Behavioral Targeting and Customer Segmentation.

Letting customers create their own segments

A core behavioral targeting element is the classic marketing technique of customer segmentation—taking a plethora of data events and shaping them into coherent groups that both attract marketers and pinpoint the audience correctly. For example, AOL’s Tacoda division lists 31 audience segments such as Active Gamer, Gourmet Chef, Shopaholic and Trendy Homemaker.

Online advertising—including behavioral targeting advertising—is the type of advertising most US marketers use to reach specific customer segments, according to a May 2008 Compete survey.

And while only 39% of US marketers surveyed believe segment-driven marketing is very important in their organization today, a full 84% indicate that it will be more important three years from now.

However, the Compete survey also found that 77% of marketers are having trouble demonstrating real business results from segment-driven marketing, such as improvements in market share. Furthermore, 27% said they see no improved business results from segment-driven marketing efforts.

In fact, according to Compete, the most consistent obstacle to successful segment-driven marketing has been identifying the right segments.

This is precisely where behavioral targeting promises to help, since the “right segments” are created by the users and their actions, not imposed on them.

The benefits of improved customer segmentation are fundamental, according to the 568 marketers surveyed by the CMO Council. Better market penetration and growth was cited by 62.7% of respondents, and greater revenue and profitability was mentioned by 52.5%.

“Despite the inherent logic of placing consumers in various affinity groups based on their actions rather than their demographics, testing which segments work best leads back to behavioral targeting’s Achilles’ heel: reduced reach,” said David Hallerman, senior analyst at eMarketer.

This topic was part of an April 2008 Advertising Age roundtable. At the event, Chris Kilkes, interactive media manager at Godfrey Q & Partners, said, “The biggest problem with testing different kinds of behavioral segments is maybe we are only reaching 10,000 people on a specific site, like NYTimes.com. When you are talking about reach and trying to get frequency, that becomes pretty problematic.

“Why do I spend 10 grand on 10,000 people?” Mr. Kilkes continued. “Of course you would say, ‘Well, that’s a richer audience.’ That’s one of the big challenges for behavioral is you’re narrowing your universe so much.”

That said, 63% of marketers surveyed in late 2007 by MarketingSherpa cited A/B landing page comparison tests as a form of analytics they planned to invest in this year. A further 49% said they looked to do multivariate tests of site or campaign pages, a core technique within the behavioral targeting process.

For more information at http://www.emarketer.com