Editor’s note: Faina Shmulyian is VP, data sciences, and Sheilah Wagner is director, data sciences, at ENGINE Insights. This is an edited version of a post that originally appeared under the title, “Using segmentation to understand customers.”  

Companies need to be nimble and focus marketing efforts and dollars where needed, when needed. Segmentation can direct those efforts and help a company know its customers and potential customers. Following the proper steps, focusing on the most applicable segments and utilizing modern segmenting techniques (e.g., biclustering, NMF, ensemble) can help to ensure the most actionable results.

Modern segmentations are expected to be rich, detailed, informative and simultaneously actionable and efficient in driving marketing tactics. Therefore, the right choice of clustering techniques is essential in developing high-quality segmentations for our clients.

Segmentation analysis can address several business objectives. To promote a product or service, it is often more effective to target a subgroup of potential customers with similar interests using specific messaging versus spreading one message that may only appeal to a fraction of potential consumers. Additionally, results can be used to better understand consumers, so messages are relevant and perceived as being for “people like them.”

When the goal is new product development, concepts, products and claims can be specifically developed that offer benefits that various groups seek. In addition to revealing unmet needs among groups of customers, identifying areas in which competition is low is another advantage that enables opportunities for success.

With targeted segmentation, the groups can be mapped to a company’s database so they can be partitioned and utilized for targeted promotional campaigns. Ultimately, segmentation allows a company to be more agile and focus efforts where needed.