Rational Marketing

This is a continuation of Target Marketing Magazine’s article about customer segmentation.

Third Party Information

The data you have on your customers, great as it is, just isn’t a complete picture. Understanding what, when, where and how consumers do business across a large group of marketers gives you insight you can’t get from your housefile. New sources of data can help you create broad-based, descriptive segments that provide opportunity for product development, channel selection and increased lifetime value. Understanding your customers through the prism of third-party data sources helps you see far deeper into your customers and gives you a more intensive understanding of their buying interests and behaviors. Consider some of the outside data attributes you can use:

• RFM: Recency, frequency, monetary value.
• Product Type: Continuity, one-shot, online subscriber, magazine, music, video, sweeps.
• Affinity Type: History, health, gardening, sports, cooking, home, crafts, kids.
• Acquisition Channel: Mail, telemarketing, e-mail, Web store, package insert.
• Performance: Fast payer, slow payer, returner, write-off, repeat buyer, renewer.

Suppose you discover that many of your customers have a strong interest in something you don’t sell, like gardening products. Or if your customers have a strong affinity for video, you might consider offering a DVD as a premium. As you develop insight into which groups prefer specific offers via specific channels, you run the risk of making your segments so small that they are no longer truly predictive. Segments can only show you that, on average, a certain group is likely to perform in a certain way. Groups can be too small to be statistically predictive.

Make sure your segments are statistically significant, big enough to be actionable, and likely to remain stable and consistent while you execute your expanded marketing plans. Chances are you’ll begin to see a pickup in response as you reach out to new prospects in new ways.

In the next post we will look at what can be gained by modeling your lists.