Direct Marketing With Better ROI Through Cluster-Based Market Segmentation

In the marketing and advertising world, emphasis is usually placed on creative pieces designed for a mass audience. As popularized by television shows like Mad Men, the sexy “creative” or design side of marketing and advertising is what draws many people to the industry. Since as far back as the 1950s, emphasis has been placed on design, almost to the exclusion of market research.

This type of marketing is cynically known by market researchers as “spray and pray” marketing, which means treating the entire target audience as if they have the same needs, wants and purchase motivations. Campaigns executed in this vein are designed and then broadcasted everywhere possible with the hope that at least some members of the target market will respond favorably.

Over many decades of seeing and measuring what works in marketing, industry professionals have come to the realization that this method is not the most effective way to call prospects to action. While an ad may be seen by a vast number of people using this tactic, they may not necessarily act on what they see.

As you know, consumers are bombarded with millions of advertising messages a day. Of all of these, only a few stand out in the customer’s mind and convince them to take action. Every time an ad is seen and does not inspire action, it wastes the company’s marketing dollars.

Smart marketers have discovered that it is not enough to merely expose prospective customers to a generic message. Instead, they have adopted the practice of market segmentation, or categorizing customers into groups based on their response behavior to a particular marketing piece or ad.

Segmentation has historically been based on simple, one-dimensional variables such as age, income, and marital status. By developing these categories of customers, marketers can tailor their messages to appeal to different markets, rather than opting for mass appeal alone. And customers have responded well to this. Consumers appreciate being treated like an individual. They like when a company makes an effort to reach out to them in particular.

Today, market segmentation has become even more sophisticated. Marketers these days are able to leverage clustering systems to segment their markets in a more targeted way. Market researchers have discovered the ability to cluster consumers into groups based on not only simple demographics but also lifestyle, psychographics, and buying behaviors. That can also take into account data mining techniques that yield information on customers such as spending habits, purchase frequency, and the ways in which different clusters shop for and buy products and services.

As a marketer or business owner, you will benefit from capitalizing on this type of advanced hyper-targeting. Once you know your most profitable segments you can conduct direct marketing campaigns through direct mail, e-mail, or telephone-based outreach to create a connection with each prospect on an individual level. You can determine the names and contact information of the prospects who, based on hard data, are the most likely to buy from you. On the flip side, you can stop wasting marketing time and money on those less profitable consumers.

Segmenting your market and targeting your marketing mediums to suit each cluster yields higher conversion rates and better use of your marketing budget. Since you are making an honest and personal connection with customers, you will achieve a much better return on investment. This is far more effective than just hoping for the off chance a customer sees your ad, and actually acts on it to purchase your product.