Market segmentation is one of the most useful and relied-on tools in marketing. It categorises consumers into groups that can be analysed and targeted. Without it, marketing would be a stab in the dark. All consumers would considered the same because they would be too different to account for.
Market segmentation, for all its usefulness, is not perfect. It’s approximate. It’s the only sane and manageable way to talk about, quantify and work with thousandfold groups of people each with their own thoughts and feelings and ways. But technology is changing that.
Big Data technologies are enabling markets to be segmented increasingly narrowly and precisely and consumers are being marketed to in more relevant and more personalised ways. This is ‘personalised marketing’. The ultimate end to this trend – often couched by marketers in terms like ‘nirvana’ is where each consumer occupies their own market segment. I.e. when there is no market segmentation, because each consumer is considered individually and their uniqueness is understood.
The benefit of this is: targeting very precisely. With less bundling and approximation, personalised marketing has the potential for great effect. In fact, it is already used incipiently by some companies. But there is still a long technological road before the true ‘nirvana’ of perfect personalised marketing and perfect targeting is reached.
Big Data Personalised Marketing
The technology that has enabled personalised marketing is the ability to collect and store huge quantities of data on consumers. In the recent past, data was collected at the cash register – time, date, purchase, price. This is regular data. Big Data is collected from consumers at all online touchpoints – name, email address, location, web analytics like time on page purchase information, demographic, contextual and behavioral data. This data can be augmented with data from external sources such as proprietary databases and web data mining.
A prime example of a company that is doing all of this, and has been before ‘Big Data’ was even a term is WalMart. WalMart collects 2.5 petabytes of data from customers every hour. That’s 2.5 million gigabytes. It records every purchase made by every consumer and has personalised customer data on around 145 million Americans. [Source: dezyre.com.]
Retail is an industry where big data has really taken off, and Amazon.com is another example of a Big Data innovator. Both of these companies use the data to make personalised product recommendations and deals to their customers.
But Big Data still has a long way to go. Only very large corporations can afford to use it because of the costs of storing and analysing it. It is by now a well-known truth that collecting Big Data is much less resource-intensive than storing and analysing it. Storage has hardware and electricity costs and analysing is a much less automated, less clear cut task than collecting it. Many companies have large amounts of data (big data, maybe not Big Data). But actually using this data is a complex task that often is left uncompleted.
And how will (or will) Big Data insights integrate with marketing department intuition and creativity? Data is the sterotypical anathema of creative directors who see it as the polar opposite of creativity (e.g. think Don Draper). In the present, data insights informs and guides the creative team (keeps them down-to-Earth and on topic). This works effectively if all the marketers understand the importance of facts in a world made of them (at least we would hope). In the future, data looks set to take more of a lead role. We predict that there will probably be two major levels of marketing: personalised marketing and branding. Branding is the marketing of the entire company’s image, and will probably be guided more precisely by data, but it’s going to be a long time before a computer can print out copy like this:
Obstacles to Personalised Marketing
There are two major obstacles on the way to the personalised marketing future that we and many others are predicting. These are:
- Consumer privacy concerns: this is a major issue emerging in the digital era. That collecting vast reams of data on consumers may make them feel vulnerable, even violated and manipulated. In response, you could get consumer boycott and retaliation.
- AI technology: as brushed on already. AI technology may automate the labour-intensive task of data analysis – the final non-automated bottleneck in the Big Data workflow. It may also automate the one-on-one personalised marketing itself. Complete AI automation to this extent is the real key to the kind of ‘nirvana’ that marketers dream of. (A lot of people’s fanciful post-work dreams hinge on AI.)
- Data vs creativity in the marketing process
Big Data is one of those major epoch-defining disruptive innovations with effects reaching into numerous fields, one of them being personalised marketing. Personalised marketing looks set to change the marketing world, and change inevitably comes with an edge of excitement and fear. Marketers should be excited about the new avenues opening to them, consumers should be excited about the improved product recommendations and less mis-targeted ad noise that they’ll be confronted with on a daily basis. But marketers should be concerned about their human role in the marketing process and consumers should be conscious of their privacy rights.