I think I first started getting my head round segmentation about 37 years ago, maybe 36, when I was a creative group head looking after the Co-op’s food retail business. The stores were pretty grim, and to be honest so were our ads, but our senior client Barry Silverman was probably the closest thing to a mentor that I’ve had in this business, and segmentation was a big theme of his mentoring.
Because of the nature of his organisation, his approach was largely product-driven, not consumer-driven – basically he’d segmented his food outlets into three, superstores, supermarkets and corner shops, and segmented their propositions and communications on the basis of the needs that each met (respectively, main shop for car users, main shop for non-car users, and secondary or top-up shop)..
This was basic stuff, but it still reflects an approach that’s fairly uncommon in large parts of retail financial services today. Well schooled by Barry, I can remember when I moved into the financial services world how troubled and surprised I was by the usual practice when promoting products to end-consumer and intermediary target audiences: to the end-consumer we said “You’ll love this top-performing fund,” and to the intermediaries we said “Your clients will love this top-performing fund.” This is search-and-replace segmentation, not the real thing at all. Although I don’t actually think we have search and replace in those days.
This particular approach is less common these days even if only because there are fewer propositions targeted simultaneously to end-consumers and intermediaries, but nevertheless our approach to segmenting markets and targeting propositions to different segments is still rudimentary in the extreme. Quite often we start well, observing that a number of segments with different needs and attitudes exist. But, all too often, having recognised this, we decide there’s no way (or no cost-effective way) to identify, prioritise and target any of them, so we need an approach that speaks to them all at once. (That’s how, as I’ve said before in this blog, a few years ago I found myself writing a mailing about Child Trust Funds to customers of a Big 4 bank that began “Whether you have children or grandchildren, or don’t have children at all…”.)
This failure to segment and target has a devastating effect on our ability to involve and engage. Our propositions and communications could be incredibly much more powerful if we could develop them with real insight into the way people are – or, rather, the way some people are.
(And, by the way, at risk of stating the obvious, segmentation isn’t just about offering and saying different things to different people – it’s also about deciding which segments to address, and which to ignore. A proposition which excites a quarter of your market can be massively more successful than one greeted with a yawn by all of them.)
I don’t suppose many people would disagree with much of what I’ve written here – and for once, by way of additional firepower, I even have the regulator on my side. The FCA may not be much concerned about marketing effectiveness, but it is very concerned about people understanding things. As a result, it more or less demands that we segment our markets so we can address them in terms they find comprehensible, but much of the time we seem to ignore this demand.)
So what’s going on? To take a couple of big current examples, why is it that neither the Pensions Freedoms of the last couple of years, or the coming of PSD2 in the last few weeks, seem to have sparked off the kind of highly segmented, highly targeted activity most likely to deliver results?
I think there are two key issues. The first is a largely emotional problem with the whole business. Segmentation involves a lot of extra work and ultimately extra expense to make life more complicated and/or to make our target markets a lot smaller. These both feel like un-smart things to do. If we can keep it nice and general and generic, we can generate business from everyone. Our slice of the cake may be a little smaller than it could be, but just look at the size of the cake!
The other issue is that for all the data revolution that we’re living through at the moment, our ability to access and use the data we need at the one-to-one level is still very limited. That bank I mentioned earlier can’t tell, or at least not with certainty, which of its customers have children, or if so how many, or if so how old they are. It may know whether some of its customers have children, but targeting its Child Trust Fund activity only on them seems like a missed opportunity. On the whole, it looks like a better bet to target the campaign very broadly – and to begin the letter with that cringe-worthy first sentence I quoted earlier.
I expect it was Barry Silverman who told me all those years ago that the secret of all good marketing – and, even more so, of all good copywriting – is to do what you’re doing with a clear and full picture of just one single individual in your mind. Not far off 40 years later, we’re still spending most of our time with our heads full of hazy, ill-understood crowds..