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Traditional consumer segmentation can be maddening.  It is at the heart of marketing practice to group consumers into segments based on their needs and self-stated psychographic profiles and to then attempt to target a high priority segment with new offerings and advertising. Yet, it simply does not work that well because it is rarely very actionable.

I remember once conducting a massive new product forecasting study where we were asked to put segmentation questions into the study.  There was virtually no difference in purchase intent across the segments!  Tell me again how this segmentation helped with innovation?

Remember Best Buy’s commitment to customer centricity? The segments simply did not lead to impactful redesign of their stores.

Take an attitudinal segment and try to target them on analogue TV.  You often wind up looking at demographic indices for that segment to place media which turns the rifle shot into a scattershot.  OK, you hit the mark but you hit a lot of other targets too. And, while I am airing our marketing research dirty laundry, have you ever tried to score the same people into attitudinal segments at different points in time? My experience suggests that you will probably only classify 50-60% into the same segment.

Jim Stengel, the former CMO at Procter said at a conference in October 2012, “Get close to the consumer and do something with it”.  In segmentation, marketing research never seems to get to the “…do something with it” part

…but here’s how that can change.

Segment moments. I am much more interesting to Ford or General Motors when I am looking to buy a car then right after I make the purchase, am I not?  I happen to be on a diet now which makes me much more interesting to Atkins, Dukan and Weight Watchers than I was a month ago. Moments segmentation is better for innovation and for media strategy intended to influence the path to purchase. In a digital and social age, moments become directly targetable because I, the consumer, do things differently on my self-guided tour of the internet depending on my current goals, giving out forensic signs. I seek out different content, I search for different terms, I like different things on Facebook, and different products show up on my frequent shopper data.  All highly targetable without needing to water things down with demographics. (For an example of moment segmentation on understanding smart phone use and motivations, click here.) (The research was led by InsightsNow, Inc., to whom I consulted, and AOL and BBDO were the clients.)

Segment for ad targeting based on brand loyalties. Increasingly, we can merge digital and social data with frequent shopper data for ad targeting. (Facebook just cut a deal with Datalogix to do this for example.) Rentrak and TRA have each merged TV viewing with frequent shopper data. The “so what” is that a marketer can now target their advertising to “switchables”.  Who are they?  The consumers who buy your brand occasionally but not most of the time.  You will find a much higher response to advertising and promotions from switchables than from those who are completely loyal to either you or some competitive brand.

Segment people as shoppers. Do I plan purchases or decide in store? Do I like to explore to find new meal ideas?  Do I like to sample the gourmet cheeses? Do I like to sniff the fragrances of air fresheners and shampoos? Do I probably have an infant at home given diaper and formula purchases? All of these have clear action implications for category adjacencies, store layouts, and specific shopper promotions delivered in a customized way, increasingly via mobile apps. Is there a consumer attitudes segmentation that can claim the success of what DunnHumby did for Tesco in the UK? Not that I know of.

Segment people based on targetable interests and values. Rather than create a psychographic battery of questions for segmentation and HOPE that we can target segments, why not flip this around? Why not analyze the interests, cultural values, and lifestyle characteristics that are available via Facebook or Google profiles and create segments on factors that reflect those actionable characteristics? That way, you can take your segmentation and do something with it! Furthermore, every ad campaign becomes a test that you have the segment right that you are targeting because they should exhibit greater response.

Final point.  Traditionally, marketing research seeks to create a small number of segments that each represent sizable opportunities.  This is still important for motivating innovation ideas, but when it comes to ad targeting, you can have many micro-segments as advertising is micro-targeted…served up one impression at a time in search, and with real time exchanges.


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3 Responses to “Four new approaches to consumer segmentation in a digital and social age”

  1. Nice article – Jeff. I share your concerns about making segmentation actionable and like your suggestions.

  2. Ed Snier

    Very insightful – thank you!