Fifty-nine percent of shoppers indicated that personalization has a notable influence on purchasing decisions, according to a survey by Infosys. The majority of shoppers—across multi-channel, online experiences—noticing a change in the way they shop due to retailers understanding and interpreting their data. Meaning that modern businesses are shifting all their time to provide segmented and personalized marketing experiences to their customers.
But segmentation and personalization are not the same things. Each has its own functions and uses. Segmentation is a tool for understanding and grouping your audience by demographics and behaviors to help you better craft a marketing approach. Personalization, then, is the use of this information in creating a customer-driven experience based on their values.
Each of these strategies provides benefits to your business, bettering customer relationships, building sales, and increasing loyalty. But understanding the differences and when to use them can be a challenge. Let’s break it down.
What is segmentation?
Without segmentation, you would be stuck trying to craft a one-size-fits-all marketing and business strategy that is bound to alienate some customers. Such a generic approach can, at times be useful, but with an abundance of customer data available for you to use and analyze, you can target your marketing strategy for the best effect.
Segmentation means the break-down and categorization of your customer data to truly understand your audience. It means learning their likes and dislikes, desires and challenges, needs, and wants. Segmentation means analysis of big data to create narratives about your audience.
How segmentation works
By taking a step back and analyzing your audience based on massive amounts of accumulated data, you can begin to group them. Often it is helpful to think of this audience as a pie, which you are dividing into segments. You can then market by a large variety of factors including:
Segmentation works by separating these audience indicators into workable groups, classified by marketable needs and preferences. A home audience will differ from a professional one. A young audience will differ from an older one. These differences affect marketing strategies and how you sell a product.
Often, segmentation occurs through insights generated by online analytical tools, customer outreach surveys, and artificial intelligence software. Customer engagement generates big data, and these tools take and analyze that data for use in marketing. There are plenty of ways in which you can create and apply this information, but when should you use segmentation?
When to use it
Segmentation is a strategy best utilized in the early stages of a marketing campaign or life of your business. The gathering and application of data help you understand your audience, which better allows you to tell a story around their wants, challenges, and needs.
Your data is not doing you all the good it might if it’s not helping you tell a story about your customers. Who are they? What do they want from your product? What challenges have brought them to you? Big data and AI analytics tools can help you put the facts into useable graphics and charts, but creating a narrative around the data enables you to communicate your marketing strategy to your coworkers and customers effectively.
Once you have enough information to craft a narrative for each defined segment of your customer base, you can apply segmentation to a marketing strategy. This enables you to create a manageable online presence in which you can better craft and personalize content to survive the Amazon effect.
What is personalization?
Through personalization, you can create specific marketing content that reaches each individual customer on a personal level. This can take the form of product recommendations, messaging that addresses the customer by name, and ads based on customer interests and needs.
Personalization is a necessity in modern eCommerce, where companies are often competing against giants like Amazon who have redefined personalization and had great success in doing so. Personalization is a component of segmentation that relies on customer data to craft personas and target messaging more specifically, but where segmentation is more about grouping customers, personalization is more atomized. It is about reaching customers on an individual level.
How personalization works
Without the rise in AI tech that uses functions like deep learning to understand data and make millions of decisions instantaneously, the ability of marketers to personalize marketing content would be minimal. This technology is transforming business, and in the marketing industry, that transformation often takes the form of personalization.
AI algorithms scan the data of users, looking for purchase history, name, email address, and more based on what they have given your business. Then, the algorithm can provide recommendations, fill in the customer’s name, select from a variety of crafted messages you have created based on your segmentation strategies, and so much more.
On a micro level, you can manually personalize content to customers through content like email marketing. However, to provide specific recommendations on the fly through a host of platforms for an effective multi-channel marketing approach, you will need AI that helps you understand your customer.
When to use it
Effective personalization strategies take an understanding of your customer base as well as significant accumulated customer data. Once you have evolved segmentation and data analysis for your business, you can find the right software to help you customize customer experience for all your users.
Personalization should happen every time a user interacts with your content, regardless of the platform. On your website, this can mean product recommendations based on user needs. In a chatbot, it can mean recognizing a customer account to better offer them assistance with their product. In a physical store, it can mean notifying them of sales and deals through a mobile app.
Across your platform, personalization provides a better marketing experience, one that customers increasingly expect. Make use of this exciting new trend by implementing a practical approach to personalization through the use of intelligent software and marketing.
Tools for a Better Marketing Strategy
With segmentation and personalization, you can generate a marketing strategy that reaches your customers where they are. Both of these approaches are especially useful in today’s digital or hybridized retail environment. Where you can attract customer interest through appealing to them individually.
While segmentation allows you to craft content for groups of customers, personalization looks even deeper at each customer individually. There are times and places for both. In combination, they can maximize the effectiveness of any marketing strategy.