Market Segmentation

Market segmentation is often necessary to effectively meet the needs of different customer groups. Different segments will value different aspects of your products, services, and brands differently. You should have a good understanding of the following dimensions of each market segment:

• Its overall size and its growth rate
• Its price sensitivity
• The benefits that are most and least important to it
• How well it is served by existing products and brands
• How brand loyal it is
• How it selects and purchases the product
• How accessible it is
• The distribution methods it prefers
• How it uses the product
• Its product usage/replacement rate
• Its longevity and projected evolution over time

Markets can be segmented in the following ways:

• Product Usage Segmentation. For instance, some people use baking soda to deodorize their refrigerators, while others use it as a surface soft scrub, to treat insect bites or itchy skin or as a toothpaste.
• Purchase Behavior Segmentation. In many industries, four groups than often emerge to one degree or another are:
• Brand loyal consumers
• Convenience-driven consumers
• Price-driven consumers
• Consumers that enjoy seeking out new brands and products within the category
• Benefit Segmentation. People might buy a sailboat to race, for a daysail, to cruise on a vacation, to live aboard, to entertain friends, or as a second home.
• Price Segmentation. Price segmentation will yield higher overall revenues and profits if designed properly. Airlines have made a science out of price segmentation. First-class travelers pay more. Business travelers with tight schedules will be less price sensitive. Tourists with fixed budgets, flexible schedules, and a long planning horizon will look for lower fares. Some people will only travel taking advantage of last-minute seat-filling bargain prices. Other last minute travelers have no choice and behaviorally (but probably not attitudinally) are virtually price insensitive. Seats are less expensive on slower days (Saturdays, December 25, etc.).
• Lifestage Segmentation. There is a system of segmenting adults into eight distinct mindsets using a specific set of psychological traits and demographics that are proven to drive consumer behavior. Consult: Strategic Business Insights VALS (values and lifestyles) at www.strategicbusinessinsights.com/vals/ustypes.shtml, and U.S. MONITOR at http://www.kantarfutures.com/products/us-monitor/.
• Cohort Group Segmentation. Refers to people who were born at approximately the same time and who have experienced the same events at the same lifestages.
• Psychographic Segmentation. Refers to segmenting people based on their values, attitudes, and lifestyles.
• Geographic Segmentation. Segmenting people according to their geographic location can help target people in the same socioeconomic bracket who may share interests or concerns.
• Geodemographic Segmentation. Refers to segmenting people based on their location—typically zip or postal code—and demographics, such as age and income. Consult: Claritas’ PRIZM® Premier, P$YCLE® and ConneXions® segmentation tools (https://www.claritas.com/products-solutions) and CACI’s ACORN (acorn.caci.co.uk).

As the previous list illustrates, consumers can be segmented on many dimensions. The trick is to arrive at a segmentation scheme that relates to differences in purchase motivations and behaviors. Different brands are designed to appeal to different needs with unique points of difference. It is important to understand the consumers for whom your brand will mean the most and who will have the highest likelihood of responding to your brand messages.

Reprinted with permission from Brand Aid, second edition, available here.

Customer Profiling

Customer profiling helps organizations identify and then effectively target the most lucrative customer segments including how to best reach them in the shopping process and what brand messages are likely to work best with them.

We help organizations profile their customers in actionable ways. First, we measure brand purchase intent. We then discover the values, attitudes, aspirations, behaviors and demographics that have the highest correlation with high purchase intent for their brand. This helps us identify different customer segments for targeting, including the most promising segments. For more information on customer segmentation, go here or here.

Specifically, we measure the following:

• Brand purchase intent
• Customer demographics:
• Age
• Gender
• Marital status
• Employment status
• Occupation
• Presence of children
• Household income
• Shopping behaviors:
• Where information is gathered
• Influencers
• Distribution channels and stores shopped
• Purchase frequency
• Average amount spent
• Importance of quality
• Importance of design
• Importance of customer service
• Importance of price and price discounts
• Values, attitudes and aspirations
• Lifestyle/activities (3-6 statements)
• Shopping (3-6 statements)
• Self-perception and personal style (3-6 statements)

We can also include product usage questions, depending on how many categories the brand represents. And we can correlate values, attitudes, aspirations, behaviors and demographics with brand preference and brand loyalty (including Net Promoter Score) as well.

If you do not have an actionable profile of your customer, you should consider doing this work. It makes your marketing spend much more effective and efficient. 

Segmenting Voters

Segmentation always begins with in-depth qualitative research to understand hopes, aspirations, fears, anxieties, beliefs, attitudes and values. This can take the form of depth interviews, mini-groups or more traditional focus groups. There are also online qualitative research methodologies. 

While segmentation can be based on demographics, psychographics, cohort groups, geography and behaviors, basing it on attitudinal statements often yields the richest insight into motivation. 

For voters, there are differences between people of different ages, genders, races, religious affiliations, socio-economic groups and geographies. However, the most insight can be gained by exploring hopes and fears associated with the following dimensions, which typically can be represented along continua:

• Sense of personal competence and mastery
• Feeling left behind and powerless versus empowered and a change agent
• Belief in the innate goodness (versus evil) of humanity
• Moral absolutism versus moral relativity
• Degree to which one believes that life is a "zero sum" game versus a state of unlimited potential
• Degree to which one thinks competitively versus cooperatively
• How broadly one views one's "tribe" (my family, people of my race or religion versus all of humanity or all sentient beings)
• Belief in the innate equality of all individuals
• Focus on helping others versus self-reliance
• Where a person is on Maslow's hierarchy of needs
• Degree to which one feels "safe"
• How strongly one embraces personal autonomy, freedom and liberty for all
• Attitudes regarding rules, laws and authority
• Fear of power concentrated in government
• Fear of power concentrated in corporations
• Fear of power concentrated in religion
• View of the role of government in people's lives
• Which form of government one thinks works best
• Which economic system one thinks works best
• Pragmatism versus staunch commitment to an idea
• Openness to new ideas and change

Insights on these dimensions can be correlated/mapped to demographic, geographic and other more actionable targeting criteria. These insights can also lead to the identification of "wedge issues" and talking points that can be exploited to steer voters in specific market segments to vote in specific ways.

Brands and Customer Segmentation

Marketers segment their markets so that they can better target the customer groups that offer the greatest sales potential. This also helps them refine brand messages for each group. Markets can be segmented on product usage, purchase behavior, benefits, price, life stage, cohort group, psychographics, geographics or geodemographics. In many product categories, there are price sensitive, convenience driven, brand loyal and category enthusiast groups. 

One way to segment markets is based on specific attitudes, values, beliefs, lifestyles and self-perceptions. The market researcher uses qualitative research to uncover hypothesized attitudes, values, beliefs, lifestyles and self-perceptions associated with heavy or loyal brand or product usage. These attitudes, values, beliefs, lifestyles and self-perceptions are translated into statements that can be tested against product/brand usage in a quantitative brand segmentation study. Once these statements are validated, they can be used in all subsequent research.

We have worked with many clients to help them determine their most lucrative segments based on attitude, value, belief, lifestyle or self-perception statements. Here are some of the statements that we have found identify different customer segments:

• I am a fun mom
• A good education is critical to my child's success
• One person can make a difference in the world
• I love to entertain in my outdoor space
• The world is changing so fast that it is hard to keep up
• Our country needs a strong leader who can take control of things
• Climate change is one of the world's most pressing problems
• I don't worry too much about anything
• I am always one of the most stylish people in the room
• Ending the cycle of poverty starts with children
• A good Christian always seeks to help those who are less fortunate
• It's ok to indulge once in awhile
• I love to drive
• I love to shop

I wish you great success in finding and appealing to your most promising customers. 

For more information on market segmentation, refer to the "Understanding the Consumer" chapter in Brand Aid, second edition.

Market Segmentation

Markets can be segmented in the following ways:

• Product Usage Segmentation. For instance, some people use baking soda to deodorize their refrigerators, while others use it as a surface soft scrub, to treat insect bites or itchy skin or as a toothpaste.

• Purchase Behavior Segmentation. In many industries, four groups that often emerge to one degree or another are:

             1. Brand loyal consumers
             2. Convenience-driven consumers
             3. Price-driven consumers
             4. Consumers that enjoy seeking out new brands and products within the category

• Benefit Segmentation. People might buy a sailboat to race, for a daysail, to cruise on a vacation, to live aboard, to entertain friends, or as a second home.

• Price Segmentation. Price segmentation will yield higher overall revenues and profits if designed properly. Airlines have made a science out of price segmentation. First-class travelers pay more. Business travelers with tight schedules will be less price sensitive. Tourists with fixed budgets, flexible schedules, and a long planning horizon will look for lower fares. Some people will only travel taking advantage of last-minute seat-filling bargain prices. Other last minute travelers have no choice and behaviorally (but probably not attitudinally) are virtually price insensitive. Seats are less expensive on slower days (Saturdays, December 25, etc.).

• Lifestage Segmentation. There is a system of segmenting adults into eight distinct mindsets using a specific set of psychological traits and demographics that are proven to drive consumer behavior. Consult: Strategic Business Insights VALS (values and lifestyles) at www.strategicbusinessinsights.com/ vals/ustypes.shtml, and Yankelovich MONITOR at thefuturescompany.com/what-we-do/us-yankelovich-monitor.

• Cohort Group Segmentation. Refers to people who were born at approximately the same time and who have experienced the same events at the same life stages.

• Psychographic Segmentation. Refers to segmenting people based on their values, attitudes, and lifestyles.

• Geographic Segmentation. Segmenting people according to their geographic location can help target people in the same socioeconomic bracket who may share interests or concerns.

• Geodemographic Segmentation. Refers to segmenting people based on their location—typically zip or postal code—and demographics, such as age and income. Consult: Nielsen PRIZM and Nielsen’s other segmentation tools (www.claritas.com/MyBestSegments/Default.jsp) and CACI’s ACORN (acorn.caci.co.uk).

(c) 2015 by Brad VanAuken, excerpted from Brand Aid, second edition

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