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AdWeek: Retailers Should Rethink Customer Segmentation to Be More Relevant

6 minute read

This article originally appeared on Adweek on April 16th, 2020.

Retailers Should Rethink Customer Segmentation to Be More Relevant

Covid-19 calls for a change of strategies

By Ryan Wuerch

The retail landscape has changed enormously in the last few weeks because of the coronavirus. More than anything, online shopping is becoming more important to consumers because people need to stay home for their health.

With critical concerns around public well-being, retailers have had to adopt new measures. For example, Whole Foods and Walmart are scaling back on store hours so employees have more time to clean shelves and sanitarily restock them while protecting the health of everyone who works at and visits an outlet, or gets orders delivered.

As brands quickly reshape aspects of their business, digital advertising shouldn’t be allowed to fall by the wayside. Reports forecast more traditional digital spend taking a predictable tumble, and it is true that campaigns designed for another set of circumstances should pause. But this isn’t the time to stop all digital advertising; rather, marketers need to be smarter about their approach to spending.

Last year’s strategies no longer apply

If you are in retail, your team has spent thousands of hours perfecting a 21st-century advertising playbook. You know the profile of your target customers—their likes and dislikes, their spending habits, what brands they shop for, what stores they visit. You’ve AB-tested, and if your data game is next-level good, you know what ad copy works best for “hockey moms in Minneapolis who buy high heels” or if messaging produces sales for “white-collar men in New York who purchase sports and concert tickets.” But this decade is off to an unforeseen start.

Unusual times bring their own set of audience segments, and how retailers spend their ad dollars should reflect such changes.

While data-powered targeting is smart during normal periods, you need to put that playbook on the shelf for the time being. A global pandemic and an impending recession are bringing about a massive shift to retail. Even relatively tenured marketing pros weren’t in the thick of the workforce during the recession of 2008 or after 9/11. So, it’s time to brush up on lessons learned from past tough times and understand that your consumers are spending and saving in completely different ways than they were just a few weeks ago. Right now, cash is crucial to consumers’ mindset.

New, useful segmentation

Unusual times bring their own set of audience segments, and how retailers spend their ad dollars should reflect such changes.

With the exception of ultra luxury retailers targeting high net worth individuals, marketers now likely have customers who are concerned about their checking accounts and will only be shopping for the best deals for essential items like groceries, household items, clothing basics and the unexpected item flying off the shelves, toilet paper. In 2020, that group of consumers is an audience segment.

Young adults in metropolitan areas who keep their salaried jobs will continue to spend as they have recently, although citywide self-distancing rules and the lingering concern of corporate reductions in force will limit their shopping to online much more than usual. That’s another audience segment for the COVID-19 period. Consumers of means can still treat themselves to larger-ticket purchases like automobiles or high-end wines and chocolates. And that audience is a segment.

All told, personalizing messaging about who your current consumers are and what they actually need is of incredible value right now.

Hyper-relevancy over hyper-targeting

Indeed, the old rulebook relied on hyper-targeted marketing and a relatively free-spending consumer base, and the new rulebook is increasingly about thoughtful, relevant branding toward a broader set of households with fewer expendable dollars. Until recently, personalized ads worked on digital platforms. But this change in consumer spending behavior presents a new reality: Your old customer profile means nothing, but their situation now means everything.

Brands cannot be tone-deaf with their marketing now or in the coming months. To the credit of the retail community, many of its members are doing it right. Macy’s, Amazon and Bed Bath & Beyond are keeping customers informed about what their brands are doing to help ensure stores and products are properly sanitized for these times. They are putting the health of customers and employees first, clearly reading a room that is full of concerned folks.

Meeting consumers where they are

Meet consumers where they are at in this moment. Deliver value in how you reach them, present them with offers (discounts, free delivery, cash back, rewards) and consider their evolving spending decisions.

Consumers are worried about personal economics and having basic supplies at home to get through their day-to-day. As a superb example of a brand stepping up to this reality, Moe’s Southwest Grill offered taco kits that feed four to six people while offering a fun cooking activity. Families and friends can share a meal while a brand forms a deep connection with customers during tough times. Retailers can learn from this example by offering household kits that help consumers alleviate everyday concerns with a single click at a discount price.

In sum, we currently live in different times than before, so retailers should rethink how they segment advertising spend and address customers’ needs in relevant ways. It’s an era where great retail marketers will step up, not step back.

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