Divide and Rule – Consumer Segmentation

One function of idiotconsumercom is to act as an accessible primer for students of marketing and consumer behaviour and analytics. This post is in that vein and should be of general interest to any ‘aware’ consumer, journalists, a marketer who needs some revision or a more subversive individual who wants to understand the ‘enemy’ (that’s the democracy of the web). What you do with these posts is up to you.

Please see: The function of this blog

Data can be used to target us personally, to individualise marketing but customer segmentation (explained below) is still a building block of modern marketing. It has a language all of its own: ‘borderline welfare’, ‘alpha territory’, ‘Sheila’. These are real-life labels for groups of consumers perceived to be similar to each other. Modern marketing is still obsessed with putting you all into groups, via increasingly sophisticated data processing of all the various transactional and browsing and cellular data you leave behind you as you live, breathe and consume. This obsession continues despite the abundance of detailed data relating to you as an individual. Why? Because product variations, stores and websites and advertising campaigns and other marketing communications aren’t aimed at individuals: they are aimed at types of people – ‘customer segments’ (people who share some common motivations, characteristics or attributes).

Segmentation relies on data. It amounts to clustering consumers who exhibit similar patterns of behaviour, attitudes or psychographics (what and how you think – collected via surveys and social media analytics). Most marketers prefer this to be done according to two dimensions. Why two? Because two dimensions make nice pictures (three dimensions make complex pictures and can cause problems when you have to explain the analysis to accountants and CEOs – who are often accountants). An illustrative example is given below in Figure 1.

Figure 1: An fictional example of segmentation in the grocery sector.

segmentation

In this case people’s spending patterns dictate where they end up on the diagram and which segment tag they are most closely associated with. City Slickers tend to be professional types with busy lives who eat overpriced ready meals containing pretentious ingredients sourced from places in the developing world (when they actually eat at home that is). Busy Bees are mixed bunch of pre-kid couples and young families who don’t have as much money as the City Slickers and their time ledger varies due to work and/or family. Grey Foodies have cooking skills, the luxury of time and money thanks to their pre-credit-crunch pensions, unlike the Austere Trads, who are forced to watch the pennies but also have the skills and inclination to cook proper, old-style food from scratch. Thrifty Nifties tend to be younger people with hectic lives and limited cash. They eat lots of microwave pizza and have irritable bowels.

Markets are complex. Segmentation is a method of market modelling, summarising what is important to consumers and how consumers vary. Marketers are obsessed with segmentation and huge sums of money are spent on it each year. Some market research and data management companies like DELETED FOR LEGAL REASONS make lots of cash from doing it for other companies because they have access to loads of data on us. Some companies with lots of their own data (e.g. DELETED FOR LEGAL REASONS) do their own segmentation. The segments often dictate how you are targeted. Targeting (yes a rather predatory term that suggests that you are in the cross-hairs of a sniper’s scope) means that products and services (now often referred to as ‘offerings’ because that sounds nicer – less industrial and kinder) are tailored to you and your needs and wants. Often the segment is targeted with a specific offering, with a new version of a product or a new brand, because targeting eight million people individually is usually nigh on impossible. Segmentation allows them to target advertising and marketing communications, product variations etc. In most markets we can’t have a bespoke design tailored to us, so what we get is a version tailored to the group or cluster with whom we share certain attributes or needs. For example, the Ford Focus is designed for the middle-income family person, an everyman car. See, it’s easy really. Put you all into groups and then make stuff that suits the group you’re in.

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