Behavioral Segmentation for E-Tail Personalization
Behavioral Segmentation for e-Tail Personalization
by
Douglas L. MacLachlan Professor of Marketing University of Washington Business School Box 353200, Seattle, WA 98195-3200 (206) 543-4562 macl@u.washington.edu
June, 2003.
Behavioral Segmentation for e-Tail Personalization
Abstract A multichannel retailer desires to develop a personalization strategy for customers who agree to receive e-mail communications containing imbedded Internet purchase appeals. Using customers’ transactions history with the firm, four behavioral segments emerged from factor and cluster analyses. The segments were also distinguishable on the basis of attitudes toward shopping, determined from an attitude survey. A CART analysis provided an algorithm for classifying customers into the behavioral segments, based simply on their purchase history information. The segments were validated in a replication, which involved a survey with a new sample. Finally, different appeals were used in personalized messages tailored to two of the segments in an I-media experiment. The appeals resulted in higher sales response for one of the segments.
Key words: e-commerce, multichannel retailing, behavioral segmentation, personalization, relationship marketing
2
Although hyped as the eCommerce “Holy Grail,” true personalization at the individual customer level remains far in the future for most retailers. Certainly a degree of 1-to-1 communications between retailers and customers exists today, but customers rather than retailers typically initiate the exchange, and the actual personalization involved is fairly minimal (Peppers, Rogers, and Dorf, 1999). So-called “personalized” retailer communications are by and large reactive, rather than proactive or promotional. Reaching each customer with individualized promotional messages is largely infeasible for most retailers, despite the new information economics driven by the digital revolution (Peppard, 2000). Indeed, some have questioned
by
Douglas L. MacLachlan Professor of Marketing University of Washington Business School Box 353200, Seattle, WA 98195-3200 (206) 543-4562 macl@u.washington.edu
June, 2003.
Behavioral Segmentation for e-Tail Personalization
Abstract A multichannel retailer desires to develop a personalization strategy for customers who agree to receive e-mail communications containing imbedded Internet purchase appeals. Using customers’ transactions history with the firm, four behavioral segments emerged from factor and cluster analyses. The segments were also distinguishable on the basis of attitudes toward shopping, determined from an attitude survey. A CART analysis provided an algorithm for classifying customers into the behavioral segments, based simply on their purchase history information. The segments were validated in a replication, which involved a survey with a new sample. Finally, different appeals were used in personalized messages tailored to two of the segments in an I-media experiment. The appeals resulted in higher sales response for one of the segments.
Key words: e-commerce, multichannel retailing, behavioral segmentation, personalization, relationship marketing
2
Although hyped as the eCommerce “Holy Grail,” true personalization at the individual customer level remains far in the future for most retailers. Certainly a degree of 1-to-1 communications between retailers and customers exists today, but customers rather than retailers typically initiate the exchange, and the actual personalization involved is fairly minimal (Peppers, Rogers, and Dorf, 1999). So-called “personalized” retailer communications are by and large reactive, rather than proactive or promotional. Reaching each customer with individualized promotional messages is largely infeasible for most retailers, despite the new information economics driven by the digital revolution (Peppard, 2000). Indeed, some have questioned
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