Marketers have been segmenting customers for as long as they've had data. Only now, there's more information than ever about consumer behavior and preferences--much of it from social media-- and all of that information can be key to segmenting customers more narrowly than ever before.
Called microtargeting or nanotargeting, the practice of using data to tailor marketing messages to tightly defined groups and individuals is emerging from an experimental stage. In fact, the ability to narrowly target consumers or business-to-business customers may soon be essential. To be sure, people notice pitches that miss the mark. In one recent Facebook discussion following the company's IPO, one commenter said she was surprised marketers aren't better at microtargeting, especially when it comes to collecting feedback from individuals about whether they want certain ads.
"There's sort of a shift in what people think about what spam is," said David Rogers, author of The Network is Your Customer, who teaches digital marketing at Columbia University. With better email filtering, most people no longer see pitches for Viagra. But even legitimate ads, much like status updates from boring friends, can become annoying and are likely to be hidden by the receiver. How much consumers want to hear from a company "really influences their perception of you," Rogers tells CMO.com. "This is where having more granular data helps you."
CMO.com talked to several marketers about the microtargeting practices that are succeeding now, and they provided some helpful advice.
1. Have a specific goal.
Confronted with a flood of data about consumer likes, dislikes, browsing behavior, location data, and shopping habits, it’s tempting to go fishing for correlations. While you want to discover patterns that hadn't occurred to you before, you need clear goals for using those insights that are not only appropriate for the channel you're using, but also cannot be achieved with existing methods. "If you're not going to do something different, it's not worth the time and effort to do it," said marketing technology consultant Esteban Kolsky.
For a campaign to increase its brand awareness, computer-maker Acer ran a sweepstakes (PDF), giving away an Aspire S3 Ultrabook to a Facebook fan every day for two months. Using the Adobe Digital Marketing Suite, the company analyzed Facebook data about consumers who entered the sweepstakes in an effort to refine the campaign. One surprising discovery: Many Acer fans were also fans of Alamo Rent-a-Car, according to Sid Shah, director of business analytics with Adobe (CMO.com's parent company). Acer responded to this insight by pitching the sweepstakes to Alamo Rent-a-Car fans, as well as other targets uncovered by the analysis.
Segmenting targets based on the analysis of fans' other Facebook likes and interests proved more cost-effective than targeting consumers who had characteristics that marketers chose intuitively, such as people who liked or searched terms related to technology.
But Shah doesn't recommend segmenting Facebook customers for a direct response campaign. "It's more about brand marketing," he told CMO.com. "You're not going to see the return on investment on a Facebook marketing campaign the next day."
You might, however, improve direct response by microtargeting your existing customer base. ESRI, which sells mapping software, has customers in 60 industries and dozens of job functions ranging from corporate executives to police officers. But when marketing its annual user conference, the company had always crafted generic messages calling for presentations or announcing registration details. Knowing that conference attendance cemented customer loyalty and ultimately increased sales, ESRI director of marketing Linda Hecht told CMO.com that she now makes drawing in new attendees a high priority.
After mingling with customers at the 2011 event, Hecht and marketing operations director Kevin Jaskowiak decided they should capitalize on customers' diversity. With tools provided by Aprimo, which ERSI uses to manage its customer and marketing data, they studied 25 variables, including job titles, industry, geography, and past conference attendance.
Then they tailored emails based on narrow customer segments with messages so specific that they would be relevant only to people in that segment. So far, the strategy has increased expected attendance at this year's user conference, scheduled for late this month in San Diego, by 20 percent compared to a year ago.
Next Page: Tempering resistance to change.
2. Expect to work differently.
ESRI's microtargeting strategy created additional work for its marketing team. The staff went from writing a few pitches per year to a couple hundred. Having metrics that show the new approach is benefitting the company helps quell resistance to change.
Meanwhile, the stats on response rates offer pointers for marketers as they keep refining their messages. "It enhances the creative process," Hecht said. "That's when you can see what message is going to work with the right audience." Frequent iteration improves results.
Improving results through microtargeting "requires more thinking, more paying attention," agreed Caree Syrek, chief strategy officer with Kinetic Social, a digital advertising agency. Marketers need to be flexible. They don't necessarily want to rework a plan they spent months creating to respond to a new set of customer demands.
For example, Syrek told CMO.com, Kinetic Social can analyze consumer engagement with online advertising down to the time of day that ads are most likely to reach their targets. In theory, if you're pitching diapers and you find out potential customers aren't online much during the weekends or in the morning, then you could save your fire for weekday afternoons. But Syrek sees few marketers taking advantage of such data so far.
Christie Hickman, senior manager with the consumer insight and strategy division at J.D. Power, helps clients with sentiment analysis--delving into what consumers think about brands and products based on how they talk about them in social media. Using software from NetBase, Hickman helps clients find information they can use to make business decisions. The findings, she said, may impact more than just marketing strategies.
The most advanced companies "have a very defined role" for social media that isn't limited to marketing. Product and R&D groups will also use social media, among many data sources, to identify market segments for which they can develop new products, Hickman said.
3. Know your own data.
A lack of integrated data remains a critical obstacle for companies that want to refine how they target customers, Columbia's Rogers said. "The biggest problem is sharing data across the organization," he said. According to a study by Rogers and Columbia professor Don Sexton called "Marketing ROI in the Era of Big Data," 51 percent of marketers surveyed complained about that.
“Data very often sits in silos, owned by the sales department, marketing department, or customer service, maybe retail partners, channels, or other people who have really important data," Rogers said. But the ability to link more data at the customer level is important to generating the deeper insights that marketers seek from microtargeting, such as Target did with its much-discussed "pregnancy score," which the company used to predict when a customer was about to have a baby.
"Data which is freely tradable quickly becomes commoditized," said Kinetic Social CEO Don Mathis. So the company focuses on differentiating itself by integrating its own data about ad performance and consumer behavior in digital media with profiles built on data from external (and more traditional) sources, including Experian Simmons and Mediamark Research and Intelligence.
A major focus involves developing new correlations between brands and popular culture. Earlier this year, the 100th anniversary of the Titanic disaster generated chatter about the 1997 movie, which was rereleased in 3-D, and director James Cameron's dive into the Marianas Trench. Analyzing the data about all of these topics uncovered correlations between conversations about Cameron and interest in luxury automobiles--creating a fresh target for automakers.
Yet marketers need to beware of the potential for backlash. Poorly targeted ads can give consumers a negative impression of a brand. Ads that seem to violate consumer privacy will likely creep people out. Facebook users, through their privacy settings, set the boundaries advertisers use to target ads to them. But on the Web, there's no such contract. If consumers get freaked out, then they may turn on the do-not-track function on their browsers.
"I'd rather see an ad that's relevant to me than something that isn't," Mathis said. Nevertheless, "we don't want to have targeting that may be accurate but uncomfortable."