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What Is Cluster Marketing and Why It Is Effective

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There are a lot of buzzwords that come and go in the world of marketing. One day it may be cause marketing that’s all the rage, the next day it’s conversational marketing. It can be difficult to predict which phases and trends of marketing are going to stick around and remain relevant and are worth understanding. Today, many are asking what is cluster marketing.

What Is It?

Cluster marketing translates to just what you would think. It involves grouping and clustering the data within marketing into distinct clusters of categories. This is to gain a competitive advantage.

It is no secret that knowing your target audience is the first step to gaining success in the field of marketing. However, you cannot look at each and every customer on their own. It is simply too much information to process and organize effectively. Additionally, on the other side of the spectrum, it is ineffective to organize your individual audience members into unspecific and broad groups. Because those consumers will not feel as though their individual wants and needs are being heard.

Clustering itself is a process of using machine technology and algorithms to locate relationships between the various areas of research and overall data of the market in order to create new market segments.

This may sound similar to market segmentation; however, it is very different. Segmenting the market involves simply identifying different demographics and psychographics within the market and separating those characteristics into different target audience groups. From there, you can then adjust your marketing tactics to whichever segmented group (example: women over age 50) based on their wants, needs, and interests.

With clustering, however, the process is very different. While segmentation simply organizes your audience into common groups based on their characteristics, clustering actually creates new groups by finding a common relationship between these various segmented groups.

In order to get a better grasp of cluster marketing, let’s take a look at an industry that thrives with it: the retail industry.

How the Retail Industry Uses Cluster Marketing

Many retail companies use cluster marketing to figure out groups that are similar or different from each other. They may collect information regarding household incomes, family size, location, and household occupations from consumers. With that information, they can connect it to a computer algorithm. It draws conclusions such as family sizes that are smaller tend to be higher spenders and vice versa. In doing this, retailers are able to avoid wasted marketing of highly expensive, newer products on segments of big families. These big families are likely to prefer buying discounted versions of products.

But how does a marketer really achieve clustering? How does one even know where to begin with all of the technology and complicated algorithms out there? Luckily, we have you covered. Here is a simple list of steps to take as you begin your “Cluster Marketing” journey.

Organize Your Data

Effective data sourcing is critical to organize your data for analysis. If your data from consumers is scattered all over the place, in locations such as Google Analytics, Facebook, Paid Search, etc., it is going to be immensely difficult to make any sense of it without an organized system. Setting up thoroughly organized records of what information is located where will avoid any complications from the start. This could be through something as simple as Excel documents or something more complex, like automated marketing dashboards.

Decide Your Metrics

Decide metrics by which you want to measure and gauge your audiences in order to find those clusters. There are countless metric options, so you must assess what makes the most sense for your business and products. It could be by traffic and web clicks, revenue, purchase frequency, or more. Essentially, choosing your metrics is going to be up to you. So, make sure to do extensive research on what method is best for you in order to ensure efficiency.

Data Visualization

Lastly, you need to establish how you are going to visualize the data that your marketing algorithms and reports have revealed. The data is useless if you and your team cannot accurately and clearly see what the numbers are showing. It may be through presentations, graphs, interactive displays, tools for data visualization in marketing, or more. Whatever you choose, make sure the clusters are concise and clear so that you can gain as much insight as possible. 

Ultimately, the reason why cluster marketing is important is that it allows you to take advantage of the new technology and algorithms we have been given while also saving your marketing team resources and time in the long run.

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