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If you operate in the world of digital marketing, you know that personalization is all the rage. Want to increase your conversion rates? Need to boost online transactions? Want to increase your average order value?

The answer – offer personalized experiences. 

And yet a recent survey of US internet users shows that 93% weren’t getting relevant marketing messages. 44% even said they’d switch brands to get more personalized content. 

The potential for marketers is huge, so it’s not surprising to see numerous solutions providers popping out of the woodwork offering opportunities for marketers to use their technology (typically some sort of machine-learning software) to learn more about their customers and audiences and shape experiences through personalized content, navigation, and directional cues. They show us case studies about how personalization has benefitted companies. In most cases, however, they are referring not to personalized experiences, but segmented experiences. 

We agree with the notion that personalized experiences are beneficial to organizations. The more we can signal to users that we understand who they are and what they are looking for, the more likely they are to become and stay customers. But what we’re hearing about from martech vendors more often than not, is actually segmentation. There is a big difference that marketers need to understand before adding more tools to an already-complex martech stack. 

Segmentation is about groups of people. It’s the process of breaking down audiences into smaller groups of people with common attributes. 

Personalization is about one specific person who could be in any segment. It’s the process of creating a bespoke experience for the individual. 

The Relationship Between Segmentation & Personalization

Levels of Personalization
I use a three-level model for personalization, which is based on the amount of information you have about your users. 

This is one of the tenets of great marketing – identify homogenous groups of people based on relevant information that can be used to deliver marketing mix strategies for great results.  Segments are typically based on descriptors, such as demographic (e.g. age and gender) and psychographic (attitudes and opinions) variables.

For instance, a reasonable segment for a company that sells fishing equipment might be 18 to 30-year-old males that have little experience fishing, but enjoy the social aspect of it and want to learn more.   

Micro-segmentation is the process of creating smaller homogeneous groups from a broader segment. It will involve using similar descriptive variables when forming segments, only that it is being performed within an existing segment. 

Building on the example above, there may be two identifiable groups within that segment. For instance, there may be a group within that segment that really enjoys fishing on lakes while the other group is much more interested in ocean fishing. 

To achieve personalization, you must be able to identify a specific individual within a segment. 

For instance, within the lake fishing segment, we may have a user of our website, Gary. Gary is just starting out with fishing (e.g. purchased a beginner’s fishing rod) and has had a few amazing experiences with his closest friends going out on a lake during summer (e.g. booked a few group fishing tours in the months of June through August). 

Why the Difference Matters

The type of information you have about your users dictates the type of experience that can be offered, which in turn will impact whether you can improve business outcomes. 

Which home page experience will appeal to Gary the most?

  1. A picture of a boat fishing on an ocean with a call to action to browse fishing equipment (segmentation)
  2. A picture of someone fishing on a lake with a call to action to browse fishing rods (micro-segmentation)
  3. A picture of a group of friends fishing on a lake where one of the individuals is holding a beginner’s fishing rod with a call to action to browse second-level fishing rods (personalization)

The answer, of course, is #3 because the content demonstrates an understanding of Gary’s actual fishing experiences.

This is not to say that experiences based on segmentation aren’t effective – in fact, personalization and segmentation can be used together to great effect.  It’s important to know the difference to ensure your marketing budgets are being allocated towards the right solutions. With 84% of marketers citing plans to increase their budgets in personalization, this becomes critical to the success of enterprise digital marketing. 

For now though, if you are keen on diving into the world of personalization (or already have), make sure that any personalization tools you consider -or already use- can identify and serve up experiences based on individual user preferences. Otherwise, you may be limited in delivering experiences that persuade your users to engage in desired actions, not to mention underwhelmed with the ROI on your martech solution.

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