This blog is written by Rajeev Ranjan at Nokia Solutions and Networks.
Customer segmentation is a basic exercise and well-known discipline used to understand customers and identify opportunities. Over the years, traditional segmentation approaches have evolved and broadened based on demographics, loyalty, payment, revenue needs or profitability – or a combination of these. But with the emergence and influence of digital media, the advent of the ultra connected Generation-C, device sophistication plus affordability, the hyper-competitive environment is forcing telcos to rethink their approaches towards segmentation. Example: my good friend changed jobs and I learned about it through his LinkedIn update rather than getting a call from him. The challenge for operators is to navigate their way through this by meeting the evolving needs, demands and expectations of consumers.
Understanding consumers in the digital age requires the ability to determine their rational and emotional requirements at each key point of interaction along the decision cycle. As the battleground of competition shifts from the product to the overall customer experience, marketing needs to find creative ways of segmenting consumers on the basis of their consumption lifecycles. In other words, it’s time to redefine the who, what, when, where, why and how.
How are your services perceived?
Here are a few trends that should ignite the creativity of marketers to rethink their mobile users’ segmentation strategy:
• Smart devices are driving the uptake of mobile data but regular usage is in its infancy.
• Technology is a less important usage consideration than the device’s form factor, with 2G smartphone owners being heavier users of data services than 3G non-smartphone users.
• It seems that the gap in spend between prepaid and postpaid may be narrowing in a more data-centric mobile environment, and that prepaid customers may increasingly reflect more of a payment preference rather than being concentrated among the lower-income population. In India, for example, some prepaid 3G smartphone users actually spend more on data than postpaid 3G smartphone users.
• Likewise, young men in India are heavy users of mobile internet, social and Instant Messaging but do not use voice services much.
The more people I talk to, the more convinced I am that mobile internet services including data tariff plans are lacking in relevance, and this perceived irrelevance is the number one reason why mobile users decide not to take up services.
This underlines the point that accurate and effective customer segmentation is becoming both more challenging and more important for operators seeking to drive uptake of new mobile services. The drivers of consumer value are becoming increasingly fragmented as the choices available to consumers continue to grow, shortening shelf life and widening access to information, which provides consumers with more control over their purchase decisions. The factors adding to the challenges of segmentation include the relatively nascent market, ongoing technological evolution, and customers’ current lack of clarity over the benefits of mobile services.
Market to micro-segments
Service providers will therefore need to become highly responsive to the market by quickly identifying high-potential segments for particular services and developing offerings to meet their needs. This is termed “micro-segmentation”. What is different about micro-segmentation is the ability to continually experiment with promotions that are likely to be highly relevant to the micro-segment without jeopardizing revenues. If you experiment with promotions in a segment that is too large, you risk the following consequences:
• People will ignore the promotion and begin the cycle of ignoring your future communications because they lack relevance.
• People who would have otherwise purchased standard offers, regardless of the promotion, decide to take advantage of the promotion – and refrain from purchasing the standard offers, thereby cutting into your margins.
Psychographics (behavior, interest, preference, commonalities) along with demography and peer groups will be increasingly important, as will more granular micro-segmentation to pinpoint and target opportunities. Example: Mavericks = heavy mobile internet users. Device = iPhone 5. He’s in his 30s, has a postgraduate degree, is a doctor by profession, and is very social. He uses the newest technology and frequently downloads apps, watches video, surfs the net. With very high mobile usage, he will receive coupons and promotions. His media sources are iTunes, ESPN, Facebook, Amazon, CNET – used mostly via applications.
It’s truly a paradigm shift in telco segmentation strategy that goes beyond the traditional ‘what and how’ a customer buys to understanding the changing value dimensions. To capitalize on the inflection point, operators need to personalize and say farewell to the “one-size-fits all” approach. Segmentation will have to be more contextual with the rapid changes in technology adoption. Only then will it be possible to render the right offer at the right place at the right time via the right channel to the right people.