“The question brands are always asking us, is what should they segment on. Brands are looking to us for our experience and expertise to help them define, as well as create, their segmentation approach.” Paul Carney
There are a number of different factors that determine what you should segment on. We’ve already talked about the importance of considering the outcome at the start and some of the key elements that make a segmentation programme effective, but here are some fundamental principles you should consider when deciding.
What dimensions truly impact consumer behaviour in the market?
Segmenting on demographics, sector or geography are easy to do and the data is readily available, but do they really motivate consumers to do different things? Do they genuinely add more to your consumer understanding than your competitors? Do they deliver sustained competitive advantage? We would argue that understanding consumers’ needs, pain points or category-specific attitudes will provide much richer insights than things like life values or broad-brush cohorts like Millennials.
“Demographic segments are easy for people to grasp, and yes, they’re easy to buy media against. But if they don’t help you optimise your marketing mix, then they have little use, and of course, your competitors can apply exactly the same lens. So they deliver little in the way of competitive advantage.” Dr. Leigh Morris
Are consumer motivations pitched at the right level?
There’s a quote by Finnish architect Eliel Saarinen, that says “Always design a thing by considering it in its next larger context – a chair in a room, a room in a house, a house in an environment, etc.” Do the same thing with your segmentation. For example, a segmentation for a domestic appliance manufacturer would include attitudes to how people interact with and view their home; or a segmentation for a confectionery company would include understanding occasions in adjacent or competing categories. Make sure that how you define your market and its context allows the segmentation, and therefore the company strategy, room to grow.
Take into account other market lenses
Apart from very specific situations, segmentations should try to compliment existing ways of understanding consumers, rather than seeking to undermine or replace them. As an example, if you are an insurance firm, and you have just developed a product that is suitable for retirees, then no amount of fancy segmentation will stop that company from targeting by age, which is fine. Add another layer of understanding onto this, another consumer lens, and you can tailor messaging, tonality and service benefits to specific consumer types within that demographic.
Less is more
As Einstein said “Everything should be as simple as possible, but no simpler.” This applies to segmentations too. Although segmentation by definition seeks to simplify complex markets, we know that they also require an extra layer of understanding to end users. So they should be as simple as possible – in execution, in communication, and in deployment.