One of these is not like the other

Cluster segmentation is a descriptive, multivariate technique that creates distinct, homogeneous groups within your customer base.  The goal of cluster segmentation is to classify consumers or businesses based on behaviors, demographics or firmographics, and/or attitudes.  In this way, you can develop more targeted programs and tailor messages based on the needs and characteristics of specific groups.  One client reorganized their marketing department as a result of a segmentation project I worked on, assigning one marketer to each segment so that consistent messaging and product offers could be employed against each customer group.  Further,the segments that are developed can be combined with models or other segmentation schemes to identify the best customers to target for particular campaign or offer. 

Determining what methodology to use for clustering depends on many factors including your clustering software, the type of data you have, and the number of consumers or businesses available for segmentation.  You should also consider the optimal number of segments to meet the business objective and which behaviors or other factors are most important in defining customers.    

Regardless the methodology chosen, you will need to do data prep.  You typically start with data summarized to the household level for B2C analysis and establishment or enterprise level for B2B analysis.  You might also need to do missing value substitution, transform categorical variables to binary or scaled variables, weight variables to drive preferred ones into the solution,  and standardize continuous variables.

Data reduction might also be necessary if you have many variables.  Tools for data reduction include correlation analysis, principal components and factor analysis.  

Once that is complete, you can create your segmentation schemes.  I run many more segmentation solutions than I show to a client because I want segments that are actionable within the client’s marketing plans and that are intuitive as well as not overly complicated.  In addition, I test the validity of my cluster solutions through goodness of fit statistical measurements and by replicating my results on a hold-out sample.   The end result is that a company can align its marketing efforts against segments, taking a customer-centered approach rather than treating every customer the same.  Cluster segmentation can be a tool for giving the right message at the right time to the right person.

Do you know who is second best?

My clients often know who their best customers are.  Typically the best are the top 20% of customers that generate 80% of the profits.  These are the customers you most want to retain.  The question becomes who are the customers that you should try to migrate into your best customer segment?  Figuring out who are the next best requires research into their behaviors, demographics or firmographics, and attitudes. 

 Segmentation is one way to separate your customer base into differentiated groups against which relevant marketing communicationsand strategies can be developed and executed.  There are many different types of segmentation and techniques including cluster analysis, RFM and CHAID.

Regardless of what method you choose, bear in mind that a good segmentation scheme is often a result of art and science.  Segments should make sense intuitively and, if they are data driven, should be sound statistically.  In my next post I will describe clustering and how that is used for segmentation.

What’s in a name?

I recently received a mailing from the deCordova Sculpture Park and Museum, formerly known as the DeCordova Museum and Sculpture Park. 

I was puzzled by the name change.  In this case, why would you essentially just reorder the words in the name?  Yes, the sculpture park is beautiful and unique in the metro Boston area.  It is well worth a visit I might add.  However, the museum is excellent as well.  There was a fascinating exhibition called Drawn to Detail which I saw last fall. 

Perhaps, the ICA in Boston is cornering the contemporary art museum “market”, with the recent Shephard Fairey show and before that an Anish Kapoor exhibition.   It also has received a lot of attention for its new building and new location on the waterfront in Boston.  The deCordova’s name change might be a bid to distinguish itself from the ICA.  If that is the case, I am not convinced that re-branding is the answer.  But if you are going to re-brand, at least be consistent. 

The website uses the new name at the top on the right…

The top of the deCordova home page
The top of the deCordova home page

 and then uses the old name under the History and Mission title.

Bottom of deCordova home page
Bottom of deCordova home page
I must admit that I am skeptical of re-branding efforts because they can be expensive and difficult to quantify.  I always want to know the return on investment.  But in this case, I think that the deCordova needs to go back to the 4 Ps:
1.  Product
2.  Pricing
3.  Placement
4.  Promotion 
Their product is contemporary art with a focus on American art, especially from New England.  The ICA tends to focus on national and international artists.  However, a strong regional focus could be an asset at a time when people are enjoying localvore cuisine and taking staycations.
Their pricing, in this case admission fees, is slightly less than the ICA – $12 versus $15 for general admission.  In addition, general admission is $5 less than at the MFA.  
Placement is where I see the greatest challenge faced by the deCordova.  They are located in Lincoln, MA, a suburban, almost exurban town West of Boston.  You don’t just drop by the deCordova as you might the ICA.  Further, the closest form of public transportation is probably the commuter rail station in Lincoln Center.  Thus, they tend to attract visitors for whom the deCordova is the destination.  I am reminded of the Barnes Foundation and the fight over moving the collection into Philadelphia, PA in order to attract more visitors.  
In terms of promotion, a very unscientific sample suggests that they receive less national attention than the ICA.  However, national coverage may not be necessary to gain the attention of their target audience.  Their current exhibition was covered by a local NPR station recently. 
The deCordova should play to its strengths and recognize their core “customers”.  Because of their location, they will not be able to attract some of the same visitors as the ICA.  However, suburbanites, families, and art-lovers will be thrilled with what the deCordova has to offer.  Unlike the ICA, the deCordova has a sculpture park to be admired by adults and children alike.  You can picnic in the park or use the walk between sculptures to work off some excess energy.  There is a hands on area, The Art ExperienCenter, that is perfect for inquisitive little (and maybe not so little) hands.  In addition, their exhibitions change regularly and there are often opportunities to hear artists talk about their work.  Finally, there is free parking.  I hate to admit it but it is nice to have.
Through surveys or focus groups, the deCordova could learn or confirm what its current visitors and members value most and use that information to shape its marketing, particularly its acquisition strategy.   The challenges faced by the deCordova and many other arts organizations in this tough economic climate require more than a just a name change.