Treating The Same Customer Differently In Different Occasions
1. Treating The Same Customer
Differently in Different Occasions
March | 2010
2. Treating The Same Customer Differently in Different Occasions
As traditional customer segmentation has become blasé, with occasion
segmentation the hot trend, it’s a hybrid model of the two – occasional customer
segmentation – that companies seeking to “be there” for their customers need
to examine.
What?
A recent survey conducted with 120 leading companies on the topic of customer
segmentation and its uses highlighted that:
97% of companies rely on segmentation in strategy development
77% use demographics, 66% use needs and 63% use value as their
segmentation dimensions
All these facts demonstrate that, by today’s standards, customer segmentation
using traditional dimensions has moved beyond being a tool for competitive
advantage and has become a must-have, recognized and already utilized by
many. Companies looking to get ahead of the competition need more innovative
and effective ways of using their customer data.
Occasion-based segmentation, which is used by only 21% of the same companies
surveyed, is a potential step towards this, but is not complete, unless married
with the customer-based segmentation models. Occasion segmentation focuses
on analyzing occasions, independent of the customers, such as considering Coke
for occasions of being thirsty, having dinner or going out, without taking into
consideration the differences an affluent and middle-class customer would have
during these occasions.
‘Occasional customer segmentation’ merges customer-level and occasion-level
segmentation models and provides an understanding of the individual
customers’ needs, behavior and value under different occasions of usage and
time. Unlike traditional segmentation models, this approach assigns more than
one segment to each unique customer, depending on the current circumstances
they are under.
But, Why?
First came mass marketing, with companies developing and promoting products
to all. Next came one-to-one marketing, with companies developing and
promoting the right products for the right customers. Occasional customer
segmentation takes it one step further in the same direction and brings in the
concept of many-to-one marketing, by developing and promoting more than one
value proposition for the same customer, based on its relevance for the ‘current’
needs of the customer.
Companies need to realize that their customers are not only different from each
other, but are also different from themselves at different times. People have
different needs when they are at work vs. when they are at home or socializing.
3. They act differently during holiday seasons vs. regular days. They even have
different expectations momentarily, based on their feelings and mood swings.
A customer, who would be willing to spend a fortune when buying a gift, could
be the most tight-fisted person on earth when it comes to shopping for his or her
own self. A mobile phone service customer who is spending hours on the phone
after work could be the same person keeping it to only short conversations
during work-hours.
Without understanding the occasion, and averaging out all of the customer’s
activities and transactions into a model that puts one label on that customer
needs and behavior, companies can never achieve 100% relevance for their
customers. Looking only at the occasion without the customer, on the other
hand, neglects the background of the individual customer, destroying
consistency. This is why occasional customer segmentation is a must-have for
companies looking into maximizing their customer value, merging these two
concepts into a powerful tool.
Let’s analyze what this means for a leading producer of sun care products, which
offers a range of items with varying levels of sun protection. If the company
looked only at the customer-level segments, based on their needs and behavior,
it would end up promoting an SPF 4 product to John Doe, who is identified to be
in the ‘careless tanner’ customer segment.
If, on the other hand, the company focuses only on one given occasion for which
John Doe will be using the protection (i.e. a desert safari where he needs
extreme protection), the offer would be an SPF 50 product. In the first case, John
would not buy the product since it will not be relevant to his circumstantial
needs. In the second case, he would not buy the product either, because it is not
a consistent offer for his general attitude towards sun protection. It would
require the producer to put the customer and occasion facts together to come
up with the right offer for the specific circumstances and the specific customer.
So, How?
We recommend three main steps towards building occasional customer
segmentation models:
Define Occasion Types and Identification Means: There exist three main
types of occasions, which can affect the needs and behavior of customers,
creating different circumstances. The first step in occasional customer
segmentation is to define what occasions are relevant for the specific industry
and product offerings, and how they can be identified for each customer:
Universal Occasions: These are highly identifiable occasions, which are
applicable to almost all customers with similar demographics. Holiday seasons,
weekends, working hours and special days are such times which can affect
customers’ occasional segment. For example, a businessman’s weekend
grocery shopping can be much different than his time-squeezed weekday
shopping behavior, and thus, need to be analyzed separately when deciding
which segment a customer belongs to.
4. Regular Personal Occasions: These are personal occasions, which are related
to the customer as an individual, yet, keep repeating over time. Some
examples would be the birthday of a customer, his or her wedding anniversary,
or simply the specific habits of the customer such as driving to work between
8:00 and 9:00 AM. These occasions can be identified through analyzing
patterns in the customer’s behavior or gathering more detailed information
about each customer. The ability to customize offerings based on these
occasions for individual customers provides the most relevance, in as such as
they are designed around the customer’s personal life. For example, a
customer would be using his credit card with a significantly different pattern
before his wife’s birthday, compared to rest of the year, and similar to the
above scenario, such occasion-based behaviors need to be analyzed
separately.
Rare Personal Occasions: These are personal occasions, which are generally
non-repetitive in nature and usually unforeseeable by companies. Events such
as a trip abroad, a car accident, or a night-out on town (which can affect the
customer’s behavior and needs suddenly, and are effective usually for a short
period of time) are in this category. Although these events are not highly
predictable, companies can identify them to a certain extent by analyzing the
irregular activities in customer’s behavior over time. Identifying such
irregularities and keeping them aside from customer’s regular behavior
provides a more accurate overall understanding. More importantly,
researching the reasons behind such irregularities can reveal untapped niche
areas. If a customer suddenly spends twice the amount his regular behavior
suggests, understanding the trigger (e.g. honeymoon, celebration) can
facilitate promoting relevance of offerings for such triggers over time.
Analyze Customers Under Different Occasions: After the occasions are
defined and identified for each customer, the second step is to isolate them from
each other and analyze customers under each occasion separately. This step
resembles a traditional customer segmentation modeling work in terms of
technical steps, the main difference being the fact that analyses are done at the
customer-occasion level, having more than one set of data for each customer
and as many segmentation models as there are occasions. The outcome would
be the set of rules, defining which customer is assigned to which occasional
segment, during what time of day, day of week, or course of events.
Continuously Score Customers: Similar to traditional customer
segmentation, occasional customer segmentation requires scoring and re-scoring
of customers, to understand their current needs and behavior. Yet, since
occasional segments are time-dependent, its scoring requires the ability to assign
segments to individual customers almost in real-time, especially if the occasions
are identified to follow short cycles, such as hours of day.
Occasional segmentation follows a different mind-set than the traditional ‘one-
segment-per-customer’ approach, which can make it relatively difficult for
traditionalists to develop and implement. However, the benefits are great, as this
moves companies closer to their customers than ever, as if they are sitting next
to them and observing changing needs and behavior through day and night.
5. What Next?
Once a company implements occasional customer segmentation, it will provide
endless insight, uncovering hidden gems in their customer base. The next
obvious step would be digging in, customizing campaigns for different occasions
of customers, developing new value propositions for promising occasions, and
offering bundles of products that would appeal to the same customer under
different occasions. Additionally, companies can benefit from identifying the
mismatches between customer behavior under different occasions – such as a
customer having high spending during one and low in another – to come up with
activities that would stimulate their behavior under certain conditions.
6. About Forte Consultancy Group
Forte Consultancy Group delivers fact-based solutions, balancing short and long term
impact as well as benefits for stakeholders. Forte Consultancy Group provides a variety
of service offerings for numerous sectors, approached in three general phases -
intelligence, design, and implementation.
For more information, please contact
info@forteconsultancy.com
Forte Consultancy Group | Istanbul Office
www.forteconsultancy.com