Member Article

The Benefits of Customer Segmentation & Data Profiling

Data is of massive importance to any business, but it’s always initially “raw” and needs to be developed through time and effort into knowledge and information. One such way of improving data is through data segmentation and profiling. This enables much more relevant marketing messages to be delivered through an enhanced knowledge of the target groups.

In this article we explore an infographic created by Glasgow based data provider Intelligent Data Group and will be investigating customer data related segmentation and profiling with a B2B emphasis, although this approach would be equally beneficial for B2C data too.

So what is customer segmentation and data profiling?

Here is a definition for customer segmentation:

“Customer segmentation is the task of analysing a customer data base into structured logical groups of customers that have certain similarities”, e.g. by turnover, by genre of business, by geographical location, by job title, etc.

Customer/data profiling takes the approach one stage further by creating a picture of a customer, this is sometimes referred to as a “persona”. The principle is to have a structured database record for a profile/persona. This needs to include as much data as is possible (to economically collect), along with a full description of the business and a photo of the customer profile. Niche campaigns can be sent out which have sufficient matches to the persona/profile data values.

Customer segmentation and data profiling - they are powerful together!

Individually customer segmentation and data profiling are powerful, but together the sum of the parts is greater than their individual components. To maximise campaign effectiveness it’s essential to combine the two (segmentation and profiling) into one coherent strategy.

What are the benefits of customer segmentation and data profiling?

Customer segmentation and data profiling is win:win for everybody, for the organisation and the customer alike. There are also definite environmental benefits, by sending out less irrelevant email that is likely to end up immediately in the bin.

Customers will appreciate much more targeted mailing that is more clear and relevant to them and personalised to their known interests and behavioural buying patterns. Customer interactions will be received more positively and a higher number of customers will be retained on an ongoing basis. In particular there will be a lower opt-out/unsubscribe rate as customers will see less reason to opt out due to more appropriate marketing. This all optimises the chances of customers buying goods and services all the more likely and will improve campaign profitability and effectiveness.

Segmentation and profiling is definitely a part of an organisations CRM (Customer Relationship Management) strategy and will improve customer brand loyalty. At the same time campaign ROI is maximised for both direct mail and email campaigns.

Internally the marketing department (or whoever is responsible) will be able to demonstrate more effective campaigns with improved response rates, positive key performance indicators and metrics. Niche marketing especially will improve, as customers interests are more understood niche campaigns will be more feasible.

Step by step approach to customer segmentation and data profiling

Below is a seven step approach to introducing customer segmentation and data profiling into a business:

1. Determine data to be collected - The first stage will be to determine internally which data fields require collection. As many as possible is desirable, but consider the cost of collection and ensure it is economical. At this same time also create the personas/profiles
2. Devise data collection methods - Collecting data can be one of the most challenging aspects of this project. It’s necessary to devise policies and procedures for data collection. Once agreed then systems and methods will need to be created to collect the data
3. Data collection - Collect data from a variety of sources around the organisation, this could be from a variety of sources (e.g. “in house” systems, public website, customer surveys, street marketing, verification exercises (e.g. online, postal and telephone)
4. Communicate the benefits - Communicate around the business about the benefits of both segmentation and profiling
5. Analyse available data - Next analyse all available data and store with the required segmentation and customer profiling
6. Actively use data - The great news is after all the “groundwork” you’re now ready to actively use the data for various reasons, but especially in Email and direct mail campaigns
7. Appraise campaign effectiveness - It’s always important to appraise the campaign upon completion and feedback the results so as to tweak the segmentation and profiling. As with any area of data management, segmentation and data profiling should be seen as a continuous and ongoing task rather than as a “one-off exercise”

The use of software

Many organisations attempt to create their own systems for segmentation and profiling without ever identifying the true costs of internal resources (e.g. labour costs, extra time, lack of familiarity, etc.)

When designing software and database systems for customer data management it can be easy to get overwhelmed. The whole area requires significant knowledge and it can be better to use off the shelf software. This software has the immediate benefit of saving considerable time and effort compare to creating a comparable internal system and will also mean the project can commence rapidly. These systems will have learned from many customer projects and will have rich functionality relating to segmentation and profiling.

Why consider outsourcing?

Many organisations choose to outsource their segmentation and profiling. There are numerous benefits to this approach, a significant benefit being a reduction in internal staff time and management demands, other benefits are summarised below.

A major benefit is the use of experts who will have completed many such exercises previously and will be able to bring substantial experience to the project. Agencies will be able to deliver a faster campaign, when the right agency is selected data quality will tend to be much higher as they will have a range of data cleansing measures in place. Additionally agency sourced data is much more likely to be “opted in” which is critical for compliance and legal reasons. “Opt in” data will also reduce risks of blacklisting and other problems associated with a lack of consent.

B2B data suppliers such as Intelligent Data Group will be able to supplement internally produced data with data from their own managed sources which will give access to a wider set of prospects. Data is likely to be more complete as suppliers such as these will have more data values typically for at least a proportion of the existing database.

Article and image credits - Intelligent Data Group

This was posted in Bdaily's Members' News section by David Bryan .