Two-tiered segmentation unlocks actionable insights

How do you start and go about building a great digital organization? Five activities provide a rich foundation for analytics driven transformation along with some core strategic analytic capabilities:
  • Digital collection audit – Collect the right data.
  • Member journey map – Create and agree on an enterprise-wide model of members and their various journeys.
  • Two-tiered segmentation – Segment the member journey by visit purpose as well as capture digital’s real-time nature.
  • Voice of member system – Collect, classify, integrate and distribute true voice of the member.
  • Unified measurement – Develop a unified framework for measuring and optimizing campaigns and enterprise performance.
Where journey mapping links your strategic vision to your operational capabilities, two-tiered segmentation links strategy at the tactical level. At every touchpoint in a member journey there is the need to understand who somebody is and where they are in their journey. That’s the the basic principle of two-tiered segmentation. These are typical comments you hear in a discussion about web analytics:
  • “Our site traffic is down.”
  • “We have problems with the conversion rate.”
  • “Our online projected revenue is way up.”
  • “Our Net Promoter Score had a slight upward tick.”
Each of these statements involves typical and interesting KPIs: visits, conversion rates, revenue and member willingness to recommend. The interpretations are obvious: Poor site traffic is bad; conversion rate problems are worse; increased online revenue is good; and any uptick in NPS is hopeful. Yet, how can you be sure you’re interpreting this data correctly? Your visits could be up because members need to find a contact number to resolve an issue with your service. Your conversion rate might be down because your new SEO delivers more visitors who are less qualified. In this case, the lower conversion rate might be offset by larger markets and the opportunity to open up new markets. Each data point represents multiple explanations. That’s why a KPI, taken in isolation, is neither actionable nor explanatory. A two-tiered segmentation scheme solves the problem more explicitly In every case, as you think about the KPI statements discussed above, segmentation offers an excellent first step toward choosing the right explanation. If site traffic is rising, the first question you should ask is, “With whom?” Is traffic rising with existing members, with online-only members, or just prospects? If revenue is going up, you’d want to ask the same kinds of questions. Is revenue going up with all members? Is it going up with members who purchase high-margin loans or is it up because you’re getting more members? Ditto with Net Promoter scores. An average hides all the interesting stuff and often moves slowly because of the amount of noise in a large population. Is my member situation really unchanged or are there shifts in segments or micro-segments? The most important question you have to ask yourself: “Who does this number apply to?” The “who” is the first tier in a two-tiered segmentation. It’s a classic database marketing style segmentation and it’s essential context for understanding almost any metric. It doesn’t matter whether the metric you’re reporting on is page views, visits, conversion rate or revenue: If “who” is the first question you should ask when you see a change in the metric, shouldn’t the answer be baked into the reporting? One might even argue that you should stop looking at site-wide metrics for things like traffic and conversion rate. They just don’t mean anything until they’re placed into a more specific context. This first segmentation is powerful and it’s necessary. In the digital world, however, it’s not enough on its own to create meaningful KPIs or to serve as a framework for a data model in the warehouse. For that, you need the second tier of segmentation. Two tiers turn data into actionable insights Suppose traffic is going up and you find that the increase is due to more member traffic. That’s interesting, but it’s still not enough information to create real understanding. The next questions you need to ask are, “Why? What are they trying to do?” Are members coming to your site to convert, or because your latest product release is generating a dramatic spike in customer support visits? It makes a huge difference, right? This second level of segmentation – visit intent – is actually the most important segmentation in web analytics. It forms the second tier of your segmentation scheme and it is essential. Metrics and KPIs should be placed at the intersection of the “who” and the “why” – visitor type and visit type. Every combination of visitor type and visit type should have its own distinct KPIs and descriptive metrics. If you say that member visits for support are up, that’s starting to be meaningful. If you say that revenue and conversion rates are up with prospects coming to the website with an intent to buy, that’s also starting to be meaningful. The same holds true if you say that time spent on your site is down among members looking for a telephone number to call for information. Metrics have meaning, and the appropriate metrics can only be chosen in the context of a segmentation. That segmentation should have at least two tiers. Putting metrics and KPIs in the context of a two-tiered segment doesn’t suddenly make them actionable and it doesn’t guarantee that they tell the full story. It does, however, advance the story dramatically. Metrics placed in this context will always be vastly superior to those provided on a site-wide basis. They will be cleaner, more accurate, and far, far more meaningful. Two-tiered segmentation turns out to be essential to nearly every significant web analytics task, from KPI development to report set design to deep-dive analysis to data warehouse modeling. Site-wide metrics for traffic and conversion rates that may appear front-and-center on your executive scorecard aren’t useful. They are, in fact, worse than useless since they encourage poor interpretations of the data. We all struggle against a set of “best-practices” that have been deeply entrenched in our industry despite their evident flaws. Management reporting based on two-tiered segmentation is completely different than what people are used to. The most important KPIs emerge out of segmentation – the simple counts of how many of each visitor/visit type the site actually receives. These simple counts are often the most important KPI for any site. Metrics like time-on-site, visits, revenue and conversion rate should be used selectively because they fit the segment and visit type and not because they have some inherent value. Success metrics become visitor- and visit-specific as, surely, they should be. Put into the framework of a two-tiered segmentation, reporting suddenly makes sense. It becomes elegant, even beautiful. And very exciting. Need more help in your digital transformation journey? Continue to follow this blog series and join our webinar “Let’s get to work” on August 16.