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(originally published by Booz & Company)


The Promise of “Self-segmentation”

Mass customization: Mass customization takes a base offering and enables customers to tailor it to their requirements. This has been used for products from jeans, sneakers, and skins for electronic devices to computers, cars, and houses. For example, Coca-Cola recently unveiled Freestyle, a fountain dispenser that can deliver more than 120 drinks customized to a customer’s taste. Companies can then easily segment customers based on their choices.

Although self-segmentation is still an emerging arena, it dovetails with today’s marketing imperatives. These imperatives, symbolized by the prosumer, crowdsourcing, and customer co-creation movements, are based on the realization that companies and customers must be interdependent participants in the interactive development of products and services. Not only does self-segmentation avoid the expense and difficulties associated with marketing research and CRM, but it also provides a launchpad for a stronger relationship and increased engagement with customers. In an era when even companies like Procter & Gamble involve customers in brand development, a top-down strategy that sees customers as entities to be managed rather than as partners and collaborators will ultimately lose ground.

Using self-segmentation information for marketing does present challenges. It must be accompanied by organizational changes. These include allowing or expanding customer input into such insular areas as product design, services, policies, and procedures, and may require that departments other than marketing and customer service open their doors to customers. Marketing must de-emphasize product promotion and think bigger than the company’s brand, tuning into conversations and issues that customers and prospects face. Monitoring and responding to conversations among multiple communities is labor-intensive, and the signal-to-noise ratio can be low. There are risks as well. The same community that offers an opportunity for a stronger relationship can also generate a backlash that hurts the brand and affects sales.

Segmentation is vital as mass marketing slips into irrelevancy, with information overload causing consumers to block out many corporate communications, no matter how precisely targeted. But CRM-based market segmentation can be expensive, complex, one-dimensional, and static. It fails to accommodate the multidimensional nature of consumers amid today’s fast-moving technological, economic, competitive, and social environments. It leads to top-down initiatives that view potential customers as targets to be blitzed with campaigns, ambushed with messages, and subjected to guerrilla marketing.

In this new era of branding, companies must focus on ethnic, cultural, religious, sports, or other segments, not markets. This pivot could be achieved through CRM systems, but self-segmented communities of interest provide a more effective alternative. Such communities can provide fast, low-cost market research, generate ideas and feedback about new offerings, help improve corporate and customer-to-customer service, strengthen relationships, provide an early warning system about problems, and promote favorable word-of-mouth. It all starts with finding communities united by a passion or an interest, and talking with them, not at them.

Author Profile:

  • Nick Wreden is an international brand consultant who is working on his next branding book, tentatively entitled, Leader of the Pack: How to Use Ethnic, Cultural, and Religious Segmentation to Engage Customers and Communities.
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