How many segments make sense for your business?

We’re swimming in data. Every time we talk on the phone, instruct Alexa to order something for us or switch on the lights, hit the keyboard or swipe left, someone somewhere is capturing and assimilating information on the most detailed aspects of our life.

A lot of this is churned through algorithms by governments, corporations and even individuals around the globe to create what marketers lovingly refer to as insights. If the translation into insights does not occur, then the terabytes of storage on our servers is absolutely wasted.

The question is: Out of all the data we capture, what insights are useful to defining customer segments and, more importantly, for how many segments can we practically tailor our communications, services and products?

Can your people and infrastructure cope with generating tailored communications, products and services for 20 segments, or is something like four more realistic? Over recent years, I have seen segmentation models that range from three to more than 60. Don’t get sucked in. Having a more granular model can be self-defeating if it’s so resource-hungry that you cannot deliver to it.

Here are some factors should influence your assessment of capacity to service multiple segments:

  1. Technology - Do you have the campaign management or email marketing platform able to cost-efficiently manage that number of segments. What is the scope of its capabilities and what do you really need e.g. consider the spectrum of decent platforms from something like Mailchimp to a comprehensive higher-end system like Marketo;

  2. Human - If you are fortunate to have such a platform, which is able to automate communications based on pre-programmed campaign workflows, do you have the internal knowhow or connection with an agency which truly knows the system inside-out;

  3. Content - Do you have the capacity to generate all the pieces of unique content for all the segments that you’re targeting? If you do, is generating all this going to deliver the sort of return on marketing investment that you’ll make?

The bottom line is that access to the technology and knowhow to theoretically deliver to the ‘Segment of One’, tailored down to the individual level in ‘next-best-action’ packages has never been greater, but in practice, can we really do it? Will we ever do it? Will the commercial benefit justify the gargantuan investment in technology platforms and content development?

Once you have defined your capacity, you can then consider how granular your segmentation model needs to be in order to amplify and support the key drivers of a great customer experience.