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The Net Takeaway: Segment Stability

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Segment Stability · 06/04/2004 12:41 PM, Analysis

We are often asked to examine performance of groups of people by segment. This seems easy; each person was assigned to a segment at day 1 and so just group up their performance.

Only, its never that easy.

Often, segments are updated based on time or behavior. RFM grouping change after purchase, or because more time has passed. Preferences may change based on a shift of buying pattern.

There is also the issue that if you are targeting segments with specific offers, its not how the segment did, its how the segment responded to your choice of specific targeted offer/content…

The analyst is then faced with how to structure the data:

  1. You can double count the person in all the groups for which they were a member
    • This basically says that you don’t care about the person per se, simply how the amorphous group of “non-buyers” responds in general to various offers
  1. You can weight down the person; in effect, distribute their impact based on the length of time they spent in each segment.
    • Much more procesing required here, of course
  1. Take only their most recent or first assignment (if you logged it. You did track segment shifts, right?) and group them by that

None of these are optimal. Instead, I’ve found myself thinking more about the Marketing Mix Modeling work going on which emphasizes a time-series approach based on econometrics. Perhaps its a “time by segment at that time” model to better understand how people behave when they are in a specific segment space.

But, yes, given time constraints, like so many others, I often fall back to first providing option 1 and then going back later and doing the better analysis… yet another case of “Good Enough” defeating “Doing it Right”

(BTW, notice how that cliche, “good enough is the enemy of best” is coming back into play? John Patterson (founder of NCR) said this back in 1900, and people keep bringing it up as if they invented it, most recently Jim Collins in Good to Great One of my bosses used to go the other way, “The Perfect is the Enemy of the Good, the Accepted, and the Paid For”)

More about Marketing Mix Modeling:
An article at TheGauge.com
Marketing Management Analytics specializes in this type of analysis

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