A recent McKinsey article entitled "Getting More From Prepaid Mobile Services" (subscription required) highlights some lessons from a consumer offering that has applicability to many other offerings - microsegment promotions and experimentation. In this article, the authors talk about how mobile operators are creating microsegments of users to test promotions with the objective of creating renewals and increased (profitable) usage.
Segmentation is a well-known discipline. What is different about microsegmentation is the ability to continually experiment with promotions that are likely to be highly relevant to the microsegment, without jeopardizing revenues. If you experiment with promotions in a segment that is too large, you carry two risks:
- People will ignore the promotion, and begin the cycle of ignoring your future communications because they lack relevance,
- People who would have done what you offered anyway, take advantage of the promotion and cut into your margins. (For example, you might be a heavy text-message user and receive a promotion for free text-messaging.)
However, if you experiment in microsegments, you are much more likely to provide a promotion that will be relevant to that microsegment, that will be adopted by them and that will result in increased revenue (and profit). The article acknowledges that running microsegment promotional experiments is not simple, but it is effective. The team will need to be cross-functional, to include marketing, IT specialists and financial analysts. And naturally, it assumes excellence in data mining. However, when designed and executed well, this approach will create more value from existing customers and may help you get more customers as well.
Have you experimented with microsegmentation? How do you think it could impact your revenue and profits?
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