One Step Beyond: Behavioral Targeting

November 12, 2008 By Dianne Admire

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Too often, marketers fall one step short of finding the best answer to their most important question, "Who do I mail?" The answer—and the route to the best ROI—is to segment with techniques that rely on behavioral data.

Every marketer must design some kind of market segmentation strategy, because the product that is for everyone is rare—almost as rare as the marketer that has an unlimited budget.

Segmentation helps answer the biggest questions: Who do I focus my spending on, and who do I ignore? And depending on the type of segmentation approach, other questions can be answered, too: What messages will resonate? When should the marketing spend occur? What products should be merchandised?

There are a few types of segmentation that break down the entire universe into marketable segments—and that help answer the questions above—including geo/demographic, psychographics and lifestyle, attitudes, and needs-based.

One or more of these segmentation approaches is generally critical for developing branding and advertising. But for direct marketers, these types of segmentation can pose a problem.

That probably seems counterintuitive, since more data is usually better, right?

That depends.

It depends on whether the market segmentation is replacing proven database segmentation techniques—such as RFMP and deciles—that rely on behavioral data or the market segmentation is being used to supplement behavioral data.

Once marketers have executed market segmentation, they too often want to turn it into a company-wide religion. Not only do they want to use it (appropriately) to drive product, branding and advertising initiatives, they also want to override database models and segmentation that are the proven predictors of future behavior.

The biggest difficulty lies in identifying attitudinal, needs or psychographic segments in the database. Many marketers will just infer a household's segment based on geo/demographic data.

But if a marketer takes that approach, it's no better than executing direct marketing using demographics—a completely elementary approach compared to using transactional data.

There is a noteworthy exception, though. If marketers can commit the resources to bring together the database and the market segmentation study, they will have a complete view of prospects and customers, a.k.a. "marketing gold."

The result of spending the time and money to bring the two pieces together is direct marketing that speaks specifically to individuals' attitudinal motivations as well as their demographic and behavioral profiles.

To accomplish this feat, the marketer must select a random sample of names from the database and administer the market segmentation questionnaire to those people. By combining the answers to the questions with the transactional data already on file, clusters can be developed.

This seems simple, even obvious, but it is difficult to find a marketer that has executed this level of research and analysis. Mostly, once the market segmentation is completed, the team loses the money or motivation to take it to the next step.

So unless you can take it one step further, market segmentation is simply not a substitute for using transactional data as the primary segmentation tool for your direct marketing. Data like specific categories or products purchased, spending levels, tenure, payment method, demographics, number of stores or channels used, and geography are the keys to determining the right content, at the right time and in the right media.

Dianne Admire is strategic planning director, strategic services at Haggin Marketing. She can be reached at diannea@hagginmarketing.com

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