Segments of One: Smarter Targeting for Your Customers
What do Pandora, Netflix, and Amazon all have in common? All three are world-class "segmenters."
Almost everyone segments to some extent—targeting different customers with different marketing—but typically those segments are big, macro-level segments. For example, software companies may have an "enterprise" segment and a small business segment.
But Pandora, Netflix, and Amazon take it to another level by creating "segments of one": micro-segments that target each customer uniquely, allowing the companies to convert visitors into long-term, high-value customers at very high rates.
Not sure what I'm talking about? Go to Amazon.com right now and note what they are merchandizing to you. When I go to Amazon, they are selling me stuff about the Boston Red Sox, the Grateful Dead, and all things marketing. But each person gets a unique set of merchandise: If you just went to Amazon's home page and they are merchandizing that same stuff to you, send me a screen shot and I'll invite you to join me at a Sox game in 2012 ... in my second-row seats. (After all, Amazon's segmenting is so good that it can probably predict who I'd like to go to a game with.)
So how do these companies do this micro-segmentation? There are two clever ways.
Individual leverage: When I first visit these sites, they are generic—but the more I use them, the more they learn about me, and the finer the segmentation gets. Which, of course, encourages me to use them even more. Brilliant.
Group leverage: Meanwhile, the more these sites can identify other users like me, the more they can pattern match. For example, if 80 percent of the people who buy Moneyball and a Red Sox banner also buy a Red Sox Mr. Potato Head doll, then Amazon is definitely going to merchandize a Red Sox Mr. Potato Head doll to me after I have purchased Moneyball and a Red Sox banner. The more people who use Amazon, the better their recommendations, and the more I buy. Again, brilliant!
The Future Is Here
I believe we are about to go through a major shift in the way we think about websites—and these companies give us a peek at the future.
The first-generation company website was a hard-coded html version of your brochure that your brother-in-law built for you. The second generation had a content management system that allowed mere mortals to add pages and edit content. I suspect the third generation will be segmentation engines like Amazon, Netflix, and Pandora.
Companies have started to make this segmentation shift in their email marketing. You've probably already moved from blasting your database with a newsletter or generic email to segmenting your database and sending different emails to different segments.
I predict that this email segmentation trend will accelerate, as it dramatically improves conversion rates. But the whopper benefits will really come when companies learn to apply that segmentation model to their websites—connecting the front end to the back end of their marketing process.
Get Your Data Organized ... Now
For those of you out there who haven't started down this path yet, it is important that you get your marketing database organized and the information integrated, so that you can segment it along virtually any dimension. You want to know whether Customer X visited your website's pricing page; whether Customer Y is a Twitter follower; and whether Customer Z is an "opportunity" in your CRM system.
That metadata surrounding your contacts is what will allow you to create very fine segments. You can then nurture your prospects with helpful, timely emails and helpful, timely Web content that will dramatically improve your customer conversion ratios.
The more people that interact with you—through your site, social media, blog, salespeople, etc.—the finer you can tune your messaging. This is how you can get your own network effects and build leverage into your conversion process.