Personalization vs Segmentation: What’s the Difference and Why they Both Matter

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Today’s consumer is flooded with more marketing messages than any one person can handle. As a result, we have become very good at ignoring unwanted attempts to gain our attention. The reason so many of the marketing messages we are presented with each day feel so impersonal is that they are. In attempts to be “relevant” or “trendy”, many marketers try to reach too broad a segment of the market and, as a result, fade into the ever-increasing noise. To stand out and entice users to engage, marketers are turning to better segmentation and personalization to help them reach their intended niche more effectively. But what’s the difference between personalization and segmentation and why are they so important?

Personalization and segmentation on the surface appear to be very similar, but in actuality, they are very different. Many times people get confused with these two and end up linking them together. Both segmentation and personalization are extremely important for marketers to grasp and execute. But lumping them together, as if they were the same thing, prevents them from being effective.

What is Segmentation

Segmentation is a marketing strategy that involves breaking down a broad target market into smaller groups of consumers, businesses, or countries that have or are perceived to have, common needs, interests, and priorities. The goal of segmentation is to get a better idea of how a group of like-minded people act and interact. From this information, a marketer can then design and implement a strategy to target them.

There are a number of ways in which a marketer can segment an audience. Some of the most common ways are:

  • Demographic: Break down according to sex, age, race, generation, occupation, etc.
  • Geographic: Break down by geographic regions such as county, state, city, and neighborhood.
  • Behavioral: Break down by the knowledge of, attitude towards, usage rate, and response.
  • Cultural: Break down by cultural origin.
  • Psychographic: Break down by the activities, interests, and opinions (AIOs) of customers.

Why Segmentation is Important

In order to effectively communicate your message, segmentation is critical. The type of segmentation used will depend on the overall goal of the marketing strategy. For instance, if you are going to send coupons for your suntan lotion company, you are going to want to be sure that you send them to homes near locations that have beaches. So geographic segmentation is a great place to start.

The more you segment, the more targeted your audience becomes. Within each of your segments, you can break them down further by using, “hyper-segmentation.” Let’s say you break down your segment by demographics and you are targeting middle-class mothers with children under the age of 5. Now, on the surface, this appears to be a good segment, but if you wanted to go deeper and target better you could break that group of middle-class mothers with children under the age of 5 into smaller segments based on behaviors or psychographics.  This would allow you to deliver a more contextually appropriate empathetic message that would deliver truer results. The more segmented, the more powerful your message can be.

Cautions with Segmentation

First, it’s important to document each segmentation slowly and track your response rates. If you narrow your target audience too tightly you won’t have enough people searching for your targeted keywords within your narrowed groups.

Second, it’s important to continue to pay attention to trends in consumer preferences. Tracking industry-relevant keywords and phrases as well as trending topics on platforms such as Quora, Google Trends, and BuzzSumo are excellent ways to keep a pulse on current shifts. You may find that as your customer changes their interests you need to adjust your segments as well.

Third, don’t assume you got your segment correct. Check your customer groups with surveys, polls, and quantifiable questions to ensure that you have set up the correct categories and that the right groups of people are going into each division within your CRM.

What is Personalization:

Personalized marketing, also known as one-to-one marketing or individual marketing, is a strategy based on leveraging data analysis and digital technology to deliver individualized messages and product offerings to current or prospective customers. While segmentation addresses a group of people with common traits, personalization is focused on the single user. Advancements in technology and data collection have given marketers tools to deliver their message in a more human way. But personalization isn’t all about technology.

While technology is used to collect the data and help the marketer deliver their personalized message, personalization starts with a better understanding of the people a marketer is trying to reach. Just because you collect data and can deliver a customized engagement, doesn’t mean it’s going to attract the user to engage. If personalization is going to be truly effective, a detailed persona that outlines the demographics, geographics, behavioral tendencies, cultural influences, and psychographics must be done. Personalization is about creating a more human connection using the tools we have available. The only way you can achieve that is if you actually understand your audience.

Get our guide & template to create better personas. 

Why Personalization is Important

We live in a culture that is constantly being bombarded with messages. As a result, we are losing our ability to pay attention. Gen Z, defined as those born between 1996 and 2010, have an 8-second attention span, which is 4 seconds less than the generation before them. (Source)  “Gen Z ~ which includes today’s teenagers and young 20-somethings ~ currently makes up 25.9 percent of the U.S. population and is expected to account for about 40 percent of all consumer markets by 2020.” (source)  As this group continues to mature, hammering them with more and more information is going to do very little in persuading them to choose one brand over another.

No matter your generation, one thing speaks to the heart of people unlike anything else, being treated as an individual. I have said it before and will stand by it here, all of us are emotional creatures and, at our core, we are seeking two things; significance and security. In other words, we want to be known and appreciated for who we are and we want to feel safe. This can only happen through one-on-one connections. As a marketer myself, my job is to help create these connections, authentically, with the tools available. For companies looking to grow now, personalization is the way to go.

The Impact of Personalization

  • Personalized emails deliver six times higher transaction rates, but 70% of brands fail to use them. (Source)
  • Sixty-one percent of marketers say personalization has helped them achieve a superior customer experience, resulting in fifty-seven percent of this group having increased visitor engagement. (source)
  • Nearly three-fourths (74%) of online consumers get frustrated with websites when content (e.g., offers, ads, promotions) appears that has nothing to do with their interests. (source)
  • In-house marketers who are personalizing their web experiences and who are able to quantify the improvement see, on average, a 19% uplift in sales.
  • Hubspot analyzed 330,000 CTAs over a six-month period and found that personalized CTAs converted 202% better than default versions. (source)
  • 36% of consumers expressed an interest in purchasing personalized products or services, while 48% said they’d be willing to wait longer in order to receive it.
  • 57% of consumers are willing to share personal data in exchange for personalized offers or discounts. Similarly, 52% of consumers would share personal data in exchange for product recommendations, and 53% would do the same for personalized shopping experiences. (source)

While personalization isn’t technically new, web developers in the 90s were tracking user behaviors and using it to influence design and content, it is more accessible than ever. The key to effectively reaching your audience on a personal level takes more than just powerful tools and analytics. It also takes an experienced marketer who understands personalization and consumer behavior. There are no tools I know of that will just take care of everything for you. If you find one, please let me know!

Segmentation and personalization are the keys to amplifying your message and connecting with your audience. The internet has leveled the playing field in most industries and now, more than ever, small and mid-size businesses can build brand equity with their customers and prospects like never before. By breaking down the population into smaller segments you can better position your product and service in a very competitive economy. By unleashing personalization, you can create an emotional connection that can transform your business into a brand.

Editor’s Note: This post was originally published in October 2016 and has been updated for freshness, accuracy, and comprehensiveness. 

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