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Here are 3 things to know about implementing market segmentation.
Segmentation professionals know that segments produced by marketing research studies are sometimes at risk of being only elegant statistical artifacts with no practical application. Analytical methods beyond the standard classification tools used in segmentation research, such as out-of-sample cross-replication and objective stopping rules, are essential to ensure that segments are real and reliable. The bottom-line measure of market segmentation is to what extent it yields segments that are trusted by business leaders who must invest their organization’s financial and reputational capital in the outcome.
It’s the researcher’s job to assure that these outcomes be articulated in terms that are meaningful to the ultimate users of the research, not in terms used to impress other researchers.
- True or False: Segmentation studies pay for themselves through efficiencies gained by precise target marketing.
- Answer: it depends.
Market segmentation research is not an inexpensive undertaking. The ROI from any segmentation study depends on getting buy-in from the organization’s leadership to enable the organization to actually implement the findings. These people include senior managers, executives, leaders of various departments or functions, and other stakeholders. Consider the situation where an organization intends to use the segments to inform new product development, target marketing communications strategies, and develop relevant communications. To achieve successful segmentation ROI, that organization must educate internal and customers’ teams about the target segments; which needs motivate them, what the benefits they seek, and how to communicate persuasively with them. It must also engage its customers, while guiding the organization in the development of their merchandising and marketing of new products for those customers.
- Make the effort to understand and immerse yourself in the factors that make the segments differ from each other.
- Needs and motivations that define each segment, including functional, experiential, aspirational, price sensitivity, variety, and others
- Existing attitudes, perceptions, beliefs, brand affinities, intentions, and preferences for products in your category
- Enumeration of purchase behavior and consumption experiences (where, when, with whom, and why)
- Shopping behavior (who, where, when)
- Key demographics and lifestyles/psychographics of the segments
- Barriers to trying new products and drivers of switching brands
- Media consumption and social media usage and preferences among high-value target segment users