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7 Ways to Define Winning Customer Segments

July 22, 2015 12:47 pm No Comments July 22, 2015

I think we can all agree – the days of mass marketing are over. Even if you have a relatively homogenous target market, you should probably spend some time thinking about how you should segment your customers to optimize your marketing efforts.

In an earlier post, I discussed the difference between market segmentation and customer segmentation. Today, lets dive deeper into the realm of customer segmentation.

John Forsyth, former partner at McKinsey & Company, noted in a Harvard Business Review blog that segmentation is the building block of customer centricity, “We see many, many companies saying, 'I want to get more consumer-driven and customer facing. But sometimes organizations dont know how to start. Id say you really start with a basic understanding of your consumers or customers, right? And thats segmentation."

Customer segmentation can be used for many reasons for a given organization, the most obvious today would be for the development of personalized communications and offers and/or different marketing programs by segment. Additional reasons set forth by Bain & Co. include: prioritizing product development efforts, designing distribution strategies and determining product pricing.

So how do businesses start down the segmentation path? First, they need to collect the right customer data. In todays world, the sources of customer data are manifold. For a retailer, shopper specific streams of information can come in through in-store technologies (POS, traffic counter), digital sources (social activity, ecommerce browsing and transactions, digital ad interactions, email, etc.) and third party data providers like Nielsen or Acxiom.

At Manthan, we believe that all data relevant to an individual shopper should be incorporated into a single customer profile to create a baseline of understanding. This may include the data points that fall into the following categories:

Demographic: Basic customer information, such as age, income, education and gender.
Lifestyle: Understanding the routines and habits of a customer, such as vacations and memberships.
Preference: Oftentimes, this includes the stated communication preferences of a customer, such as email opt-in. In other cases, it may include implied customer preferences, such as what sort of channels the customer is most likely to redeem an offer or what day/times the customer is most responsive to a communication.
Loyalty: Loyalty data generally includes statistics relative to the business loyalty program, such as when the customer joined the program, whether they are active, how many points have been earned and/or redeemed. For companies without defined loyalty programs, this can include a recency, frequency, monetary (RFM) score.
Behavior. This can include various behaviors, such as browsing, redemption, sentiment or cart abandonment. This also can include customer transactional behavior, such as spend by category and/or brands and spend by price point.
Value. This is the value an individual shopper represents for the company, whether in terms of revenue or profitability. This can be expressed in terms of historical spend, lifetime value, average spend per visit, etc.
Predictive. Sometimes, customers should be segmented based on projected activity, such as a propensity to purchase a given item or likelihood of leaving the company for a competitors offering.

I know, seven categories can lead to an overwhelming number of options when starting down the customer segmentation path. The best way to approach customer segmentation is with an objective in mind. What are you trying to achieve by segmenting your customers? Are you trying to maximize marketing lift in terms of revenue? Increase customer retention or merely optimize your email deliverability? As with most customer insights, the marketer should always begin with the business question.

To learn more about customer segmentation strategies or solutions to drive better marketing performance for your business, contact Manthan today.

Battle of The Segments: Market Segmentation vs. Customer Segmentation

July 20, 2015 12:30 pm No Comments July 20, 2015

In a former life, I worked for a cloud-based retail technology solutions provider looking to bring a retail merchandise planning application to the US market. As with all IT vendors, the actual marketing of the solution preceded the finished product.

In the solution pitch, we talked a lot about top-down and bottom-up planning processes. Top-down planning includes the strategic objectives mandated by management based on a number of inputs, included last year’s actual company performance, growth objectives, forecasts and general market indicators. For most, top-down planning was only as granular as the department/category level (most retailers employ at least a four-level merchandise hierarchy often starting with department and/or category). Then the merchandisers work the plan to devise a bottom-up plan. Oftentimes, these plans can go as granular as the SKU by location level, but might be higher in the overall product/store hierarchy.

OK, enough background. This is what I found interesting: when we were building the messaging for the merchandise financial planning solution, the VP of Product Management, our resident retail expert, insisted that the following message was included in the sales pitch, “The bottom-up plan always wins.” I remember the conversation like it was yesterday. I looked at her inquisitively and asked, “Why?”. She looked at me, shrugged her shoulders and responded, “Ask a retailer. It just does.”

Fast forward nearly 10 years – I’m on a call with a retailer and we’re talking about buyer personas. Although this particular retailer did not have a ‘360-degree view of the customer’, they had a distinct vision of the person that they were trying to pursue. Affluent, career-oriented, female, 35-44 years of age … you know the type. Then I asked the question “Is that person actually buying from you?” The response was, “Nope.”

Market segmentation and attempting to define your ideal buyer persona is a little bit like top-down merchandise planning. You have a general idea of how you’re doing and what the market conditions look like. For those that lack the “bottom-up planning” (i.e., actual customer analytics and the ability to segment based on actual customer data) – the marketing tends to be more aspirational. In short, it’s just guesswork. We pursue target segments based on our assessment of the overall market opportunity – but not an understanding of the reality.

If this retailer knew that, although they were trying to reach the career-minded mother, they were actually stealing the hearts, minds and wallets of the young woman getting ready to graduate from college, would that change their overall strategy? It’s tough to make a call without the data.

Without the data, one cannot determine whether pricing, promotions or other communications could be better for slices of their current customer base. Or if they are missing out on an opportunity to market more effectively to a more profitable customer segment (e.g., ones that never buy on discount) or drop ineffective advertising channels. You see the big picture in terms of overall market movements, but fail to see the details. And, in failing to see the details, you cannot take advantage of the quick wins with the customers that you already have in your hand.

A Marketing Metrics Cheat Sheet for Data-Driven Marketers

July 14, 2015 9:48 am No Comments July 14, 2015

I spent some time yesterday thinking about the following: “If I wanted to be a data-driven marketer, what would that look like?”.

Fortunately, I have a dusty old book on an office bookshelf called, “Data-Driven Marketing: The 15 Metrics Everyone in Marketing Should Know.” Author Mark Jeffery from the Kellogg School of Management lists out the 15 things that marketing executives should be able to reference (and calculate). But it was published in 2010. Ugh.

I took gander anyways. Jeffery details out the following metrics:

Brand awareness
Test-drive
Churn
Customer satisfaction
Take rate
Profit
Net present value (NPV)
Internal rate of return (IRR)
Payback
Customer lifetime value (CLTV)
Cost per click (CPC)
Transaction conversion rate (TCR)
Return on ad dollars spent (ROA)
Bounce rate
Word of mouth (WOM) (social media reach)

And, I think there’s an easier way to go about it (in terms of data-driven customer marketing). As a marketer, I want to understand three things:

My customers
My channels
My campaigns

In addition to accumulating all the relevant information regarding the above, I also want to understand each entity relative to how it impacts my business in terms of revenue and profitability.

So, instead of a laundry list of metrics and starting with the math – the best approach is starting with a question related to my customers, my channels and my campaigns. When McKinsey Research projected the looming shortage of digital and analytical resources – to the size of 190,000 data scientist and 1.5 million managers skilled in analysis in 2018 – many managers took pause. Analytics vendors saw this as an opportunity (i.e., let’s sell products or solutions or services to give the business users the data and a digestible form of analytics!). Educational institutions saw another opportunity (i.e., let’s create a data science and business analytics advanced curriculum!).

Last year, I spoke with an incredibly thoughtful Big Data services consultant on the topic of metrics. Although much of his revenues were derived by providing the right questions and the right answers to the organizations that contracted with him – he generally spent project kickoff sessions educating all project participants on how to come up with the right questions for the business. Questions first, metrics second.

Applying this to the top three (customers, channels, campaigns), a data-driven marketer could start with the most basic question framework – the 5 W’s (because we all know these!):

Who are my best customers?
What products do my customers prefer?
When are the most effective campaigns delivered?
Where do my customers buy?
Why do they buy in this channel vs. that channel?

Start with one of the W’s – then make sure at least one of the three entities (customer, channel, campaign) reside within the question. Then iterate, drilling down into more granular detail, or re-direct down a different path. Asking the right questions is like any sort of activity – ‘practice makes perfect.’

Becoming a Data-Driven Marketer

June 29, 2015 12:36 pm No Comments June 29, 2015

Data-Driven Marketing. Given all the references to data-driven marketing in the marketplace, one has to assume that there is no one single definition for the word.

Lisa Arthur, CMO of Teradata Applications, took a stab at defining it for the Economist Group in early 2014:

“Data-driven marketing is the process of collecting, analyzing and executing on insights from unstructured and multi-structured data that are integrated across the enterprise.”

She goes on further to state that it’s NOT data-driven marketing if (1) a single view of the customer does not exist; (2) you are not taking a coordinated cross-channel approach to connecting with the customer; and (3) you are using mass marketing tactics.

Using Arthur’s definition, data-driven marketing only occurs in a perfect world where the business is at the bleeding edge of technology and data science. It’s possible … but not primetime just yet!

Tom Kaneshige, the senior writer for CIO, asked the same question of several tech vendors earlier this year. I liked the response of EVP of Advertising at SundaySky’s response:

“Arguably, the most important evolution in the history of marketing is the ability to understand what data you have, what data you can get, how to organize and, ultimately, how to activate the data.”

I wouldn’t necessarily put it in that order – but I can jump on board with SundaySky’s definition!

Here are my two cents: a marketer is doing data-driven marketing if they are:

Analyzing the data available to them to understand marketing and business performance
Mashing up different/multiple sources of data to get to a single version of the truth (remember the term mashup?)
Seeking to incorporate new data elements into their analysis
Using insights from analysis to take action to improve marketing performance and the connection with the customer

This way, everyone can be a data-driven marketer if they’re using insights to drive marketing decisions.

Webinar:The 4 Marketing Skills You Need to Survive

June 24, 2015 9:01 am No Comments June 24, 2015

Today’s marketer needs to be savvier than ever to succeed. The power now rests in the hands of the discerning consumer – who can view, on-demand, any detail related to the four P’s. That is, a consumer can access information on your (and your competitor’s) – product, pricing, promotions and places,right now.

Competing on price isn’t an option for most businesses today. Sustainable competitive advantage now rests in the marketer’s to meet the demands of the customer – and delight her with a positive brand experience.

Watch this webinar, hosted by Manthan’s Head of Customer Analytics Hillary Ashton, to learn how to cultivate the right marketing skills to connect with the modern consumer. You’ll learn:

How to build an agile marketing organization
How to approach 1-to-1 marketing
How to use marketing measurement to evaluate the customer journey
How to use marketing analytics to deliver customer insights to your business

Access The 4 Marketing Skills You Need to Survive webinar now.

Do Not Let Safety Stock Hold You Down: Stock What Your Customers Want

June 23, 2015 5:36 am No Comments June 23, 2015

Maintaining safety stock is a standard practice to ensure that retailers are cushioned against time lag or delay in the replenishment of cycle stock. Retailers’ warehouses are filled at least 1/10th over the brim, in the apprehension of supply-chain bumpy-rides. This is more so in case of perceived fast moving items. Obviously, retailers walk the double edge of maintaining sufficient stock while running the risk of inventory going stale if the sales do not match the projections.

‘Out of Stock’ is a sign retailer hate as it brings down sales and worse yet, pushes the customer to competitors. Suppliers too would like to be ready with stocks when they know their product is doing well in certain stores and not let it stay holed up at the back of the store where the product has not taken off!

Managing safety stock is a tricky game for both suppliers and retailers. Not only does it hold up cash and already scarce warehouse space, it often forces merchandisers to go for unplanned markdowns. It is a logistical nightmare and managing the extra stock can create undue pressure on merchandisers and category managers. Better demand forecasting and inventory management aided by factual data, can not only release the pressure on the managers but ease out cash flow as well.

The crucial question is how to maintain a balance, especially when considerable lead time is involved in replenishments? Streamlined information exchange and real-time visibility of inventory to both retailers and suppliers have nailed the issue squarely and decisively. So much so that Gartner predicts in less than a year as much as 2/3rds of profiting retailers would have moved to platforms providing analytics-driven stock predictions and visibility.

Knowledge of how each SKU is performing under each category in different stores, say during a promotion, can make a huge difference in building an agile and effective supply chain. Real-time actionable retail insights are key here as historical data is not always accurate in predicting demand and category performance. For example, just because Red Scarves did well last summer, does not mean that they will win customers once again, this season. Rather, if the data shows that there was a strong demand for floral motifs in the opening week of the season, retailers will be better prepared to stock accordingly and run the promotions. But in case of retailers had added a considerable safety stock on Red Scarves in their inventory, merchandisers would be forced to sell them at a discounted rate to clear the holed up stock!

Outdated stock and out of stock, both can derail the customer experience and may work adversely on the retailer’s reputation and goodwill. With real-time visibility on what products are winning customers’ approval and at what rate, retailers can manage inventory better. Similarly, the suppliers can use the insight to improve their demand forecasting and accordingly optimize inventory. The real-time visibility of product performance can also help them make informed decisions on slow and fast moving products and even analyze the response to the new products while beefing up distribution.

Keeping a huge buffer stock, apart from cycle stock is no more advisable in the view of the complexity of customer preference and volatility of demand. Insights that lead to instant action may well be the key. The choice is yours.

Join the Retail Collaboration Network on LinkedIn, and connect with experts and users interested in Supplier Collaboration.

Overheard in the Market-Argyle CMO Leadership Forum

June 18, 2015 11:14 am No Comments June 18, 2015

I recently returned from the Argyle CMO Leadership Forum in San Francisco, where top marketing executives across industries gathered to discuss best practices in marketing. If you sat in the main session room – you would have heard these words/phrases often – data, agile, digital, limited resources, experience, customer centricity, journey, persona, etc.

Depending on who you talked to, the general outlook was ‘glass half full’ or ‘glass half empty’. Personally, I think there is a tremendous amount of opportunity for marketers today to challenge and overcome the status quo, especially after listening to a particular speaker at the event – Julian Aldridge.

Argyle session speaker Julian Aldridge, VP of Brand Evangelism and Activation at Charles Schwab, said that marketing today is all about attitude and leading from the front. His session, entitled “Leaving Fear Behind: How Venture Marketing Vanquishes Fear” covered the issues that marketers face today (i.e., you’re only as good as your last campaign) and why that’s ineffective for the well-oiled marketing organization.

For those of you not familiar with the term, venture marketing is an approach to marketing that aligns with a venture capitalist’s approach to investment. In the VC world, investors take risks and bet with the expectation that they may only win 75-90% of the time. And these wins – well, they’re big wins.

So, the old point of view (you’re only as good as your last campaign”) is no longer a mantra in the new world of venture marketing. Now we’re talking about being OK with failure – as long as we’re taking each test scenario as an opportunity to learn.

In a related piece in the Argyle Journal, Aldridge mentions that his CMO is a fan of the saying, “It’s a marathon, not a sprint.” The Charles Schwab VP interprets this cliche through a “venture marketing” lens – noting that venture marketing breaks the marathon into a series of one-mile increments, where each mile is a complete test, opportunity to collect data and potential for a big win.

During the speaking session, Aldridge highlighted an excellent example of venture marketing in action – Adidas. Yes, the footwear brand sponsored last year’s World Cup (holy investment Batman!). But Adidas moved beyond the traditional television spots to achieve on its marketing objectives with a content-first strategy. This content strategy enabled Adidas to execute small, agile-oriented tactics to build positive buzz for the brand. The brand used social media to broadcast its content on a mass scale, used its sponsorship to access teams, players and other assets to drive its campaign content. In the end, the company increased brand interactions by seven times and significantly exceed its planned sales goal for the World Cup Adidas ball.

The practice of venture marketing is new – and like content marketing, there’s much buzz but not ‘tried and true’ step-by-step processes for success. What I mean is that there’s no single right way to approach venture marketing for your business. Aldridge did point out a couple of useful tips though:

If you can’t get your marketing project up and running in 90 days, then it’s not a venture marketing project
Create a marketing backlog – much like an agile developer’s backlog – to explore brand stories, epics, and themes
Amplify everything with social
Beta test commercials with YouTube
Test and learn, test and learn

I wish you luck on your next marketing adventure!

Smarter Trade Promotions Funding for Smart Retailers

May 12, 2015 5:40 am No Comments May 12, 2015

A major chunk of the supplier’s profit is direct towards funding promotions at Retailer outlets- as high as 30% of the gross sales of their products. Retailers should be smiling at this promotion funding and putting in all their marketing might to put this huge amount to the best use.

But ask any retailer and he will tell you while the numbers look good on paper, getting the cash at hand is a tough and tedious process. For one, the sum to be spent on promotions, agreed between the retailer and supplier is released to the retailer only after the promotions are over and the proof of pudding is tasted, which is anywhere between 3 to 6 months. During this time the retailer has to sweat on not only the mechanics of the promotion but in maintaining a detailed financial record of the trade promotion spend.

This being a specialized job, most retailers hire expert auditors who pour over promotion records, spend hundreds of hours in calculations and creating reports. Audit firms bill anywhere between 20 -30% of the recovery amount that the retailer is due from the supplier. Not a very inspiring picture, right?

Now, let’s tweak the scene a little. The supplier allocates trade promotion funds and the retailer works out the details, focusing his energies on matching customer expectations and maximizing the impact his marketing efforts can bring. The entire promotion fund is broken down into weekly / monthly campaigns across different categories and individual products.

As the campaign rolls out both the supplier and the retailer are able to monitor the progress real time, getting granular details right at the SKU level. The financial details, down to each penny spent, is recorded and available for review anytime. The retailer can furnish the details and claim his money from the supplier almost immediately, without employing a battery of auditors and paying them a large chunk from his pie. The supplier too can get a much clearer picture of the performance of his products and understand customer preferences to fine tune his category and product strategies.

Isn’t this a win-win scenario for both the supplier and the retailer? Sure it is! Wouldn’t you like to know how this is possible? Well, it is no rocket science.

What we discussed here is an example of well planned and executed collaboration between the supplier and the retailer, also known as “Shelf-Centered Collaboration”. This practice is gaining ground as it brings the suppliers and the retailer on the same page with an objective of effective promotions management, enabling real time insights and building a stronger bond with the end consumer. Such collaboration is possible when essential information is available to both the parties simultaneously. Retailers can opt to share vital information with individual suppliers through emails and data downloads. Another, and more broad-based approach is to connect various suppliers and retailers on a common platform or portal. Here both retailers and suppliers share a platform and gain real time insights across stores. In fact, most of the suppliers and retailers are moving towards portal based collaboration as it provides transparency and improves efficiency. By streamlining communication channels, supplier collaboration platforms help in reducing procurement costs and optimizing real time decision making prowess.

Given the magnitude of trade promotion funding and high stakes it carries, a portal based approach has become essential today. As per Abeerdeen group’s B2B collaboration and BI study, 83% of industry leaders already have a B2B collaboration initiative in place. It is proving to be a strategic advantage to the early adopters as it provides for collaboration in managing trade promotions and budgets. In addition, this approach also helps in reducing supplier risk, building agility in supply chain management and making the process more resilient altogether. The time for better collaboration is now and those falling behind may lose on a major head-start.

Join the Retail Collaboration Network on LinkedIn, and connect with experts and users interested in Supplier Collaboration.

New Guide: Integrating Interactions with Multi Channel Customer Marketing

April 29, 2015 11:13 am No Comments April 29, 2015

When your customer glides from one channel to the next, does she encounter a different experience? Unfortunately, with most businesses today, this is the case.

The problem stems from the way channels are designed and maintained.Most consumer businesses have different marketing teams managing different marketing channels with different messages and offers – largely to the extent that customers have a wildly different experience when they interact with multiple channels throughout their path-to-purchase.

True masters of multi-channel management do four things right. The first is to understand the customer’s unique journey – across all channels. For the other three essentials for multi channel marketing success, download the Manthan’s recent whitepaper: 4 Steps to Marketing Nirvana.

Overheard in the Market: Forrester’s Forum for Marketing Leaders

April 27, 2015 12:52 pm No Comments April 27, 2015

I had the opportunity to attend recent Forrester Marketing Forum for Marketing Leaders on April 14-15, 2015 in New York City. The Forrester B2B Marketing forum was a two-day event chock full of session content that mapped to what’s at the top of mind today for most marketers, whether B2B or B2C.

Although the conference guide prominently displayed the event theme as “Connect, Engage, Deliver”, in my mind, the forum’s takeaways can be summarized as follows:

Customer Obsession: This is a step beyond customer-centricity, where the customer should be the basis of all marketing decisions. Obsession is not only being “considerate” of the customer and her wants and needs, but it takes it a step further – marketers should be intimately aware of all aspects of the customer and their behavior. In a world of customer-centricity, the question was “Will my customer like X?” In today’s customer-obsessed world, the question is, “I know A, B, C about my customer, so does that mean that they will like this?”
Customer Journeys: We all know that a shopper embarks on a path-to-purchase, interacting with multiple touchpoints across various stages of the funnel – from awareness, consideration, decision and post-purchase. However, the traditional, linear funnel is no longer a good representative of the customer journey. Marketers need to work on re-imagining and re-constructing the experience to best suit the consumer expectations – and this requires an incredible focus on attribution techniques and marketing measurement. 32% of Customer Insights professionals plan to adopt journey analytics soon. Don’t get left behind.
Customer Privacy: Consumers, in general, are getting savvier about customer privacy, with Millennials leading the pack. However, marketers must view privacy through a different lens – rather than the lens of – “I can no longer get this customer’s data!”. Instead, Forrester Principal Analyst Fatemeh Khatibloo notes that customer privacy is no longer about tactical execution, but about building a different relationship with consumers. She went on further, “[Customer privacy] is about building trust and services. She referenced several examples of brands leading the way in this dialogue, including Under Armour. The brand recently purchased multiple apps fitness apps to provide services that consumers value – while aggregating and analyzing user data.

After the initial keynote, I think all marketers in attendance could agree that marketing is tougher than ever. In the absence of a Chief Customer Officer, we are the protectors of the customer experience, yet forced to continue to increase our activities, whether by market, channel or frequency. The types of digital touchpoints are growing at a rapid rate, and as marketers (as a whole), we’re struggling to keep up.

Boiling it down, Forrester VP and Group Director Carlton Doty mentioned that, “In the age of the customer, your only source of competitive advantage is customer obsession.” At Manthan, we believe that moving toward a single view of the customer with robust analytics is the only way to achieve that competitive advantage.

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