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Digital Segmentation by consumer channel preference

This is yet another way to segment consumers and is based on the premise that is inherent in a multi-channel environment. While it may not work across all kinds of needs, it helps determine which channel is more likely to be used, especially when a business needs to continuously invest in multiple channels.

The fundamental premise of this is what is known as a "Technology Acceptance Model". This has several elements. When confronted with the option of using a channel, the consumer has a perception about the usefulness of the channel (PU). This is layered with the perception of the ease of use of the channel (PEOU). If the channel is perceived to be useful but not easy to use, the likelihood of its being used reduces. Similarly, although the channel is perceived to be easy to use, if its usefulness is questionable, the channel is unlikely to be actually used.

It is only when both PE and PEOU get high scores in the minds of the consumer that the intention to actually use that particular channel is validated - and confirmed upon actual usage. The preferred channel in the model is therefore the channel with the highest intention to use.

The model can be explained with a simple example. Let us assume a consumer wants to buy (for the first time in her life) a life insurance policy. Her channel set is caused by her experience with channels in former service settings or as a result of external factors like social influence of her family or marketing campaigns. Her channel set might consist of for instance three channels: telephone, Internet, branch office. She might use the Internet to gather information and might go to a branch office for closing the contract. After evaluation of her experience, her (presumably quite subconscious) expectations will be confirmed or disconfirmed. This will have impact on the preferences of the three channels within the channel set, which will determine the channel choice during the next purchase of insurance.

Studies have revealed some interesting insights into how men and women rate channel preferences.

• In evaluating channels women are more outcome-oriented; men are more convenience-oriented
• The evaluation of the channels shows that men are more positive about the Internet; women on the other hand are more positive about the mobile Internet.
• Although for all groups the Internet is the most popular channel, the face-to-face channel is most popular among the lowest educated, the telephone among the highest educated.
• The middle educated score highest on the satisfaction scores with the experiment; the highest educated score lowest. The higher educated might be more critical in general or they might be more critical because they have more experience with buying travel insurance.

So there you have it! A usable segmentation model based on usage of various channels by consumer preference. Try it out the next time you are faced with a budget allocation conflict across multiple channels. It will surely help you identify the channel that will give you the best return on investment!

Digital Marketing Segmentation on the basis of purchase behavior

Purchase behavior in the online world is a very different entity when compared with the traditional world. With the rise in social and digital media platforms, consumers are constantly evolving and changing the ways in which they research and purchase online. New shopping paths are emerging depending on behavior, device, location, and intent. It’s not just what consumers do that is important; it is also how, when and why they do it.

Consumers are increasingly distracted, but smarter. Marketers don't need to lag behind! Digital marketers need to take a hard look into the data trail that consumers leave behind. Analysis of this behavior can provide actionable insight into how consumers arrive at their purchase decision.

One of the chief ways in which this can be done is in terms of the purchase behavior of the consumers. In order to implement some key questions need to be answered. They include, what does your consumer buy online? How frequently? Each time they buy, how much do they spend? Do they buy products only from a particular category? Or do they often buy from a variety of categories? The answers to these questions will enable you to do what is commonly known as a FRAC Analysis in the digital marketing world.

Simply put, FRAC Analysis involves:

• Frequency = the number of transactions the customer has made in a fixed time period
• Recency = interval between the times when the latest consuming activity happened and the present
• Amount = monetary value of each purchase action
• Category = types of product purchased, singly or together

This is an excellent way to segment your existing customer base and slot them into buckets. Some buckets will respond better to offers and promotions than others, so your email marketing or App marketing efforts can be concentrated on them for best results. Not only that, over time, the FRAC Analysis can also begin to help you predict how the customer lifetime value changes over time and to spot trends that help you maintain/retain the hold you have on your most profitable customers.

Smart online segmentation through search behavior

While search is the number one activity that most people do online, not many realize that searchers reveal more than they conceal! Thanks to the power of big data it is indeed possible to use search behavior to indulge in some informed and powerful segmentation. Let us take a couple of instances.

1) You work with a company that is launching a fitness tracking watch

• You would definitely be interested in people who are looking for fitness-related information. So the usual keyword suspects would include terms like "Gym", "Fitness Center", "Healthy Living", "Exercise recommendations", "Healthy Eating", "Fitness Tracker", "Fitness Tracking" etc.
• Additionally, you would be even more interested to know which of these searchers went on to visit the website of health related companies and organizations.
• Further insights could be gained if you could filter down to searchers who actually looked at competing brands/products from your competitors
• A glance at Analytics data would give you a precise fix on the age group, gender skew, attitudes, opinions and interests.
• Combing all of these would provide you with a laser-like focus on exactly the right audience. No reach wastage, no unnecessary spends!
• It would also inform you about the precise price-point that will attract these searchers.

2) You work in the travel vertical, booking custom vacations for customers

• You would be interested in searches around terms like "Best Vacation Option", "Best place to visit in October", "Vacation for two to <Destination>", "Best family vacation in <budget>", etc.
• You would be even more interested in finding out which of these searchers went on to check travel aggregator sites, individual operator sites or even airline and package tour websites.
• Specific information on people who looked at online shopping sites for travel-related purchases could give you an alert that they are seriously planning things.
• Further insights could be gained if you could filter down by searchers who visited your closest competitors for similar services
• Again, analytics data would give you age, gender, attitude, opinion, interest specific information.
• You could even look for specific inputs on people who browsed through ratings on sites like tripadvisor and kayak.
• These channels could also give you a wealth of social media information helping you pin-point the right prospects.
• All of this information would help you collate a list of active searchers who are inclined towards the product/service that you are specifically selling!

All of this is possible even with free tools available online. Even more specific information like where people came from, how long they spent, which specific parts of your site and where they went on-wards can be gained by deploying the free and simple Google Analytics on your blog or website. Getting analytics on your website should therefore be your number one priority. After all, here is an opportunity to see the power of segmentation work for you. Up, close and personal!

Digital Segmentation Experiment

The next time you are out shopping for home goods, groceries and daily consumables, try out this little experiment. In fact, you can do this even if you only ever shop online without having to physically get to a store. The experiment has to do with the way people purchase and it may reveal things about you that you probably never noticed before. Ready? Let us begin.

Price

Is price the primary criterion for all your shopping endeavors? I mean, is that the dimension you start with when looking for things to buy? Don't jump the gun just yet. Even if price is the fundamental criterion, there are several aspects of it. For instance:

• Are you on the look-out for the lowest possible price?
• Are you sometimes (with a specific set of products) willing to pay more for perceived quality?
• Would you consider buying products that are currently on a discounted price as opposed to their regular retail price?
• Would you consider buying items closer to their expiry date if they are discounted?
• Do you stop by the bargain discount counter or tab at all? Or frequently?

Quality

Similarly, is quality your chief criterion? If so, what are the parameters of your quality-centric shopping?

• Would you consider paying more for quality?
• Is higher price your most reliable indicator of higher quality?
• Would you pay more for organic products?
• Would you be willing to pay more for 'green' products?
• Does quality apply across all your purchases? Or is it limited to specific product types? For instance food items, skin care etc.

Brand

Brands exist for a reason. They seemingly offer consumers choice. But brands may mean different things to different people. Even the same brands! How do brands figure in your shopping criteria?

• Is there a specific brand you are fond of? 
• Do you have brand preferences across products lines?
• In your mind, do you have a hierarchy of preferred brands? Options if your first choice isn't available?
• On what basis did you develop this brand hierarchy?
• What factors influenced the brands in your consideration set?

Your answers to these questions will tell you a lot about the kind of consumer you are. Remember there are no right or wrong answers. To each one their own style! All we are trying to do here is to find out what kind of a value/price/brand shopper you are. More importantly, doe your preferred store or online destinations allow you to shop based on these criteria? Is it an over guidance or a tad more covert? Think about it!

Segmenting the Digital Shopper | Thoughts and Observations

Is there a fundamental difference between shoppers online and offline? Marketers have constantly been grappling with this question. It is no so much the matter of need or infrastructure but more on the lines of ability and willingness. Using segmentation to understand them will help us answer this perennial question.

Let us try to take a look at consumers and their behavior on online channels. This only includes those consumers who have made use of some digital channel at some point in their purchase journey. Whether it is Research-Online-Purchase-Offline or otherwise. A while ago, a leading media agency (associated with a big network) came up with six distinct segments for these consumers. 

The segments include:

• Basic Digital Consumers
• Retail Scouts
• Brand Scouts
• Digitally Driven Consumers
• Calculated Shoppers and
• External Shoppers

The details pertaining to each of these segments are as follows:

Basic Digital Consumers: these are not savvy digital users. While they may have a basic level of comfort with online research and shopping, the are not as prominent on mobile or social channels. However, in terms of overall likelihood of buying offline, they are the second highest segment.

Retail Scouts: These consumers exhibit a market preference for a particular retailer over brands. This is not to say that they are brand averse, rather that they look at their preferred retail outlet to inform their shopping. They have a decent presence on mobile and are likely to use it more at home than elsewhere. They are comfortable buying online but don't show a marked preference for that or offline.

Brand Scouts: These consumers are very similar to the Retail Scouts except for the fact that they have a favorite brand as opposed to a retail outlet. The majority of them begin their shopping research with a particular brand in mind. They may however be motivated to buy other brands.

Digitally Driven Segment: These consumers use every digital channel to inform and conduct their online shopping. They use social and mobile more than any other segment, value convenience above all else and they do everything in their power to avoid physically going to a store. While they have a healthy user base at present, they are only likely to grow in numbers and importance as a segment.

Calculated Shoppers: These are the "wait and watch" consumers. They know that they want to make a purchase but are trying to narrow down the consideration set to pick one clear brand. There is no urgency in their shopping pattern. They prefer to take their time to get the best deal.

External Shoppers: These are the window shoppers of the online world. These are non-mobile shoppers. They typically make use of fixed web channels to conduct their research and try to find compelling reasons to buy and to buy a specific brand at the same time. They too take their time to make a purchase.

So, various clearly-defined segments do exist in the online shopping sphere after all! The important thing to understand is that the purchase journey or paths taken to purchase differ for all these consumers. While price may be a core concern, it is the nature and length of the journey undertaken that becomes the dominant factor. Price and promotions are relegated to secondary positions.

The other thing to remember is that like all journeys, these paths to purchase will also change over time. The increasing shift to mobile devices will fundamentally change the way consumers look at and experience online shopping. Demographics alone will be of little aid in helping us track these journeys. Marketers therefore need to keep a keen eye on intent - the triggers that influence each of these segments - in order to devise a strategy to cater to these segments. That and continuous refinement over time to co-relate to changing behaviors.

Digital Segmentation in the Automobile Industry

Answer this quickly! What do the following Automobile brands have in common?

Porsche, Audi, Bentley, Lamborghini, Bugatti, Skoda, Seat, Scania, Man and Ducati

For those who don't know (and frankly, neither did I before I researched this post!) these are all automobile brands owned by Volkswagen! 

While that bit of information is startling enough, a closer look reveals another facet. Many of these brands compete against one another, especially in the Luxury segment. What this means is that consumers, irrespective of the brand preference, are actually putting their money into Volkswagen's pockets. In most cases, they don't even realize they are doing so. Call it underhand marketing or brand segregation at another level, it clearly works for Volkswagen.

This brings us to the topic of today's post. How exactly does segmentation work in the Automobile Industry? In previous posts we have already examined in detail why demographics are not the ideal way to segment. However, does the automobile industry have a specific type of segmentation that works? They answer may surprise you. For there are not one, but three non-demographic ways to segment for this industry vertical.

1. Value-based segmentation

Value means different things to different people. Hence, this method of segmentation can be further sub-divided into three distinct categories.

a) Those who buy cars for their economy (fuel or otherwise)

These people are looking for the cheapest car that will serve their needs. Brands aren't that important to them. They prefer to go with the brand or dealer who offers them the biggest savings or discounts. They are particularly concerned with fuel economy. After price, that is their chief concern.

b) Those who buy the best car they can afford

While a bit more brand conscious, these people are looking for the best car they can afford. They typically have a budget in mind and use a checklist to find a car that checks the most boxes. Build quality, durability, reliability, fuel efficiency, service availability, cost of parts are all factors they look at. Price is a primary concern but not the only one.

c) Those who buy the car that enhances their status

This category of people may not readily admit their desire, but status or the prestige value of the car is an important factor in their consideration. Their version of status may not realistically represent the luxury market - rather, it is an upgrade to the next level of car that they desire. Owners of hatchbacks moving to sedans and sedan owners upgrading to an SUV are examples that represent this category.

2. Aesthetics-based segmentation

Again a complicated segment simply because aesthetics (or the lack of it) differ greatly among individuals. For some buyers an expensive car is a showy automobile that has a lot of chrome and ornamentation while for others it is a much more subtle, bling-less appeal. The key to understanding this segment is identifying cues from other aspects of their life. What does status represent to them? How do they define class? How good or contemporary is their understanding of style? What trends in fashion and lifestyle appeal to them? The answers may not be readily available or forthcoming. So the best way is to use cross-category information to identify their sense of aesthetics.

3. Evolution-of-choice segmentation

This is an important segment in the automobile industry. These are people who bought a particular brand. The reason could be one of many - the discount was great, the deal was attractive, the version that year had great styling etc. Post this, they fall into a wide spectrum. On the one hand there are hardcore loyalists of a particular brand. They have only ever owned one make of car and will continue to do so. Possibly moving up the value chain with other brands across categories from the same manufacturer. On the other extreme of this spectrum are the brand flirts - those who buy whichever make of car catches their fancy at that particular point in time. They can be easily persuaded to buy another make. In between these two extremes lie the susceptible consumers. They have a particular brand preference to a greater or lesser degree. However they can be persuaded to consider another make - if the motivation or rationale is strong enough.

Depending on the kind of segmentation approach chosen, a digital strategy could be put together to identify the best approach. When catering to the Value buyers, product features that confirm their needs can be highlighted. When catering to the aesthetics seekers, content marketing with a lifestyle or fashion slant could prove effective. When playing to the evolution-of-choice consumers, influencers and endorsements from trusted category experts could swing things in one's favor. 

What is important however to start segmenting. If an automobile marketer chooses not to do so, they run the risk of using the wrong way to market to the wrong audience. And that is never a good way to build a brand in any sector!