SEGMENTATION

Your Guide to a successful Market Segmentation Research?

Successful segmentation should be meaningful, actionable, targetable and all the other ‘-ables’ we can think of to evaluate the solution.

In most cases, there are objective or subjective ways to measure each of these criteria, so logically, we can prove which of many solutions are the ‘best’. But this approach rarely satisfies what is a much bigger challenge – will the segmentation actually work for the client?

It is true that marketers will have confidence in a segmentation solution if, and only if, they LOVE the solution. For something to ‘work’, we have to have a consistent view of what working means and in a business context, the biggest challenge no one way is necessarily right for all, and simply finding the points where the needs are similar across ALL stakeholders, generally means reversion to something mediocre or rather boring.

So what is the right segmentation solution?

Is there any solution which is ‘perfect’, or even ‘great’, considering that we want something we can use across the business in a consistent and powerful way?

The best Market Segmentation approach requires a new way of thinking and three fundamental changes.

This requires us to view segmentation solutions like strategic growth horizons – the first segmentation we have won’t answer everything, but it WILL be most congruent with our existing knowledge, beliefs and ways of working, whilst the second and third solutions will represent more disruptive ideas, sizing and scoping market opportunities for the future.

They will be scarier, requiring the business to take a leap and potentially change itself to adapt to and use the new framework. To some extent, therefore, the desire to embrace a consumer or customer segmentation model brings with it the parallel challenge of assessing a corporate or brand’s aptitude for risk.

The second change required is that we don’t rely on market researchers to develop the segmentation. This is a pretty tough thing to write as the owner of a market research business, but the reality is that researchers are generally not business people or even marketers. Instead, they are sometimes statisticians, or more commonly, smart people who have adapted sophisticated multivariate statistics to everyday application through cleverly designed, user friendly data analysis packages. The result is that most researchers will have a ‘favoured’ approach (one they know how to use) .

So if the segmentation is NOT going to be driven by a market researcher, who should businesses turn to?

Our view is that there are three important stakeholders in a successful segmentation:
  • The client (driven by a key sponsor who is responsible for understanding and challenging the various applications of the segmentation to the business)
  • The analyst – creative with numbers
  • The salesperson who can pressure test it

These three parties must work collaboratively to develop the three segmentation horizons with each having an equitable contribution in terms of the outcome.

The third and final change in thinking required is the letting go of current rules, products, brands and consumer behaviour. Most behavioural segmentation processes ultimately aim to predict and explain current behaviour, then identify targetable demographics or attitudinal proxies that help interpret that behaviour.

Whilst this process is robust in its thinking, it is only robust in the context of the market as it stands today and not what the market might look like should a new entrant or competitive offer emerge. As such, these approaches will naturally lack longevity and the ability to help identify early whitespace opportunities.

An opportunity-based approach, on the other hand, combines current behaviour with broader understanding of needs and motivations to distil a series of strategic growth platforms against which brands and innovation needs can be overlaid. This does not mean that clients need NPD ideas to put into the segmentation process (although this is not discouraged either!), but the solution needs to help predict the winning combination of marketing mix variables of the future, based on a comprehensive understanding of the segment needs, motivations and contextual behaviour.

So What Does Successful Segmentation Look Like?

It is one you can make work within your business with your people. It is one you can activate internally and externally. One that allows you to target media, align products and services and develop clear messaging.

One that everyone in the business intuitively gets from the CEO down the line.