Segmenting people into groups based on something they have in common has been around since the 16th Century – Yeomans, Knights and Labourers were audiences before they knew it. The more familiar language of social class is over 50 years old but we can still hear consumers being labelled as “ABC1s”. 

Nano segmentation

Ten years ago, it looked like segmentation was going to be assigned to the bin of history itself. Technology was seeing a much-documented explosion in the volumes, speed and variety of data.

For a time, everyone was trying to head to hyper-personalisation. Driving this was the customer’s own data but also a huge marketplace of third-party data that was collected, shared, modelled and sold in multiple places.

The one thing the industry forgot was to take the customers (and the politicians) with us.

Too much was done with customer data with a slight of hand and no transparency – data was used to do things “to” customers – not “with or for” them. So GDPR came along and ePrivacy is fast behind. The rules have changed.

It is no longer permissible to process a customer’s data on an individual level without explicit permission to do so. Consequently, it must be recognised that organisations will have plenty of “missing” data. On top of this ePrivacy is likely to cut a large swathe of digital data, and potentially current technology approaches, out of the marketer’s toolkit.

We are now living with fast paced consumer change, the proliferation of customer data and a more volatile business environment. 

All of this is challenging the marketer when it comes to using data to understand existing and future customers. We can return to some of the old ways (can I buy Knights on Facebook?) or we can look to see what the advances in data science and technology can offer.

The large corporates dominating many markets today do so because of their broad and deep understanding of customer behaviour.

The challenge is to equip yourself with similar capability in terms of both data and data science. Understanding current and future customers is key to success – one approach is to build incredibly small micro- or nano- segments across the market to link customers to their context and to future customers.

This approach of working with data for “crowds” of customers is the new approach for segmentation in this increasing legislative environment. 

Many modern marketers may have been tempted to write-off segmentation as an outdated concept that is no longer fit for purpose due to the new marketing realities.

However, what is clear is that segmentation remains an important tool in the marketer’s armoury and 2019 will see the emergence of a new approach – clustering customers into nano-segments – which is proven to achieve competitive advantage in this tough business climate.

This article was published by Decision Marketing, 19 December 2018.