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Customer Micro-Segmentation

Natalie Samuels
  • Updated

Customer segmentation is the practice of dividing a company’s customers into groups relevant to a particular business. The goal of segmenting customers is to decide how to relate to customers in each segment to maximize the value of each customer to the business.

Micro-segmentation is a more advanced form of segmentation that groups small numbers of customers into extremely precise segments, based on various factors, including behavioral predictions. Marketers can then direct specific marketing actions to each micro-segment to maximize the effectiveness of every contact with each customer.
 

Lifecycle Stage Groups and Segmentation Layers

Optimove utilizes a very advanced micro-segmentation approach based on an initial high-level segmentation of customers into distinct lifecycle stages. For example, the customers of an online gaming company might be segmented into six lifecycle stages: fun, new, active, star, churn, and reengaged.

Next, Optimove dives deeper and segments customers in each lifecycle stage group into distinct segmentation “layers”. This segmentation is achieved using cluster analysis on sets of attributes that share a common context. Some segmentation layers are behavioral, while others might be demographic. The process is performed differently for each lifecycle stage group since customers in each lifecycle stage need to be segmented differently.
 

Micro-Segmentation

After completing the initial lifecycle stage and layer segmentation, Optimove places customers into one or more relevant clusters within each segmentation layer. Each customer will then be associated with a string of different clusters. Customers with the same pattern of cluster associations are then grouped as a micro-segment.

 

Using Micro-Segments to Optimize Marketing Actions

Micro-segments typically contain very few customers each, allowing for highly-personalized predictive analysis and marketing action optimization. By tracking and carefully analyzing how different marketing actions affect the spending behavior of different micro-segments, it becomes possible to predict the varying effectiveness levels of different marketing actions on different micro-segments.

The goal of this process is to determine, in advance, which marketing actions will have the most desirable impact on each group of customers.
 

Optimove’s Unique Approach to Micro-Segmentation

One unique aspect of Optimove’s micro-segmentation is a focus on the dynamic nature of customer behavior. In other words, Optimove continuously recalculates the segmentation of every customer and tracks how customers move from one micro-segment to another over time.

In other words, most companies view segmentation as a method of clustering similar customers together at a given point in time, but they completely disregard the path or route that each customer has taken to reach his or her present segment. By analyzing customers based on their movement among segments over time, Optimove achieves far more accurate segmentation than any other known method.
 
Furthermore, the combination of this dynamic segmentation approach with Optimove’s ability to create extremely homogenous and compact micro-segments results in an unparalleled degree of customer segmentation accuracy. When factoring in Optimove’s core focus on customer lifetime value in all calculations, it is easy to see why Optimove’s ability to predict the response of every customer to any marketing activity is a generation ahead of any other marketing action optimization solution.

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