Marketing Segmentation: The Perils of an Incomplete System
Marketing segmentation can be compared to the role of a pilot: Without enough — or correct — data, he could be left flying blind. While segmentation can create a comprehensive framework for the “who, where and what” of marketing, if you’re working with weak data, you might end up wasting precious marketing dollars. By combining current internal data with more intelligent solutions, it’s easier to segment your current and potential customer base by taking the bigger picture into consideration. Jason Norfolk, VP of product management, explains why demographics and internal data aren’t enough.
When demographics and internal systems fall short
Many institutions operate and segment based on rudimentary information gleaned from demographics, survey recall and internal data gathered to create a customer profile. Unfortunately, that may not be enough to accurately segment and market to a subset of customers. While a financial institution may understand a customer’s assets and deposits within its own wheelhouse, it may not have a clear picture of overall wealth and potential.
At the same time, Norfolk says that some institutions choose to build their own customer segmentation frameworks, spending time and money on a bank-specific solution. While these tailored customer segmentation systems can help institutions fine-tune the process, they are still not an ideal solution. Custom built segmentation systems typically cannot be geographically represented or connected to third-party information sources, which could make market sizing a challenge and leave intelligent data out of the full picture.
The impact of relying on an incomplete solution
Norfolk warns that if you’re targeting to the wrong segments, you could end up with wasted direct marketing dollars, misaligned products, misaligned channels, messaging that doesn’t resonate and poor media selection. Additionally, segmentation should be used to find markets ripe for growth or markets you should consider exiting. Without the necessary data, you could miss opportunities or spend way too many resources on unprofitable markets.
Complete segmentation solutions
For more accurate segmentation, you need to incorporate multi-dimensional insights based on measured data. “The foundation of our segmentation is anonymous, measured financial data (43% of total US liquid assets are captured by our IXI Network) versus most of the other syndicated segmentation systems that rely heavily on census demographics and survey recall data,” says Norfolk. “We use measured wealth and credit data in our algorithms, as well as estimated income and spending, and then we layer in demographics and survey data to flesh out the cluster descriptions.”
The difference is clear: The ability to ensure that every marketing dollar counts by combining a firm’s unique customer data with a more complete set of data based on wealth and other defining factors is critical to effective customer and prospect segmentation. Norfolk suggests that leveraging advanced consumer insights can help financial services firms make sure their investment into segmentation really pays off.
Marketing segmentation can help you successfully market to the right groups, but if it’s constantly clouded by incomplete information, you could be missing the mark. Make sure your navigation is on track by choosing solutions that give you the data you need to make the best marketing, acquisition and cross-selling decisions.
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