MICROSEGMENTATION por: Red Design Systems ‐ 31 Julio, 2019

MICROSEGMENTATION

For a few months much has been said about the similarities between Microsegmentation and Long Tail; referring them like “as same”. We are here to clarify this horrible myth..

The theory “Long Tail” was introduced in the “Wire” magazine by Chris Anderson in October 2004 , presenting it as:

“A business strategy that demystified traditional models, in which products that must be sold are, who have greater turnover”.

The article explained it in a simple way; companies allocate all their efforts promoting star products (20% of all his products) hoping that they generate 80% of the sales

“Microsegmentation is more than just long tail”

In another way if the companies will start to use micro segmentation to recognize the real customer, they will diminish useless efforts using real smaller targets, who get improve this revenue and take advantage of all his products (80%).  All of the above, presents a direct relationship between both concepts, however, the terms have been embezzled and put in conjunction with total abruptness.

The Main Difference

1. They don’t mean the same thing: 

Its evident that both theories talk about  how minorities could be exploited . But in the concept  of Micro-segmentation you can capture the attention of those fundamental sub groups; understanding the individual behavior of customers  and identifying the best strategies to meet their needs; offering the products what they really want and not only what we suppose they need.

2. There is no existing 80/20 relation 

There is no percentage relationship similar to “Pareto” in Micro-segmentation (principle Elemental of the Long Tail), for this case, the chosen sub segments are creating according to the  marketing research variables; a normal  population case would have a lot of micro-segments (going from 10 to 350). However, each sub segment generates a different contribution on sales, where not always 20% of the segments generates 80% of the profits, being specific , each group contributes a significant percentage of the volume of sales, in some cases on a specific product or on a category of products.

3. We aren’t sure  how homogeneous the segments are.

In the Long Tail the Micro-segmentation is not evident. The main theory talk about companies using all their efforts to increase presence in the 20% of your customers who represent the 80% of sales. But they never talk about which characteristic should have customers in this 20%.  In another way, we don ́t know how depth is the information who was taken to determine those segments, or if they analyzed data including variables like relevance, measurability and substantiality of the segments. 

For this reason we could have doubts about how effective are his chosen targeting groups and if companies marketing strategy are thinking in the best way to increase sales and customer acquisition.

4.  It is not only digital.

Finally, there is a lot of controversy of the Long Tail theory applicability, as stated by Sergei Netessine and Tom F. Tan in his article “Is Tom Cruise being threatened?” In which they refer

“A business model based on the effect of Long tail can work in the case of companies that have a distribution exclusively digital, like the Rhapsody music website”

However, the applicability of the Micro-segmentation is oriented to any type of business, industry or market without any distinction. It should be noted that for the use of this tool it is essential to have a digital data collection system that facilitates the interpretation of trends and consumer behavior with the given variables; in addition to require Remarketing and Retargeting(Add link) lists to guide the advertising efforts to the selected population group.

 

SUMMARY.

 The panorama today, implies being fully aware of how the fluctuations of the market affect the daily marketing strategies implemented. Even so, the technology has facilitated tools to compile data, make decisions and create information models with resources such as “Big Data” that responds more easily to the Question

How can I obtain more profitability from the products I offer?

The Micro-segmentation as a tool, is an excellent means to achieve the objectives strategies of the company and enhance the results that Long Tail has as a model for success in the organization.