The phrases "one-to-one marketing," "mass customization," "market segmentation" and "marketing to a segment of one" have joined today's marketing jargon. Are there real differences between these concepts or is any confusion in the use of these terms just a semantic stewpot?
I think there are great differences between these concepts. Let's look at each of these terms.
One-to-One Marketing. My grandparents owned a small grocery store in Hampton, Virginia, in the early 1900s. As each customer entered their store, one of them would greet the customer by name and suggest new products that had come into their store since the customer's last visit. The customer relationship management (CRM) database existed in my grandparents' heads, and appeals were made consistent with their knowledge of each customer.
Today we keep track of our customers through large databases that record every interaction through each touchpoint. When a customer interacts with a salesperson, call center operator or Web site, the customer is made to feel that the company knows and cares about him/her.
One-to-one marketing is the foundation of CRM treating each customer as an individual. I believe one-to-one marketing is a system for customer retention, not a strategy for marketing to customers.
Mass Customization. Henry Ford is said to have remarked that the customer could have any color car, as long it was black. Mass customization is the reverse; it gives every customer the ability to choose any color.
The salad bar at your local restaurant is probably the most familiar example of mass customization. Each patron serves up his or her favorite combination of veggies, fruits and desserts.
Products are sold to customers according to their specific tastes, sizes or other criteria. Mass customization is not a marketing concept, but a delivery concept.
Market Segmentation. According to Dr. Art Weinstein, editor in chief of the Journal of Segmentation in Marketing, "Segmentation is the process of partitioning markets into groups of potential customers with similar needs and/or characteristics who are likely to exhibit similar purchase behavior."
Segmentation is, therefore, a marketing planning process. The process of segmentation involves the partitioning of markets to attain maximum efficiencies. Ideally, one wishes to identify all the people who want what the enterprise has to sell, their numbers, distribution channels and relevant media usage. With these pieces of information, marketing planners can minimize the resources that have to be used by the enterprise and maximize the profitability from the target segment.
Segments can be defined by numerous criteria. You could define segments such as heavy versus light users, geographical targets of opportunity, attitudinally consistent groups or groups similar in demographics. These types of definitions always result in discrete groups.
Marketing to a Segment of One. For many marketers, the ultimate goal is marketing to a segment of one. From my perspective, this concept is economically impossible. If market segmentation were truly a marketing planning process, marketing to a segment of one would involve planning strategies for each customer. This is clearly not possible.
It is possible to plan mass customization strategies that impact individual customers. Also, one-to-one marketing is clearly based on the idea of interacting with individual customers. Market segmentation, on the other hand, involves product development, message delivery and distribution to groups of customers.
The smallest segment that one can efficiently target is the group having the smallest number of people from which the enterprise can make an acceptable profit.
Progressive Insurance began its Autograph program in 1998. Through market research, Progressive learned that a segment of its customers valued an insurance program based on their personal driving experience. The system uses cellular and Global Positioning System technology to track actual driving patterns.
Bob McMillian of Progressive maintains, "Our premise is that how you actually use and operate your car is more relevant to insurance pricing than traditional factors such as your gender, age or marital status." Progressive has, in fact, mass customized their auto insurance product.
The most efficient enterprise will use market segmentation, mass customization and one-to-one marketing. Market segmentation is used to determine the parameters of the marketing effort. How many people are interested in being able to buy customized products? Which of them will provide enough lifetime value to the enterprise that special CRM programs will pay off?
If there is a sufficiently large segment of the market which wants the customized product, relevant messages will be targeted through appropriate channels to interested customers. The mechanism for delivering customized products will be put in place; at the same time, effective CRM capabilities will assure the customer that his or her patronage is appreciated.
Register or login for access to this item and much more
All Information Management content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access