15 million loyalty members every month, allowing it to customize communications, promote relevant offers, and provide unique and unexpected rewards that deepen consumers’ emotional bonds. Nordstrom, a best-in-class personalized marketing retailer, learns from customers through advanced analysis of its millions of social media followers’ posts as well special in-store experiences, like pop-up shops, that generate data on specific categories and designers.

>> Using the right mix of triggers. The right message or the right offer at the right time provides the critical trigger to prompt consumer action. Starbucks increased afternoon visits through product and promotional offerings to high-potential customers during Happy Hour, generating incremental profits and strong promotional appeal. A special offer on snacks the week before a big holiday, or a discount on home meal delivery during a major storm, engages consumers with empathy, and reaps rewards for your company.

The Wisdom of Honoring Identity

Segmentation gives a broad perspective of the market, and identifies potential trends, priorities, and opportunities. But the proven business value of individualization, fueled with the possibilities offered through today’s technology, can guide the way and expand beyond the notion of consumer groups and forge meaningful, personalized connections with individuals.  Transcending segmentation not only makes business sense – generating increased revenue and efficiency – but today it makes human sense as well.

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