Careful segmentation of audiences can not only improve the allocation of marketing resources but help build longer and stronger relationships with customers.
But in a Warc Best Practice paper, “How to use segmentation effectively”, planning consultant Merry Baskin acknowledges that the practice does have limitations.
For example, advertisers may find it difficult to buy media – even in the hyper-targeted world of “online” – against the unique segments that a brand manager may have identified, especially if you are targeting a “psychographic” that is, in itself, a sub set of a larger demographic.
“We feel we are ready to stop renting and buy our first home” is only a sub section of “All young heterosexual people 24-35 living together in a stable relationship, but not yet with children”, for example. Lots of those “young heterosexual people 24-35 living together in a stable relationship, but not yet with children” are perfectly happy to keep renting. “Buying an ad” to talk to everyone in that age group inevitably means a heap of wastage. Sometimes advertisers just “suck it up” and accept that wastage is inevitable. But an ad agency or media buying company who can devise a means to better target those intending home buyers more accurately will win friends fast.
The other problem is consumers typically have multiple identities which depend on the context in which they find themselves.
Someone who is feeling a little wild and into trying new things when faced with a late night bar full of new top shelf spirits may be very conservative when it comes to choosing life insurance the next day.
But none of these arguments should detract from the fact that many businesses are generating profits as a result of pinpointing valuable segments and adjusting their business and marketing strategies accordingly.
A problem for marketers, however, is that while the idea of clustering an audience may be fundamental to marketing, there is no truly recognised process to develop an effective segmentation strategy.
Marketing staff inside clients, Baskin notes, will generally start with a hypothetical idea of the groupings in their market, which could be based around the particular benefits consumers look for in the product or service and whether they can satisfy it – all of which can hopefully also be tested against existing data on the behaviour of existing customers.
The next stage is often a two-step enquiry process using in-depth, qualitative research techniques to pursue and tease out trends to start with, backed by quantitative techniques on attitudes and behaviours to confirm that they are representative of the whole market.
Segmentation criteria can range from basic demographic and socio-economic factors (including purchasing ability – simply having enough cash for a discretionary purchase, for example) through to more specific ones such as usage, style of usage, location, life stage, what a consumer believes a purchase says about them, broad psychographics and context.
“The most successful/popular are behaviourally rooted, because behaviours deliver tangible value to the bottom line of the business,” Baskin observes. Or to put it more simply, aligning a product and service to the moment when a customer can take it up easily is likely to be a success.
And, vitally, “segmentation should shape more than just marketing”: the rest of the organisation needs to be on board with the concept if it is to be successful. That’s because the segmentation arrived at can be applied across multiple areas – such a product delivery channels, for example – and not just communications. Or intelligent use of segmentation can turn pricing from an accounting exercise into a market-based one, or help deliver a more personal and helpful customer care experience.
“It is hard to imagine creating effective communications, developing innovative products or building successful brands without using some version of it [segmentation] to inform your decision making,” says Baskin.
At MOP, we see this as what we call “advanced commonsense”. You wouldn’t walk into a business networking event, for example, and stride up to everyone in the room with arm outstretched waving a business card and deliver an identical “pitch” for why you’re a useful person to know, or even to “do business” with. Rather, you’d take some time to judge the people you meet, adjusting your personal presentation and “elevator” pitch accordingly. You wouldn’t just bombard them with information, you’d make polite enquiries to establish their role, and mindset, and whether it’s a match to your own. You would modulate your physical behaviour and manner to match theirs, and you’d engage in a conversation to find mutual common ground. Only then would you cautiously advance why you might be helpful.
Unless your marketplace is “everyone”, advertising and marketing really should be no different.