An end to Customer Segmentation?

This week I read yet another article asking the reader if their 'customer segmentation was in good shape?'. It included all the same old hackneyed claims about how a strong customer segmentation strategy yields better results from marketing, more sales, longer-lasting loyalty, increased customer satisfaction, etc.

Don't get me wrong - all these claims are probably true but they've been true for decades and if you are only now waking up to the concept of segmentation, where have you been? My real beef with 'traditional' segmentation (see my example below) is that it is an approach that is long past its sell-by date, overtaken by advances in omnichannel engagement, high speed (real time) data analytics on big data and a growing awareness of what Customer Experience really means in practice.

Here's a few things to think about:

• Customers don't fit into static, strategic segments - in one group I initially identified as a homogeneous segment (young professional women living an aspirational lifestyle on a budget) I identified a sub-group with 5 distinct behaviour patterns during the course of a single day, as well as weekday / weekend and month start / month end differences. A 'one size fits all' approach for this customer segment was likely to miss the mark, most of the time. Furthermore, adding more and more parameters into the segmentation didn't really help either - customers remained stubbornly mercurial.
• Your segments are the same as everybody else's - I've seen a lot of segmentation descriptions in past 20 years and I can't help but reflect how similar all the segments look - largely because many of the descriptive variables are common (age, gender, location, income, NRS Category, etc...). In B2B its just the same - everyone wants to talk to the 'C-suite' because they all score highly against the same criteria (e.g. BANT). We are too used to defining segments by what customers are, rather than by what they want/need and when. A needs-based segmentation has to be more flexible because a lot of what defines it is moving.
• Segments that reflect you, not your customers - all too often organisations have built their segments around the things they want to sell and how; fair enough, economies of scale are dependant upon finding groups with common needs that can be serviced at a profit but too many organisations design a product with a notional segment in mind and then try to find members of the target segment to sell it to. This typically means that there are usually just a handful of discrete segments in the engagement strategy.
• 'That was then, this is now!' - the 'on-demand, instant gratification' generation are moving far faster than their predecessors - they come 'into market' far closer to the critical decision point, so the window for making a well-timed offer is much smaller: too soon and they're not interested but leave it too late and you've missed your chance. Serendipity can be forced, but not if you are not listening attentively and recognise your cues when you hear it.
• Just because they can, doesn't mean they will - my recent research into automated emotion analytics and marketing, rammed home to me just how important receptiveness is to sales and marketing yield: A customer may need your product, can afford it and may even be shopping but if they just don't like you, you're facing an uphill battle. This is why I invented the Customer Experience Vector (CXV) - a way of embedding customers' emotional states into predictive models - finding the relationships to heal and those up for the deal. (By the way, getting a customer to more than 'like' you doesn't really make any significant difference until they 'adore' you - the £10 bouquet achieves 90% of the £25 bouquet effect). Sadly, emotions are fleeting, so forget about an emotions-based segmentation - its membership list is probably out of date by the time you've defined it (besides there is a better way).

At the end of the day, the only segmentation that matters to the customer is the 'Segment-of-One' - them! Customer experience is all about how the brand, product, service, etc, is perceived by the customer not defined by the customer (or you), and they're all different. The good news is that there are tools that can accommodate this fast-moving, not-wholly logical, customer-centric world; the bad news is that if you've got a Segmentation Strategy, you're going to have to give it a long, hard look - and if you are serious about Customer Experience, you probably already are.