By Emily Bielak
Sometimes, leadership doesn’t quite know the problem they’re trying to solve…only that there is one. In other words, symptoms can be identified, but underlying causes remain a mystery.
It’s not uncommon for our team to be approached with issues along the lines of:
“We’re losing share to a competitor, but we don’t know why.”
“Repeat business is not what it used to be, but we don’t understand what’s driving that.”
“Customer behaviors are changing, but not uniformly across all demographics. How do we know what is causing whom to change their minds and preferences?
The universal answer to such conundrums could be simplified this way: “Well, it’s complicated.” However, our belief is that, “There’s a good chance customer segmentation can provide the clear answers to complicated questions.”
To us, the answer often lies in looking at a brand’s customer base in a more granular manner than what has been done historically. Importantly, this entails not lumping all customers together into one monolithic “customer base” — rather, understanding unique behaviors that are tied to distinct and disparate segments or cohorts.
The critical intelligence gained when doing so empowers brands to unlock the missing piece to the puzzle before them, regardless of the questions they have: What’s driving changes in consumer behavior, and what do we need to do in response to maximize our position in the market?
Advanced Segmentation Strategies for Advancing Business Goals
It should be stated upfront that segmentation is much more than merely “categorizing” customers along traditional baseline filters: demographics, geographics, psychographics, and prior purchase history. While those data points are useful as far as they go, they simply don’t go deep enough.
What we truly want to uncover are the whys behind the whats — the motivators and behaviors that lead up to, and persist long after, a purchase incident. This necessitates observing and understanding behavior far beyond purchase alone (clicks, views, return visits, research, etc.). We want to closely study customers’ attitudes, motivations to buy (and demotivators), factors that influence preference, various personality traits (introverted or extroverted, creative or analytical, etc.), and much more.
Studying the market holistically empowers the research team to test several different segmentation variables in order to analyze the data from a range of discrete perspectives, such as:
- Customer Need – What’s driving the purchase motivation?
- Emotions – Who might be shopping out of frustration, and who is pursuing pleasure or relief, for example?
- Spend Sensitivity – How can we separate and market more effectively to the budget-conscious vs. the willing spenders?
- Attitudes – What is the purchaser’s frame of mind at the point of purchase? Price-conscious? Luxury-aspirational?
- Behaviors – How do customers engage with our product, and what is their experience when they do? What actions do they take upon purchasing and immediately following?
- Geography – Does our product appeal have regionality to it that hadn’t previously been considered?
- Demographics – Can we identify variables such as generational differences that impact adoption?
- Occasionality – What is the purchase occasion? Is it a party, is a family prepping for vacation, or is the purchase part of a routine, weekly family grocery run?
Depending on who within an organization wants visibility into customer preferences and behaviors, the research team can analyze the data along various segmentation variables to provide specifically relevant insights. Perhaps the marketing team wants to know how to better develop messaging in marketing and advertising — this team may want insights about attitudes and emotions across customer segments. Separately, the product development team might want to deeply analyze behaviors so they can optimize future product iterations to align with customer usage preferences. By knowing the intended purpose for the segmentation, the research team can hone in on variables that produce the best, most strategic segmentation output.
Of course, a customer will not always be able to self-identify as this customer persona or that; and they might not be able to freely articulate what motivates their behaviors and how emotions experienced influence their future usage and decisions to repurchase or refer a friend. Those insights must be mined, refined, and converted into actionable intelligence.
Reminder: We typically recommend taking a three-phased, “Qual >> Quant >> Qual” approach — segmentation analyses included. The initial qualitative exercise would assemble a small but representative sample of internal stakeholders who are closest to the market and who best understand the customers for some in-person or phone interviews. Then, by applying the intelligence gleaned in the qual study, we are able to develop a quantitative survey instrument that uses data-informed logic and a closer understanding of the markets we are studying. Finally: a follow-up qualitative study. Now that we understand the audience segments and the segment characteristics, beliefs and actions, etc., we can now apply “personas” to the distinct cohorts and segments of a given market. It is often in this phase during which the deepest, richest, most actionable insights are discovered, and from which our customer personas really come to life.
Applying Segmentation Analysis Data in the Real World
We like to say at Martec, “The wisdom lies in markets.” When executed strategically and with a blend of quant and qual methodologies, the outcomes of segmentation analysis can be nothing short of powerful. Even when the brand doesn’t know the specific problem they are trying to solve at first — only that there is one — audience segmentation is so often key to gaining an understanding of discrete customer types and what motivates each to take the actions that we want them to…as well as where the brand may be coming up short.
Teams across the company can use the insights gained to implement specific and ultimately measurable actions throughout the operations of the organization. For example:
- Packaging: Perhaps it’s discovered that the packaging of our product is no longer resonating with a certain audience segment; or is even working against us in some way. The brand development team now has specific feedback on which to begin iterating updates.
- Advertising and Marketing: Perhaps we need to dramatically shift how we are communicating with our various constituents — aligned not with our own preferences and convenience in mind, but with those of each distinct customer segment…young and old, tech-savvy or not, etc.
- Product Development: Perhaps the product itself is in need of iteration or feature refinement to meet new market demand or preferences of various audience segments.
- Go-to-Market Strategy: Maybe the data suggests that something significant needs to change in terms of how we advertise…and where…and when…and to whom. Gone are the days of one-size-fits all market-share strategies and audience-acquisition plans!
- Profitability and Budgeting: Maybe the intelligence reveals profitability opportunities along various customer segments that weren’t clearly understood when analyzing the market as one monolithic “customer base.”
Next Steps: So What? and Now What?
It should be stated and emphasized that, in most cases, a customer segmentation strategy is often the first step in a broader market research initiative. In fact, we often consider this methodology to be a prerequisite for many other research projects that will follow-on, such as customer journey mapping, message testing, user experience testing, and almost any major initiative that needs to be informed by understanding the holistic totality of the segments that make up a brand’s viable customer base.
By mapping each unique segment’s customer journey, you can:
- Identify customers not optimally satisfied and re-engineer customer experiences to move them into the happy column;
- Pinpoint specific touchpoints along the journey that move the customer satisfaction needle up or down, and respond with action accordingly;
- Filter out certain segments that might be skewing your understanding of the customer by incorrectly assuming that a vocal segment of a population represents the broader whole, when, in actuality, it is only a small sample.
Each customer segment has its own journey…its own milestones…its own emotional inputs and responses. And therein lies the map to hidden treasures that are often buried in questions we neglect to ask or answer about our customers.
