What is the difference between Segmentation and Personalization?

What is the difference between segmentation and personalization? This is the question that came up during one of the webinar on personalization by Optimizely. This blog post is for those who have the same question.

Basic definition of Segmentation is  - division into separate parts or sections.  For the purpose of marketing, it is a processing of grouping customer and prospects into similar groups based on various criteria such as demographic, geo, behavioral and psychographics.  You can use one or more of such attributes to define your segment.  The purpose of segmentation is to understand about a group (segment), and develop marketing strategy to better target those segments. 

Personalization is providing marketing messages and/or experience that is tailored based on a customer’s needs or preferences.  Personalization can be very basic that can start from simply recognizing the person by name or it can be very complex that includes all sorts of data about a particular customer combined with device and contextual data (1st party data + 3rd party data). Personalization is the action that you take based on the learning you have about the person (a segment of 1 individual).

So segment is a way to understand your customer based while personalization is the action you can take based on that understanding.

Let’s look at very basic example to clarify these two terms:

You look at your site visitors and identify that there are two main behaviors of your visitors:

1.       Visitors who mainly click on sports related content, that’s where they spend most of their time

2.       People who mainly read finance related content, that’s where they spend most of their time.

Using this information, you have two segments – 1. Sports Visitors and 2. Finance Visitors 

This is called Segmentation

When someone who fall into “Sports” segment comes back to your site, you rearrange the content to highlight latest sports stories so that these visitors can easily discover the content they love.  On the other hand, a visitor who falls into “financial” segment will see finance stories highlighted.

This is called Personalization. 

Now this is not 1:1 personalization but it better than no personalization at all.

Hope this clarifies the difference between the two terms.  

Questions? Comments?