Historically, the division of markets had nothing to do with the customer, but with the operations of the business and the reach of the media. If a business was divided into four geographic regions, it could run different advertisements in each of those regions. If a newspaper reached one state, advertisements in that newspaper would reach citizens of that state. It took some time to discover that making slight adjustments to the message based on region would make the advertisement more effective for the people who lived in that region.
With the advent of magazines, demographics and lifestyle became a part of segmentation strategy. If a given magazine was popular among middle-income white females who were fond of knitting, then advertisements in that venue would naturally reach the same segment. Turned around, this meant that if a company's product appealed to a very specific demographic/lifestyle group, it would do better to place its advertisements in magazines that appealed to that group.
It wasn't considered until very recently that advertisements could be targeted to very specific people, individuals who perfectly matched the kind of customer that is most likely to buy a given product or brand. The idea of personalization and one-to-one marketing blossomed in the early 1990's, in the early years of the Internet. I don't have the sense that the technical capability drove the change, as I recall reading about one-to-one marketing some ten years prior, but it did cause interest to be rekindled because, until the Internet, it was a theory that lacked a means to be put into practice (one could not personalize a television commercial, and while magazine publishers were pioneering ways to offer customization for a single subscriber, they couldn't make it cost-effective for the advertiser).
Even so, the Internet remained a difficult medium in which to effectively segment markets or practice one-to-one marketing because of anonymity - the vast majority of sites a person visits has no idea who that person is, and the few that require the user to create a personal account know only the information provided on that site and the behavior of the customer on that site, which is scant. Merchants such as Amazon seem to have made some progress in that regard, using browsing and purchasing history to make decisions about what other items might appeal to a given individual customer, but it's been quite primitive.
Social media has opened the door further: an individual who logs into a social site is at least flagged - and if they neglect to log out, their session remains active and can be available to other sites if there is an agreement and permission in place to share their personal data. And in that way, it's possible to identify an individual and assess which advertisements would be most appealing/effective for that individual and serve them accordingly.
Going by personal experience, this is more than just theoretical pipe-dreaming. Lately, I have noticed that the advertising I have seen online seems to be better targeted to me based on my browsing behavior. For example, I looked into a few sites from furniture merchants while I was considering redecorating my home office, then noticed ads for some of these very same merchants appearing on other sites I visited. I also noticed that I was seeing a lot more ads for similar merchandise (home office furniture and equipment) from vendors whom I had not visited.
This happened far too often for it to be coincidental. Clearly, my behavior had been observed and an assessment made: I have been flagged as a person who is considering a specific purchase, and merchants who offer merchandise are likely paying a premium to reach me.
Out of curiosity, I peeked into my e-mail "spam" folder, where commercial messages are shunted - and was likewise pleasantly surprised. There are still the old-school spam advertisements - mortgage refinance, hair tonic, boner pills, correspondence-school diplomas, and Nigerian princes-in-exile - but among them, there's an impressive proportion of advertisements from sites I have visited, or about merchandize I recall shopping for, in the past month or so.
Some would be upset by this - there's been a great deal of fear-mongering about the loss of privacy (chiefly from traditional media who haven't yet figured out a way to offer the same capabilities to their own advertisers, so their motivation for drumming up panic is transparent) - but I'm actually quite impressed and, in a strange way, glad to see advertisements for things that I might need in place of ads for things that are obviously inappropriate to me.
But to the point, I see a significant improvement in segmentation and one-to-one marketing that is a positive sign that an opportunity that has been neglected or squandered for decades is finally beginning to be leveraged, and feel hopeful that it's closer to achieving its potential.
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