- Where Insurance & Technology Meet

Micro-Segmentation For The Micro-Organization

In the new world of data, big data, and analytics, some concepts and approaches can seem overwhelming, especially for small to mid-size enterprises (SMEs) that don’t have substantial resources.  However, there are common sense approaches to implement techniques which may not be as elegant as more formal approaches, but are nevertheless effective in providing real results.

As we come across these, we’ll highlight what we see as value points, and ask you to share your own experiences.  As Red Green says,  “We’re all in this together.”  And to that end, we’d like your thoughts.

A Macro View of Micro-Segmentation

One of the topics that really hurts our brain is ‘Micro-Segmentation.’  We have written on this and its application by organizations such as Progressive and Allstate which have the capacity to make substantial investments in telematics, data stores, analytics, and other tools.  As a result, these carriers are able to create and refine increasingly precise groupings of clients, prospects, etc. to whom they can market products meeting very tightly defined criteria.

But what can a SME do?  Well,we went looking, and found , a serial entrepreneur whose current (apparently successful) portfolio includes a UK based on-line business insurance comparison quote site.  On ecadamey, an e-learning site (another of Lyndon’s enterprises), Lyndon claims, ‘I micro segmented my insurance business three years ago and grew net profit by over 200%.’

The conversation on ecademy continues, and is worth a look, simply to see that a number of SMEs are actually trying micro-segmentation.

Down to the basics ….

So how does an SME actual DO micro-segmentation?  For that, we turned to Matthew T Grant.  (Matthew is Managing Editor at MarketingProfs, which curates on-line marketing tips).  On his personal blog, Matthew did what he refers to as a ‘reality check’ on micro-segmentation by conducting an interview with Brett Lauter, who was then (2007)  VP of Marketing at GMAC Insurance in Atlanta.

Lauter put out  Four Keys to Smarter Segmentation (all quotes attributed to Lauter):

1. Start with the Basics of Your Business: “You start with the basics: What is our business? Who are our customers? What motivates them to buy? If you keep that in mind, you may discover that the traditional approaches to segmentation — product-based, lifestyle-based, behavior-based, etc. — aren’t that bad.

2. Go with What You Know, Part 1: “You can waste a lot of time accumulating demographic and psychographic information about your customers, when the most effective segmentation decisions can be based on information readily available, like purchase history.”

3. Go with What You Know, Part 2: “Some of what we know is really just common sense. … In the insurance and banking worlds, there are specific life events that generally cause certain purchasing behaviors. …  since insurance is regulated on a state-by-state basis, when someone moves from one state to the next, they’ll have to buy a new auto insurance policy.Long story short, there are a lot of things that will influence or inform your segmentation strategy that don’t require in-depth studies or combing through mountains of data.”

4. Keep Your Eye on the Money:  “You don’t segment for segmentation’s sake. If your investment in segmentation isn’t producing business results, or the results are becoming less and less significant, then it’s time to shift resources to other activities.”

Is that it?

So is that all there is to Micro-Segmentation?  Hardly.  Progressive insurance has been doing different forms of segmentation for decades, and its results show the results.  However, Progressive didn’t start with all the answers, they had to start with asking the most important questions and being willing to let the answers help form the next questions.

The point here is that starting with common sense is better than starting in some random fashion.  And, in the case of segmentation, the SME has the chance to apply the techniques with increasing levels of precision and grow into a BME (Big Mother of an Enterprise).

So, what do you think?  Are you looking at segmentation?  How are you doing it?  What have the results looked like?  Let us know.  We’re pulling for you.