The Best And Most Efficient Way To Segment Your Customer Base

Marseille, France - March, 24th, 2014: First test drive of a new luxury sedan Mercedes C-Class W205 (D-segment) at international press launch. It is the most popular Mercedes model in Europe. Mercedes produced more than 2,2 million C-Class cars of the previous generation.
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The ways in which marketers segment their customers are changing.

According to a 2019 Marketing Week survey, demographics, such as age and gender, are being replaced by psychographic and behavioural segmentation. Consumer life stages and online behaviors, such as search and purchase activity, are now more favored by marketers. But the sheer amount of data has left the industry challenged and overwhelmed. What is the “best” and most efficient way to segment the customer base?

Should they use:

1) attitudinal attributes to understand their customers’ motivations and interests,

2) purchase and CRM data to target subsets of existing customers,

3) search and browsing behaviours to target completely new customers, or all of the above?

In this article, Hitwise presents our guide to audience segmentation. Our data set combines online behavioral data with attitudinal, demographic, and geographic variables. This allows us to create bespoke segments tailored to our clients’ strategy and customer objectives.

Our answer then to the best segmentation method is that it depends on your objective. In this article, we spell out how segmentations can vary depending on key objectives, such as acquiring new audiences, combating competition, and growing the customer base, using brand examples.

Segment for acquisition

In this example, we use Mercedes and how they can acquire a new electric car audience?

New car sales in Australia fell by -7.9 per cent in Q1 2019, marking 12 consecutive months of decline year-on-year. But there is one bright light for the industry – the intent to purchase electric and hybrid vehicles has grown according to a Roy Morgan study. The October launch of Mercedes’ first all-electric vehicle, the EQC, couldn’t come at a better time. Visits to the most popular models on their site, like the C-Class and A-Class, have dipped -6 per cent and -20 per cent in April YoY, respectively. 

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Identify the “Affluent Electric Car Searcher”

Mercedes can first identify consumers who are interested in and searching for electric or hybrid cars. The EQC comes with a hefty price tag of AUD $150K. So, by applying an income threshold, like households that earn above AUD $100K, Mercedes can pinpoint an affluent electric car audience. Inputting both conditions of electric car searches and household income, Mercedes has a target audience of 63K unique users

Pinpoint where to best advertise

Mercedes would want to know where they stand compared to the competition. The brand ranks fourth in terms of car manufacturer sites, with Tesla leading with 50 per cent greater reach.

By looking at their behaviors on Media sites, the affluent electric car audience is more likely to visit Drive, Which Car, and Motoring than the average online consumer. To close the gap, Mercedes could then place EQC reviews on these sites, or display ads to drive interest with their target audience.

Segment for optimization

How can British Airways optimize their direct bookings?

According to a recent Expedia study, the average consumer visits 38 sites before making a travel booking. The average duration from browsing to booking takes about 45 days.

For top UK airlines, Ryanair and British Airways, the number of browsers, those who visit the site but don’t book, exceeds 400K each week. The overlap between the two airlines is also significant.

Discover the British Airways’ Browser

There are two “browser” segments that British Airways could target:

  1. British Airways’ browsers, which include people who visit their site, but book elsewhere
  2. Targeted Ryanair’s browsers, which include Ryanair’s browsers who have viewed British Airways’ site.

Over a 12-week period, British Airways attracted almost 3M direct browsers. The airline also has an additional 660K browsers that they could “poach” from Ryanair.

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Win back your browsers

After visiting their site, British Airways’ browsers clicked onto metasearch sites, like Skyscanner and Google Flights, indicating that they have restarted their search journeys.

By combining geographic data with search data, British Airways can also pinpoint their browsers’ routes of interest. This segment were more likely to reside in London, Liverpool, and Cambridge, and had searched for long-haul flights to New York and Orlando.

These insights can help British Airways refine their flight promotions and paid search to win back these “lost” customers.

Segment for engagement

 How can Vogue grow their loyal readers?

Engagement metrics, such as average visits per reader, are critical to media sponsors and advertisers. In the US, Vogue drew the smallest audience at 800K readers in the four weeks to March 30, compared to over one million for Vanity Fair, Harper’s Bazaar, and Marie Claire. But Vogue has the best audience engagement. Over those four weeks, their average reader looked at 28 pages on Vogue’s site, compared to less than 17 on other publications.

Take a look at the latest Audience Segmentation Guide for a deeper dive into the data.

Target Vogue’s loyal readers

Vogue can first segment their readership by the number of articles viewed over a set time period, to pinpoint their “loyal” segment. The vast majority, at 83.4 per cent , of Vogue’s online audience, viewed one article a month, with a further 13.9 per cent looking at 2-5 articles a month. The remaining 2.7 per cent of readers consumed over five articles a month. 2.7 per cent is a small percentage, but this loyal readership is over twice the proportion of other fashion magazines.

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Build content that your loyal readers want

Vogue could look at the types of content that each segment is more likely to consume on their site. Low-touch readers were viewing lists, such as “unusual baby celebrity names” and “best rom-coms”. Whereas, high-touch readers were looking at fashion shows like “Versace” and guides detailing “supermodel looks”.

Vogue could then tier their content topics. They could draw low-touch readers back to their site with lists. To keep their loyal readers, Vogue could feature more supermodel guides, styles, and fashion shows

Key Rules

There is no single “best” way to segment your audience. Here are the key rules that marketers must, and are increasingly, following:

  • Before building your personas and segments, assess your business’ objective. Is it acquisition, optimization, retention, or all of the above?
  • Be creative with defining your target audiences. This is where behavioral segmentation, like searches, visits, and purchases, is often superior to other methods.
  • Incorporate traditional methods, such as demographics and geography, to further refine your segments.
  • Review! Ensure your segmentation strategy is always meeting your business’ objectives, and assess whether these objectives and priorities need to shift and evolve as well.

Download the latest Audience Segmentation guide here!

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