Many brands develop advertising or other types of marketing communications using one of two strategies:
1. Develop communications that are designed largely to appeal to one or two groups in particular, generally based solely on some type of demographic characteristics (e.g., appeals to millennial women)
2. Create messaging that is more general and intended to appeal to the mass market
These same approaches are typically used when brands are developing products to appeal to either niche audiences or a wider group of customers.
Unfortunately, these strategies can be very ineffective. In the case of being too laser-focused with one group of customers, brands can miss the opportunity to appeal to a wider group of customers. Or when attempting to appeal to a wider audience, the message or product ends up not really resonating sufficiently. Additionally, trying to appeal to specific groups based on demographics only implicitly assumes that all individuals within the group are homogenous and have the same needs, wants and attitudes, and that their behaviors are likewise similar. This can be a faulty assumption.
Trying to appeal to specific groups based on demographics only implicitly assumes that all individuals within the group are homogenous and have the same needs, wants and attitudes, and that their behaviors are likewise similar.”
So, what is a more optimal approach to develop targeted communication or products based on the unique needs and desires of specific groups of customers? Our experience shows that brands enjoy greater success when using a form of segmentation analysis. This provides the ability to separate customers into mutually exclusive groups each of which shares some common underlying characteristics such as similar needs, attitudes, behaviors, or perhaps who are all similar in their opinion of a particular product or service.
There are different approaches that can be used to segment a broad target market into subsets of customers who share commonalities. We find that one of the most effective approaches is cluster analysis.
Why is cluster analysis an effective segmentation approach?
- Cluster analysis seeks to identify and group together customers so that individuals in each of the resulting segments are as similar as possible to one another in terms of their needs, attitudes, behaviors, and/or priorities.
- It ensures that the segments themselves are as dissimilar as possible.
However, cluster analysis algorithms typically do not include demographics which does not provide for true targeting of groups. In order to overcome this deficit, Radius has developed an approach to cluster analysis called Targetable Segmentation. It gives brands powerful insights for developing messaging and communications that will resonate among highly targetable groups.
Targetable Segmentation gives brands powerful insights for developing messaging and communications that will resonate among highly targetable groups.”
How effective is cluster-based Targetable Segmentation?
We recently worked with a large financial services company to identify groups of customers that differed with respect to their motivations and attitudes towards finances. Using Targetable Segmentation, the company was able to develop unique messages for key segments resulting in a 63% increase in the open rate of emails and a 500% increase in individuals responding to the offer that was presented in the email.
The goal of cluster analysis in our Targetable Segmentation approach is to ensure brands are reaching the broadest group of consumers as possible while still being able to target communications that resonate with their unique situation and needs. This leads to more optimized communication and product development strategies and greater success in the marketplace.
Want to learn more about cluster-based Targetable Segmentation?