Demographic segmentation is old and outdated.
It’s 2019 and marketers are still relying on 100-year-old techniques to segment customers.
Back in the days before smartphones and social media, customer segmentation was heavily demographic- and geographic- based. Segments were primarily story-driven and rarely backed by any form of data. According to Wikipedia, demographic segmentation began in the 1920s when television and radio took off. Marketers relied on demographics to define their audiences because those were the only real metrics available to them.
Fast forward to today and this type of segmentation still exists, even in the age of information. It’s baffling that people are still relying on demographics when we know that this will seldom, if ever, address the true intentions of a potential customer. Demographics-driven stereotypes have been proven to be unreliable, leading to irrelevant ads that don’t win attention.
For example, let’s look at Prince Charles and Ozzy Osbourne. Based on demographics alone, they would be placed in the same customer segment.
So why are marketers so attached to outdated demographic segmentation?
In this Martech podcast, host Benjamin Shapiro reasons that this might be because demographics are easy for Marketers to grasp. “It’s easy to picture a 25-year-old male fraternity bro and come up with a marketing plan to approach them”, versus trying to think holistically about someone who may have taken an action such as “liking” a piece of content.
So, if not demographics, what should marketers use?
BEHAVIORS. Behavioral marketing is based on the actual interest and engagement patterns of your audience. You can use website activity, purchase activity, and activities from third-party applications to tap into how your customers are engaging with your brand.
With the help of tools like Affinio, Tim Burke explains that “you can uncover vast amounts of insights from the actual behaviors of your customers, which you can then use in your marketing campaigns. In other words, you take all the information you have from your users and use it to build a more realistic profile of them, which you can use to tailor your marketing messages”.
This form of segmentation bundles consumers into smaller groups based on the specific behavioral patterns they display. This might include their online search and purchase history. Segments can formed based on factors such as:
- Purchasing behavior
- Frequently searched items
Why does Behavioral Segmentation work?
Simply put, users want to receive messages that are tailored to them. 53% of online shoppers think personalization is valuable and a Deloitte study found that 36% of consumers expressed an interest in purchasing personalized products or services, while 48% said they’d be willing to wait longer in order to receive it – so tailoring your message and offering can make a world of difference.
MECCA, the largest beauty retailer in Australia, is transforming the way they think about their customers by employing behavioral segmentation. The MECCA & Affinio case study explains how MECCA created an anonymized dataset of 50,000 customers’ transactions (behaviors), fed them into Affinio, and within minutes Affinio was able to identify six distinct audience segments, each with their own insightful characteristics. These segments provided MECCA with the framework for further customer research and the foundations for a detailed roadmap for growth. Specifically, MECCA was able to develop a plan to improve the personalization of its in-store experiences to better meet each customers’ needs.
In a time when consumers expect meaningful and personalized communications, you can no longer use demographics alone to figure out what an audience wants. Let’s stop using century-old guesswork and start listening to what consumers are telling us with their behavior.
To learn more, tune into the MarTech Podcast and hear from Tim Burke and Benjamin Shapiro on how data is changing the utility of customer segmentation.