M-Retailing

GUEST OPINION Why retailers should move from segmentation to individualization to reach mobile shoppers

057f758Many retailers are on board with segmenting their customer base in an attempt to make marketing more personal. But the mobile revolution is making even that redundant – these days you have to think individualization instead. Kurt Heinemann, CMO of Reflektion explains

In July 1956, Wendell R. Smith, president of the American Marketing Association (AMA) and the first president of the Marketing Science Institute, explained a new concept to readers of the Journal of Marketing: segmentation. Smith’s award-winning article described it as “a rational and more precise adjustment of product and marketing effort to consumer or user requirements… The differentiator seeks to secure a layer of the market cake, whereas one who employs market segmentation strives to secure one or more wedge-shaped pieces.”

Segmentation was the hottest idea since sliced bread—or cake—and companies have been slicing up the overall market into targetable segments ever since. Based on this concept, businesses pitched products and services to well-defined segments in radio, print, and broadcast ads. As companies grew to know more about each media channel, they were able to define segments with greater precision and target their advertising spend on the segments most likely to buy their products and services. But even though segmentation has grown far more sophisticated since the 1950s, it remains something of a blunt instrument in the marketing toolbox – and its traditional principles have become even more outdated in an era where mobile commerce is expected to drive half of U.S. digital commerce revenue by 2017. Segmentation can talk—or even shout—but it can’t listen, observe, and respond, in the way individuals have come to expect from their mobile experiences.

While segmentation is still leveraged today, now using Artificial Intelligence (AI), in the online and ecommerce space, it’s not the only technology suited to help retailers understand their customers. Interactive digital channels and AI together can also deliver individualization, which provides a more personalized experience for each online visitor, and is much more than the one-way lecture of segmentation. An individualized experience is more like a two-way conversation with a terrific sales person or customer service expert who understands what the customer is looking for, listens to what the shopper wants, and responds in real time.

Both segmentation and individualization can begin from the same point: the visitor—whether a customer, student, citizen, patient, or a person who is in all of those categories—arrives at your site. Segmentation responds with its preprogrammed page for users in a certain category or coming from a certain site. Individualization may begin in the same way, but as soon as the visitor clicks on something—or hesitates— individualization begins connecting the dots of the clickstream to customize its response to the visitor. The individualization component draws inferences and displays one customized page after another, playing a dynamic game of “warmer, colder” that matches the visitor’s behaviors with the company’s entire inventory of products by leveraging information such as where they came from (an app or another mobile site), how they responded to the first page they saw, and how they responded to the next, and the next.

Both types of sites—those that segment visitors and those that deliver individualized experiences—leverage AI engines that receive exactly the same type of clickstream data. But with individualization, the AI engine doesn’t aggregate that clickstream data into general reports; it keeps each clickstream separate so that it can gain a clearer picture of individual searching patterns and predict which attributes will appeal to that individual. It applies powerful algorithms to that data and within a few clicks, a visitor to the individualized site should feel like they’ve reached the right department or a shopper should feel like they’re standing in an aisle curated for their preferences. This sense of real-time conversation not only creates an individualized commerce environment that has been shown to boost conversion by 20 percent, but it also increases engagement by 70 percent and creates a feeling of trust.

Trust developed between the retailer and customer further enhances brand recognition and loyalty. Because individualization implements a two-way conversation between the retailer and the shopper, and ultimately provides each individual with what they are looking for, a deeper level of customer service is provided. This level of interaction makes individualization even more important for consumers who are turning more frequently to their mobile devices. However, the race to hone in marketing strategies for mobile optimization is still underway.

One of the greatest mobile challenges for marketers is the limited screen real estate found on mobile devices because this leads to limited interaction. When shopping on a laptop, computer, or even a tablet, there is at least a two to three column view. This provides maximum real estate where more products can be easily displayed in an aesthetically appealing manner. The multiple column view benefits retailers looking to offer shoppers many options on one landing page. However, when we switch to a mobile view, the column view diminishes to one column. As opposed to multiple columns, one column forces shoppers to scroll endlessly until they reach the product they’re looking for (assuming they have the time and willingness to scroll through pages). When a shopper is constrained and can’t see as many options, it’s even more critical to bring the most tailored content to the front. The limited real estate mandates that businesses provide the most relevant experience possible.

In order to capitalize on the consumer’s limited time, and turn them into shoppers, retailers should also optimize their mobile site search. Unfortunately, site search today is still commonly leveraged much like a dictionary look-up tool. However, this can easily be an engagement and merchandising opportunity. Implementing mobile site search allows retailers to respond to each shopper’s intent and preferences in real time by individually prioritizing a selection of products as a result. For example, a millennial who is a loyal customer to O’Neill decides to conduct a mobile site search for new shorts. Because this particular customer has interacted with the site before, O’Neill will display options of shorts catered to his or her personal style. What’s more, first-time site visitors will be provided with additional search terms to help them specify the product that they are looking for. The more that each visitor interacts with a site leveraging individualization, the more the technology will better understand the customer for their next mobile visit. This provides a more personalized, rapid shopping experience for each individual shopper.

A great example of individualization is Netflix. Most people are now familiar with the way Netflix begins to “understand” their individual tastes and recommends movie selections accordingly. Other businesses are now rushing to offer a similar type of individualized experience for consumers visiting their retail sites. Similarly, retailers adopting online individualization vs. segmentation find their consumers stay on their mobile sites longer, click on more products and ultimately buy more.

When compared to segmentation, with its “and/or” and “if/then” statements that aim to pigeonhole each shopper in a preexisting category, individualization is a dynamic conversation, observation, and drawing of conclusions that discovers and tracks all of a shopper’s unique preferences. Individualization has always been a defining characteristic of great retail experiences. For example, a savvy local boutique owner builds a loyal base of delighted customers by noticing what her customers wear, listening to what they say about their lives and their needs, and observing which items they purchase, which they reject, and why. What’s new is not individualization itself but the scale at which AI can deliver it, taking into account millions—if not hundreds of millions—of preferences and inventory items, thousands of times a day, for hundreds of thousands of customers.

While retailers continue to use segmentation, consumer interactions with the digital world are expanding and their mobile attention span is contracting. Individualization is the only marketing strategy that can consistently deliver the highly relevant content that keeps fickle, impatient customers engaged while increasing conversion, brand loyalty, and revenue per customer. The bar has been raised from segmentation to individualization, and organizations need to change up their marketing to meet the new expectations.