Segmentation is one of those customer insight and marketing terms which divide opinion. Leaders have their favourite approaches. Boards can be ardent fans of the need for a segmentation, or complete unbelievers in what is perceived as marketing “spin“. One of the reasons for this appears to be, the mixed fortunes of implementing segmentations. Some companies extol real benefits, and focus that have come as a result, whilst others bemoan wasted spend with consultants and agencies.
My own experience is that appropriate segmentations can add real value and enable a clearer understanding to focus on appropriate target audiences. But a few misconceptions need to be addressed.
The chief misconception I would cite is, the belief that any company or market only needs one segmentation. One of the guiding factors for selecting the most appropriate segmentation approach is the purpose for which that model will be used. A segmentation to guide market participation strategy, is a very different challenge, to one for new proposition development, or to target different customer treatments. For this reason, it can be beneficial for a company to have more than one way of segmenting it’s customers (even if one is considered primary when seeking to embed in culture of organisation). One analogy for this is the benefit of having a Rubik’s cube set of segmentations for decision making.
Once the challenge of identifying the purpose of a segmentation is overcome, using incisive questioning, then a CI leader needs to select the most appropriate tool for the job. Here there does appear to be a degree of fashion influencing choices over the years. Many years ago, simple demographic segmentations were popular and can still perform a useful function. At the height of influence from market research teams, attitudinal segmentations were favoured and are also more viable than many believe. Since the success of Dunn Humby and others, behavioural segmentations took centre stage. Directors, particularly finance directors can favour value-based segmentation and operations directors can favour simpler life stage/“needs based” segmentations.
As all these segmentations have had their day, and still have their advocates, it is not surprising to find more organisations these days with hybrid segmentations. Popular combinations for hybrids appear to be value + life stage or behavioural/trigger + value based segmentations. Having once achieved developing a rich attitudinal segmentation, from substantial quant research and then producing predictive models to overlay this onto a data warehouse for targeting – I regret how much attitudinal segmentations are dismissed nowadays.
However, my guidance to customer insight leaders is, to be aware of as many potential approaches as possible, and then to focus your efforts on being clear as to the purpose for any one segmentation. At the end of the day, it is not a ‘universal truth’ about customers, it is just a model to enable appropriate action.