Multichannel Breakthrough: Segmentation Powers Insights into the Empowered Shopper

The Robin ReportAs with all new approaches, the best innovations in the digital marketplace occur not as a result of reinventing the wheel, but by integrating and retooling existing assets. Things become truly exciting for the merchant in the combination of insights derived from spending behavior with insights derived from transaction analysis—in time as well as virtual space. By including the insights from real-time transaction data, behavioral models of different segments of e-shoppers can help to extrapolate that a device that has clicked on these specific links is likely to make purchases in certain market sectors within a specified period of time. At MasterCard, we are creating a breakthrough for merchants in segmentation by bringing our own enormous anonymized data set to bear on the task of identifying shopper segment behaviors. By applying insights on spending behavior to our partners’ online populations using common geo-demographics, our partners are able to identify online shoppers with a high propensity to spend in a given industry in the next 30 days.

It is becoming increasingly clear amid the rapid growth of ecommerce that merchants need to excel at their online strategy, and soon, if they are going to survive (let alone thrive) in a multichannel environment. Most merchants understand that there is not a single best approach to multichannel operations, and that a store’s online presence must be tailored to its overall brand strategy and business model. What is often missed in the rush to market, though, is that just as no two retailers are exactly the same, so are no two shoppers. And in these times of movement toward multichannel ubiquity, the adage “The Customer is King” doesn’t begin to describe the power and control that shoppers have taken of their shopping experience.

Merchants have long understood that their customers have different shopping and spending patterns— what they buy, how much they spend, what triggers prompt purchases, etc.  In order to plan effectively, retailers think in terms of segments of their customer base. The most forward-looking, seemingly clairvoyant retailers have used intensive segmentation strategies based on comprehensive data and rigorous analysis.

What these segmentation schemes have not taken into account, however, is a different metric: customers not only have different purchasing behaviors, they now have different ways of going digital, as well. It’s a timing issue, in part. Some shoppers are still just getting comfortable with ecommerce; some use ecommerce almost exclusively; and there are many shades of grey in between.  In economic terms, though, what we have found is that a multi-channel buyer at a specific merchant spends 300% more than an exclusive channel buyer with the merchant. In order to capitalize on that increase, an effective multichannel strategy will need to make space for these different kinds of in-store and online behaviors if it is to have any real impact on sales. That strategy could become more powerful when it’s possible to identify transactions taking place on mobile devices.

In addition to multichannel must-haves like foolproof, secure and efficient payment systems and near- instantaneous shipping and home delivery, successful multichannel merchants will need to rethink and supplement their segmentation strategies by adding a new dimension to existing information. There will be, for example, aspirational shoppers who would not dream of buying something without having a chance to see it up close and personal; there will be others who may only rarely set foot in a store; and some who will try things out first and then wait for an online deal before making a purchase.

Savvy marketers can design offers that will appeal to each different behavior, whether it is an emailed invitation to a private in-store trunk sale, an online-only special, or even an app that will allow customers to get targeted promotions when their mobile device signals that they’re near a store. But if those offers are to result in sales, they have to reach the right shoppers—and only the right shoppers, to avoid the very real danger of deal fatigue.

How can all these different segments be reached? If you spend any time online, you’ve already seen some version of this: the ads that appear on your screen seem surprisingly in tune (or oddly just off key) with searches you may have recently made or sites you visited. One way this happens is through the use of “cookies.” A cookie is a small packet of data that is placed by a website on a computer, and can be used to track the sites that the computer subsequently visits. While any site can do an IP address look-up to determine the likely geography, unless you’re Google or a very savvy shopping site neither the cookie nor the website knows very much about the person on the computer—only that this computer looked at a luxury leather goods site.

The cookie, though, will be the reason you may be getting ads for handbags while you read the news online.

This example is obviously oversimplified. There’s actually a hierarchy of cookies that makes for a more complex picture. The 1st party cookie is the cookie “dropped” by cookies.com on its own users. 3rd party cookies are cookies dropped on cookies.com by data companies that have agreements to tag cookies.com users. 1st party cookies are generated from the website itself, and 3rd party cookies originate on a web site other than the one you’re currently looking at. Using cookies, web sites can track if you’ve put something in a shopping cart, if you’ve abandoned the cart or made the sale, and other browsing behavior data. In addition, companies associate attributes like age, ZIP Code and income to specific cookies over time, such as behavior and registration data as those metrics become available.

Given the trend toward smaller and more defined physical store locations and capacity in the face of wildfire ecommerce growth, merchants absolutely need to understand their customers’ online behavior more accurately than ever before. MasterCard works with partners that maintain large third party online populations, to which MasterCard appends insights regarding spending behaviors, in order to glean an understanding of online behavior.

In the new environment of constant and instantaneous connection, customers expect to be able to shop exactly when and how they want.  MasterCard’s innovative approach to segmentation and data analysis, coupled with what our partners are doing in the area of e-shoppers, enable the development of powerful multichannel strategies and incisively targeted marketing, so as to identify shopper segments, not individuals, likely to make purchases in a specific category over a specified period of time. Armed with the new generation of browsing and transaction analysis, merchants will be able to provide these shopper segments with the full multichannel shopping experience.

Andrew Mantis About Andrew Mantis

Andrew Mantis leads the MasterCard Advisors Information Solutions/Merchant practice. He can be reached at Andrew_Mantis@mastercard.com.