Consumers on the Move

THE GOOD NEWS IS YOU'VE got lots of customer data! The bad news is you've got lots of customer data! How can the promise of true integrated marketing be possible in that sea of disparate details? And how can you quickly tease meaningful information from it that will make a tangible impact on your company's bottom line?

One of the most effective ways to demonstrate the value of your database investment is to ensure it can answer core marketing questions, such as:

• Who buys from me?

• What are they going to buy from me?

• Where can I find them geographically?

• How can I best communicate with them?

Answering these questions is possible only if you have a consistent framework to define and describe each customer or prospect. A segmentation system allows you to identify opportunities and take marketing action. And advances in database technology are allowing us to go beyond “who, what, where and how” and add two new questions: “when” and “on which screen.”

WHERE WE STARTED

The most common approaches to segmenting a customer database are through demographics, buying behaviors or geography. More than a quarter century ago, Jonathan Robbin helped create the first geodemographic segmentation system called Prizm (Potential Ratings in ZIP Markets), a marketing database that combined geographic and demographic characteristics of neighborhoods. By analyzing the aggregated 1970 decennial census data, Robbin was able to differentiate and describe each census neighborhood in the United States. A sociologist, he uncovered the correlation between a neighborhood's demographic characteristics and the likely consumer behaviors of those who lived there.

But where did this intersect with marketing decisions? Each neighborhood could be labeled with a geodemographic segment code and every record on a customer database could be tagged with segment codes. This allowed marketers to calculate the kinds of neighborhoods likely to have a concentration of a company's best prospects.

And that's how we lived for most of a quarter century, with that static snapshot taken from area-level, decennial census data. But in the last few years there have been dramatic changes in marketers' data and targeting choices.

WHAT'S CHANGED

Advances in computing technology, data quality and statistical techniques have allowed us to break the yoke of the once-every-10-years census data and deploy segmentation systems using household-level data. Now, instead of being able to differentiate between whole neighborhoods, marketers can differentiate between next-door neighbors. This is significant if you consider the average number of households in a census block group is 600. Rather than papering the entire neighborhood with your marketing message, now you can select the specific households most likely to respond to your offer.

The overall effect is to dramatically improve targeting power. Core demographics like age, marital status, income, kids and net worth still play a powerful role, but now it's with household-level accuracy covering some 120 million U.S. households. And the old mythology of poor household data has dissolved with routine household-level match rates consistently in the 90% range, plus the ability to code tens of millions of records in just hours.

The framework for a segmentation system also had to change. Instead of simply finding differences between neighborhoods, the “life stage” concept is most meaningful when differentiating consumer behaviors, media preferences and lifestyles among next-door neighbors. It's as intuitive as it is practical.

Moving from that old, static snapshot to the reality of a changing, dynamic marketplace is where the advantages of a household system come into play. Most compelling is that the segment codes for each household can be updated every time the household database is updated — approximately once a month, not once a year. This allows marketers to identify when a household migrates from one life-stage cluster to another.

When life-stage changes happen, previous attachments to purchasing behaviors, media preferences and lifestyles destabilize. Consumers are then open to trying new brands and products through new channels. This is a great opportunity for marketers that want to add the “when” to their targeting strategy. For example, when consumers have babies they're suddenly acutely aware of where the diaper aisle is in the supermarket. And they're more likely to stay at home watching “America's Funniest Home Videos” on a Friday evening rather than go out nightclubbing.

Life-stage migrations, from getting your first apartment to retirement, have a dramatic impact on our consumer behaviors and media preferences. If 90,000 households just moved into your most profitable life-stage segment this month, you want to talk to them before the competition does.

Even syndicated survey data like MRI or IRI works better because the surveys are coded at the household level. Maps can be articulated with the latitude/longitude accuracy of dot-density maps to indicate where the target households are — a huge improvement over ordinary thematic maps and their blankets of color. So now marketers have a consistent framework with which to view their customer and prospect universe.

LOOKING TO THE FUTURE

As new media channels proliferate and mature, marketers must strike a balance between their choice of targeted households and the media selected to reach those prospects. New technology in addressable advertising across “all three screens” — computer, cable television and wireless — is terrific for capitalizing on the consistent accuracy of a household-level segmentation system. It's the computer screen where the “geo” is really becoming less central to targeting since information can be found anywhere and at any time. Let's take a look at each screen's targeting capabilities.

• Computer

  For lack of a better term, “Personicx cookies” are the next step for boosting the effectiveness of online ad targeting. Right now most online advertising is done in an untargeted “spray and pray” style. But with a cookie tied to a household segmentation system, both the advertiser and Web site publisher can dramatically improve targeting and site performance.

  For example, when a computer with a Personicx cookie indicates the user is from a particular household cluster, the Web publisher will know how to improve users' site experience with targeted content for households in that cluster. This will improve the quality of ad delivery and allow a sponsor to buy X number of impressions in that cluster.

• Cable television

  After years of talk, addressable advertising over cable TV is ready to take its first real steps. But while the plumbing may be in place, the work of deciding which ad goes through which pipe still needs to be done thoughtfully. This is changing television into a real direct marketing vehicle — one requiring the same targeting expertise as traditional DM channels.

  Consider the power of using the same consistent household-level segmentation framework online and off, and with “directcast” TV (as opposed to broadcast). And, in the same way advertisers can pay for and measure reaching 2 million households in a given cluster online, they will be able to make similar targeted media buys via cable TV.

• Wireless

  The “third screen” offers DMers the same opportunity to know a subscriber's consumer life-stage segment and to deliver targeted content whenever and wherever that person happens to be. The geographic independence of today's mobile consumer renders the traditional “You are where you live” approach of classic geodemographic systems more or less irrelevant. Not only will we marketers need to know the predictive and descriptive characteristics of the mobile subscriber looking for information about our products, we'll have to provide meaningful information that's applicable to where they are at any given moment.

  A lot has changed in the science and art of consumer segmentation in recent years. Improvements in the power and cost of computer technology, data quality and statistical techniques have provided DMers some powerful new tools. The opportunity to achieve true integrated marketing across all channels puts more control into marketers' hands than every before. These are exciting times indeed.

JOSH HERMAN (Joshua.Herman@acxiom.com) is data product innovation leader at Acxiom Corp. in Little Rock, AR.