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No One Is One-Dimensional

November 17, 2015

By Stephen H. Yu, Target Marketing

If anyone says to your face “You’re one-dimensional,” you would be rightfully offended by such statement. It would almost sound like “You are so simple that I just figured you out.” Along with that line of thinking, you should be mad at most marketers, as they treat consumers as one-dimensional subjects. Even advanced marketers who claim that they pursue personalized marketing routinely treat customers as if they belong to “1” segment along with millions of other people. Sort of like drones with similar characteristics. Some may title such segments with other names, like “clusters” or “cohorts.” But no matter. That is how personalization works most times, and that is why most consumers are not impressed with so-called personalized messages.
Here is how segments are built through cluster analysis. Unlike regression models, clusters are built without clear “target” (or dependent) variables (refer to “Data Deep Dive: The Art of Targeting”). Considering all available variables, statisticians group the universe with commonly shared characteristics. A common analogy is that they throw spaghetti noodles on the wall, and see which ones stick together. Analysts can control the number of segments and closeness (or “stickiness”) of resultant groups. I have seen major banks grouping their customers into six to seven major segments. Most commercial clustering products by data compilers maintain 50 to 60 segments or cohorts (I am not going to name names here, but I am sure you have heard of most of them). I was personally involved in a project where we divided every town in the U.S. into 108 distinctive clusters using consumer, business and geo-demographic variables. The number of segments may vary greatly, depending on the purpose.

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