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Segmentation and personalization– similarities and differences

Bajor Lívia

Segmentation and personalization– similarities and differences

Let’s start with an example to get you up to speed. You’ve made up your mind to travel to Vietnam. You’re searching for the best airfare offer, checking several online booking websites. Ads are popping up here and there, cool. You find the best ticket and decide to go for it.  A few days later, ads are still popping up, still cool-ish, maybe they just haven’t noticed that you already got what you wanted. You go to Vietnam for 3 weeks, come home, and ads are still popping up… not so cool. This is segmentation, not personalization.

The above example clearly shows how annoying ads can be due to (poorly executed) segmentation. Even though they shouldn’t be, segmentation and personalization are often used interchangeably. They are, in fact, two very different marketing strategies that work best when combined. So, what’s the difference, really? Let’s dive in.

Segmentation is based on groups of individuals with common characteristics, such as location, IP address, interests, age, gender, sales funnel stage, buyer persona. Segmentation is controlled and carried out by a marketer who breaks down the target audience into smaller clusters of people and targets them with marketing tailored to appeal to that particular segment.

Personalization, on the other hand, is all about the individual. While they might also be a part of a segment, it doesn’t matter because the message is tailored just to them. It’s based on data that’s individually identifiable, therefore enables the marketer to send messages that are only relevant to the individual. It works in real-time and reacts to the now, allowing for completely unique messages.

While some marketers try and choose to opt for segmentation or personalization only, if you want to boost your conversion rates, website bounce rates, average order values, cost per acquisition, to name a few, you’ve got to use both. Of course, it doesn’t happen overnight: first you need to collect a substantial amount of data about your (potential) customers. Think of it as a pyramid-like structure whose base is data collection: page views, traffic sources, social graph data, attributes, activities and so on. The richer data you have, the better you can understand your audience, segment and personalize experiences. The middle level of the pyramid is segmentation. When you have enough relevant data, start analyzing it and looking for correlations and connections between groups, such as interests, traffic source, demographic attributes, behaviors. The top level of the pyramid is personalization. You can do this if you know your audience and the most valuable segments. Delivering unique, one-off-like, personal messages in real-time vastly improves the effectiveness of your marketing.

To get there, follow these 5 steps:


1. Collect data and build customer profiles.

Use your existing segments as a base, and build buyer personas representing individual customers in those segments. Identify new dimensions that help you create a more refined segmentation.

2. Map the customer journey.

Identify a typical customer, a persona, in each segment and describer them: habits, interests, behaviors. Identify when, where and how they interact with your business, and look for occasions where a personalized interaction can lead the customer towards making a purchase.

3. Write rules and build models.

Determine who gets what message and when. Use your experience, common sense, intuition, market research and business strategy to create the initial rules, then test, test and test.

4. Determine your act.

Determine through which channels and triggered by what actions you will deliver your message. Make sure to optimize your communication (remember, omnichannel experience?) so that you don’t send a personalized e-mail with one message, and call your customer with another.

5. Automate.

Creating a personalized experience requires a lot of manual work in the beginning, and automated solutions later on. It is simply impossible to manually handle all the information coming from your website, e-mails, widgets, display ads, social media channels and so on.

So, segmentation or personalization, after all? Both. As Agility PR Solutions points it out “Segmentation tells you whether or not you should market to someone in the first place, and it helps to establish specific life cycle streams for active customers. Personalization, however, is typically triggered by individual acts and needs to respond to the existing segmentation categories”.

If you’re on the look for a smart solution that can help you automate your efforts, discover the opportunities of Liferay!