Market Segmentation and the Clickstream

From: Bryce Isham & Jack Thompson <bisham_at_claritas.com>
Date: Tue 1 Feb 2000 12:22:44 -0500

At the beginning of December, I posted a message about
market segmentation applied to the online world.
Several people responded to my posting via the list and
a number responded to me personally. Jack Thompson, a
very knowledgeable resource about market segmentation,
and I have discussed the issues, and kindly offer the
replies below.

Here goes . . . all comments and questions are welcome
. . .

There is some concern that traditional market
segmentation techniques do not work in the dynamic
environment of the web. Some comments were:

1) The web is so dynamic that sites want to identify
the individuals needs and serve content and ads on the
fly to match. There is no " we find out who they
are because they fill in a form to get a demo or
something", we have to find out what they want from the
clickstream, they are not in the main going to "tell"
us anything.

There are two situations to think about. The first
case is truly serving relevant ads and content on the
fly, based on the clickstream data. In this case,
there is a correlation between someone's clickstream
and what content and ads they should be served. See
number 2) below for a more complete explanation of this
concept.

The second is when a site has a free demo feature or
other mechanism that requires contact information --
this is not so uncommon! In this case, the contact
information can be used to segment and profile your
site visitors and customers. After you have done this
segmentation, and figure out what type of site visitors
are accessing your web site, you can serve up content
and ads based on the general visitor profile.

2) You're much better off looking at real behavior
(purchases, web logs, response to e-mails, etc.) to
glean actionable profiles, if you are a direct
marketing oriented site. All the best personalization
I know of is driven off real behavior, not
self-reported or appended information.

I may have been a bit unclear in my original email by
implying that you have to know where your customer is
coming from, physical address, before you can use
segmentation-style marketing.

Segmentation has allowed us to correlate different
types of purchase and lifestyle behavior. For example,
someone who golfs is likely to buy golf balls -- very
intuitive example. Someone who golfs is also likely to
take a trip to a foreign country -- not quite as
intuitive. Survey data allows for the determination of
correlations between different behaviors and purchase
patterns. These surveys are conducted by major
research companies and the sample sizes are large
enough to provide statistically valid correlations.
If most survey respondents who play golf also take
foreign trips, then there is a high correlation between
these two lifestyles. If most survey respondents who
play golf do not go to automobile races, then there is
a low correlation between these two lifestyles.

This does not mean that someone who golfs is going to
take a trip to a foreign country, just that they are
more likely to do this than to exhibit other behaviors,
like go to an automobile race. Behavioral correlations
are a very good way of establishing reasonable
personalization.

Applied to the online world, this means that if you
have a web site that focuses on golf, then advertising
trips to foreign countries is better than advertising
automobile races. If your site has varied content,
then if someone visits a golf-related page or makes a
golf related purchase, then it is reasonable to serve
them content or ads related to foreign travel.

3) mass customization on the web can go too far! while
we indeed realize a value from segmentation large
groups of customers in order to "talk" in a more
harmonious way to different types of people, we need to
balance the refined level of granularity with
reliability of our messages. mass marketing is too
big, 1-1 marketing is too small because of the
idiosyncratic nature of individuals. we need to
identify the smallest "1 to few" group that represents
a stable collection of characteristics that are
reliably valid for current and future groups.

Response 3 is basically what market segmentation is all
about!

In sum, I don't want to lose the value that can come
from knowing about an individual customer. The main
point is that traditional segmentation techniques have
their place in the online world. Segmentation will
allow you to tailor general site content and
advertising, attract online advertisers, target online
advertisements, and find appropriate traditional media
channels for advertising. All of these points are
covered more completely in my original message.

Thank you.

Bryce Isham, bisham_at_claritas.com
Jack Thompson, jthompson_at_claritas.com
Claritas Inc.
(607) 266-3400
www.connect.claritas.com




Received on Tue Feb 01 2000 - 11:22:44 CST