Pointers on Behavioral Segmentation

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Behavioral segmentation is the practice of segmenting your customers based on what they do. I wrote previously about the basics of behavioral segmentation. During the last year, I’ve been putting it into practice through a customer segmentation project with a CASC business partner. Today I’d like to share with you some of the lessons I’ve learned through that experience.

NOT Just an Analytics Exercise

Behavioral segmentation has the advantage of revealing segments of similarly behaved consumers that you may not have thought of previously. It requires a lot of data crunching. There is no doubt about that. However, it is important to remember that behavioral segmentation is not entirely an exercise in numbers. If data crunching is all that you do, you risk creating segments that either are based on artificial or fake relationships or are not very actionable from a target marketing perspective.

Successful behavioral segmentation should be a collaborative exercise between your analytics team and those who have a good grasp of your business and your customers. The latter are most likely found in your marketing or sales department. The process of behavioral segmentation should be developed as an iterative process that goes back and forth between analytics and marketing. The analytics team should start by understanding from the marketing team the purpose of the segmentation exercise, the observed behaviors at hand, and the capability of marketing to implement behavioral segmentation insights. Based on this initial information, the analytics team can produce an initial set of behavioral segments based on customer data.

This initial segmentation scheme should be presented to the marketing team both to make sense of the results and to see if meaningful actions can be taken to target each segment. The input from the marketing team is then fed back to the next round of data crunching to adjust the segmentation focus and approach. This process is repeated until both sides are satisfied with a meaningful set of segments to be implemented in practice.

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Predicting Significant Customer Life Events

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The ancient philosopher Heraclitus said that “Life is Flux”. That statement has important meaning to how a business should connect with its customers. Consumers’ needs change constantly depending on what is happening in their life at the moment. It is impossible to catch every ripple in life. But a business needs to anticipate and respond to the most significant life events in order to build long-term loyalty. The first step is to understand what it means to have a significant life event, what happens to consumers during that time, and how it manifests in consumers’ activities. I will offer some answers in this article based on my own and others’ research in this area.

Consumers’ Experience of Significant Life Events

Significant life events abound in everyone’s life. Some of these are positive events, such as getting married, having a baby, or getting promoted at one’s job. Some are not so happy, such as getting a divorce, losing a loved one, or getting laid off. There are also events with bittersweet feelings such as retirement and sending kids off to college. Whether good or bad, these events are considered “significant” because they change our identity. That is, who we are as a person. For example, getting married means the addition of a new role as a husband or wife. Losing one’s job means the loss of an existing role as a worker and bread earner.

Such role transitions and identity shifts often create a sense of instability and can be quite stressful to the person going through the transition. To cope with the demand of role transition, existing research shows that one can simply cope with the emotional stress itself, or one can take a more proactive approach to do one or both of two things: (1) clarifying what one’s role will be following the significant event; and (2) adjusting one’s resource mix to be prepared for the new role.

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Research Focus: Gamify Your Loyalty Program

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Author’s note: With this post, I am restarting a previous tradition on my blog to report from time to time the findings from a single research paper. Now named “Research Focus”, these slightly shorter posts will summarize each research paper in accessible and practically relevant lingo. The focus is on what the research findings mean to practice. The research papers featured will be chosen from recently published or soon-to-be-published work as well as significant working papers that I consider to be highly relevant to loyalty marketing practice. The goal is to facilitate the dissemination of scientific research, build practice knowledge, and speed up the scientific discovery to practice cycle time. I hope you will enjoy the feature!

Loyalty program is everywhere, yet engaging consumers in a loyalty program remains elusive to businesses. Look at your own wallet or key ring, and you are likely to see at least a few loyalty cards that you no longer use. You are not alone. The 2017 Colloquy Loyalty Census reports that as many as 54% of loyalty program memberships in the US are inactive. A more recent loyalty program engagement survey of 1000+ consumers by CodeBroker shows that 65% of those surveyed are engaged with less than half of their loyalty programs.

The loyalty program (dis)engagement problem has various possible solutions. One solution is gamification, that is, introducing gaming into a loyalty program. Examples of this approach abound in practice, offered by familiar brands such as Victorial’s Secret, Domino’s Pizza, and Starbucks (see the picture at the beginning of this post for a screenshot of the currently running Starbucks Bonus Star Hopscotch game). In today’s Research Focus paper, to be published in Journal of Business Research, Professor Jiyoung Hwang and her colleague studied when and how gamification helps in a loyalty program context. Continue reading “Research Focus: Gamify Your Loyalty Program”