Creating specific customer groups, or segments, helps companies create relevant and personalized marketing and communications. To do so, many implement large-scale market segmentation studies which divide a broad consumer base or business market into sub-groups based on some type of shared characteristics. These studies then help companies determine which of these segments are viable target markets. While often a long and often arduous process, the resulting segments and democratization of them can make a marked business impact. All of which makes it disheartening to witness companies making all too common, and easily avoidable mistakes. To help you avoid the same snares, below are five common segmentation mistakes and how to avoid them.
Relying on the obvious
Too many companies rely on demographics, stated needs and purchase behavior to create their consumer groups. While this approach can be useful for marketing purposes, it is far less effective for informing messaging and targeting for communications purposes. Studies that rely only on these data points tend to be more tactical by nature and don’t give you the tools you need to build a customer strategy around it. Individuals don’t make decisions solely based on their age or past behavior, so why hang your hat on data that doesn’t drive decisions?
Values, firmly-held beliefs, and how individuals see themselves play an integral role in how consumers view brands and frame their choices. Using an approach that emphasizes attitudes and values allows you to do more than just cluster consumers that LOOK like similar consumers – it allows you to cluster people who THINK alike. Take the time and be thorough in your exploration of your consumers’ mindsets before beginning development of your segmentation survey. Use qualitative research or in-depth quantitative research to unearth fears, aspirations and motivations that can paint a clearer picture of who your consumers really are. By deepening your understanding of the different mindsets of target customers before your segmentation study, you can animate your customers in a way that lets you develop strategies that drive your business. While more of an upfront investment, a thorough exploration will ultimately lead to a more distinct and dimensionalized segmentation, and more marketing successes going forward.
Relying on old when everything is new
In the last 3-5 years many industries have gone through dramatic changes. From television to retail to health care, what was a template for success years ago could very well be a recipe for failure today. Categories are changing so quickly. And, consumer expectations, preferences and wants follow suit. Yet many companies rely on a segmentation from years ago to inform their strategy. In this fast-changing environment companies cannot stand pat with an old playbook.
Overhaul is a scary word. While some segmentations need to be scrapped, that’s not always necessary. However, if your company is in one these changing categories, you do need to check for and make updates. An annual audit to make sure your segments still fit is both prudent and not such a heavy lift. By looking under the hood once a year, you can gauge if the segments are still valid, what can be appended, and what the pros and cons of starting from scratch are.
Ignoring the audiences that could be
Companies often go into their segmentations with pre-conceived notions of who their audiences are. They rely on their own customer databases or only survey people who they think are using their category or brand, not realizing there is another segment out there that is still an important group. We call these ghost segments. And they are important to identify and account for because they can represent a tremendous opportunity if they are marketed to, or otherwise introduced into the brand’s ecosystem.
Ensure that your segmentation is far-reaching and future-looking by challenging assumptions and incorporating your company’s 2-3-year plan and any market trends into your segmentation blueprint. Look at your non-customers. Is there an easy opportunity to convert them with the right messaging and specific offering? If so, shouldn’t they be represented as well? Is there a new product on the horizon? If it has the potential to attract a different consumer group, this should also be examined.
Remember, there was a time when diet beverages were geared towards women. Things change and consumers can quickly break out of the boxes we put them into. Take the time to think of all the possibilities and what may lie ahead.
Misusing Big Data
How to effectively use Big Data is a question that keep marketers and researchers up at night. When it comes to segmentation, we often see companies starting off a segmentation with whatever big customer data sets they have on hand. This is a risky approach to incorporating Big Data because it ignores those ghost segments and, as we also covered earlier, often leads to an over-reliance on behavioral data that ignores attitudes and values. There is certainly a place for Big Data in segmentations, but where and how you utilize it makes the difference between it being additive or counterproductive.
Instead of starting with Big Data, create your segments using primary research and other relevant inputs and use Big Data to round out your segments and target them efficiently. Plugging your segments into a data management platforms (DMP’s) will provide insight into what other products, services, interests, and media your segments gravitates toward. Using Big Data at the tail end adds dimension to your segments. Moreover, once defined, these platforms can help you target your specific audiences effectively with media buys.
Segmentation complete. Now we’re done.
It’s common (and maddening) for companies to complete exhaustive segmentations without a go-forward plan for implementation. A segmentation and the audiences that fall out of it need to live and breathe in every corner of a company. But all too often segmentations devolve into indigestible data points that reside in the hands of a select few.
Before the ink is dry on your segmentation, understand how the insights could be relevant for each department and how to make them come to life for different teams. On the back end, plan workshops that educate employees and that underscore the importance of this initiative to the organization and their specific department. Create 360-degree personas and promote them in various ways. Schedule check-ins to show team members how they are being utilized and their benefit. Do anything and everything to make the segments sticky and relatable to ensure they are used and embraced across the organization.
Much like effective marketing, segmentation studies should be tailored and unique. Off-the-shelf segmentations don’t take into account the nuances of your specific business and when it comes to messaging and engagement efforts, distinctions and shades of grey are important. Avoiding the pitfalls above require care, customization, and collaboration with experts. While at the outset it may be intriguing to skip steps and take the easy route, remember that relevant and meaningful consumer engagements hang in the balance.