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Facing increasing market pressure, 60% of top-performing (“Best-in-Class”) companies plan to increase budgets for customer analytics and segmentation technologies next year to find more sophisticated ways of identifying key trends and commonalities among customers, according to an Aberdeen Group?report.

The increasing competition for high-value customers is causing many companies to improve the intimacy and relevancy of marketing messages by incorporating demographic, geographic, psychographic, and behavioral variables into their customer segmentation models, Aberdeen said. However, the study shows that the top challenges faced by companies are poor data quality (61%) and the?non-existence of required data (31%).

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The report, “Customer Analytics: Segmentation Beyond Demographics,” identifies Best-in-Class performance compared with the industry average and “Laggards,” and identifies differences in capabilities and technology use.

Key findings:

  • 74% of Best-in-Class companies track past business history for improved segmentation and 56% track behavioral attributes for use in segmentation.
  • 88% of Best-in-Class companies use geographic variables for improved segmentation and 81% use past business history.

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  • 48% of survey respondents say the top pressure causing companies to segment and target customers is a desire to increase customer loyalty and retention.
  • The need to increase profitability (34%), either via improved response rates on marketing campaigns or by minimizing customer churn and maximizing customer retention, is the second-highest concern for survey respondents.
  • Best-in-Class companies say they currently use customer feedback tools (65%), customer databases (64%), segmentation and targeting tools (60%) and data hygiene tools and services (40%) to better segment customers for marketing purposes.
  • By combining processes designed to identify high value customers for marketing purposes (57%) with the ability to share customer analytics analysis among multiple functions in the organization (71%), Best-in-Class companies say they are able to maximize their sales and marketing efforts through segmentation.

“One of the top pressures for all organizations is the need to measure and maximize return on marketing investments,” said Ian Michiels, senior research analyst at Aberdeen. “Customer analytics play an essential role delivering superior performance from marketing spend, and Best-in-Class companies demonstrate that the use of multiple attributes in customer segmentation, including demographic, psychographic, behavioral, and purchase history allows top-performing organizations to achieve superior annual revenue growth, market share, average order value growth, and improved customer profitability.

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