Definition:

In marketing, Segmentation is the business practice of splitting target markets into actionable groups. Segmentation creates variable subsets of a market based on demographics, transactional, behavioral, and situational criteria used to understand target audiences better.

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The Business-Driven Multifaceted Aspects of Segmentation:

Today, consumers expect personalized experiences when they engage with brands and organizations. To create these personalized experiences, you must first understand your audience through the process of collecting relevant customer data and understanding and anticipating their needs and wants. This is when Segmentation steps in.

According to a study by Bain & Company, 81% of surveyed executives asked about their experience with customer segmentation said it was a critical tool for growing profits. The same audience reported profit growth of about 15% as a result. Segmentation has been around for as long as we can remember. Some of its benefits we can all enjoy today are:

• • A better understanding of your customers: Using different types of data such as demographics, transactional, behavioral, and situational, we can understand customers' expectations and how to drive an effective segmentation strategy.   
• • More targeted marketing tactics: With a relevant Segmentation in place, you can create tailored experiences pertinent to your audience. 
• • Driving business growth: With a better understanding of your customers and putting in place more targeted tactics with the correct Segmentation in mind, your overall marketing strategy will most likely be more successful and hit its business goals such as increasing sales, building better products, and boosting customer satisfaction and loyalty.

I have been in the Marketing space for more than 15 years, and it has been fascinating to see the evolution of Segmentation over the years. I often tell brands and organizations I am lucky to engage with, that a successful Segmentation is the right combination of People skills, Technology, and Process. If one of them is missing, your efforts will eventually collapse. Stepping back, I can see three significant evolutions Segmentation has gone through over the years:

1. Siloed-based Segmentation: Our marketing efforts were essentially one-way-driven in the early days, and most strategies in place were product-led, with 1:1 personalization not being the principal focus for cultural, financial, and technological reasons. Most technology choices were based on the nature of the channel from which marketing tactics were sent (such as Direct Mail and Call Center). It was also hard to cross-pollinate data from other channels and create a cohesive customer experience.
2. Multi-channel-based Segmentation: With customers having many more channels to choose from to interact with brands, this situation provided opportunities for us, Marketing practitioners, to collect multi-channel data and to enhance our Segmentation. This situation also added complexity to how we collected and cleansed this data and identified customers across the board. This is also when we started moving away from siloed-based segmentation technologies and looked for an alternative to creating a 365 cross-channel customer view. Our internal processes have also adapted as we sought alignment between teams on how best to develop consistent experiences across customer touch points.
3. Segmentation in the age of CDPs: In today's world, it has become increasingly challenging for marketing practitioners to deal with a data deluge caused by more savvy consumers and an explosion of engagement channels. There's also constant pressure to create real-time and scalable personalized experiences with data governance and privacy in mind. Since creating compelling customer experiences go beyond the Marketing department (now includes Sales, Support, Product, and Operations), Segmentation has become a strategic tool that needs to be defined, communicated, and measured across the entire organization. While internal processes have shifted, technology choices have as well. Since Data is the fuel of any successful customer experience, technology platforms such as DXPs and CDPs have emerged and are now a topic of discussion in most c-level conversations I have with organizations. Segmentation has become a source of a healthy debate about real-time data ingestion, identity stitching, data governance, channel activation, and journey analytics. I am also amazed to see all departments in an organization part of this debate as they inspire to create the compelling experience their customers want and expect.

Online resources to learn even more about Segmentation:

• • About Segmentation and Privacy: Forrester’s 2021 US Consumer Privacy Segmentation‍
• • Accenture's Tell me all about yourself‍
• • IDC's Worldwide Advertising Technology Forecast, 2021-2025
  

Join the conversation and share your views and experiences around Segmentation by leaving a comment below.