Segmentation—the process of identifying specific customer groups—is imperative for personalized marketing and communications.
Often, segmentation projects entail large-scale market studies that divide a broad consumer group or business market into sub-groups based on some type of shared characteristics. Those studies then help companies determine which consumers are most likely to purchase their products.
Though frequently a long and arduous process, segmentation can make a marked business impact. Which is why it's disheartening to witness companies make repeated and easily avoidable mistakes.
Here are five such common segmentation mistakes, along with tips on how to avoid them.
Mistake 1: Relying on the Obvious
Too many companies get stuck in mainly looking at demographics, stated needs, and purchase behavior to create their consumer groups. Although that approach can be useful for marketing, it is far less effective for informing messaging and for communications targeting. Studies that rely only on such data points tend to be more tactical and don't give you the tools you need to build a customer strategy around it.
People don't make decisions solely based on their age or past behavior, so why hang your hat on data that doesn't drive decisions?
How to avoid it
Values, firmly held beliefs, and the way individuals see themselves play an integral role in the way 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 lets you cluster people who THINK alike.
Be thorough in exploring your consumers' mindsets before developing 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. For example, as it relates to cars, it might be critical to segment those those who value safety over performance; and, regarding food and beverage, there is a major difference between consumers who strive to lead a healthy lifestyle and those who most value convenience.
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 to drive your business.
Although more of investment up front, a thorough exploration will ultimately lead to a more distinct and dimensional segmentation, and more marketing successes.
Mistake 2: Referencing the Old, When Everything Is New
In the last 3-5 years, many industries have gone through dramatic changes—from television to retail to healthcare. What was a template for success years ago could very well be a recipe for failure today. Categories are changing quickly; consumer expectations, preferences, and wants follow suit. Yet many companies turn to their segmentation from years ago to inform their strategy.
The market can shift within months, and companies will flounder if they stand pat with an old playbook.
How to avoid it
Overhaul is a scary word. Though some segmentations need to be scrapped, not all do. However, if your company is in one those 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 whether the segments are still valid, what can be appended, and what are the pros and cons of starting from scratch.
Mistake 3: Ignoring the Audiences That Could Be
It's commonplace for companies to go into their segmentations with preconceived notions of who their audiences are. Companies explore only their own customer databases or survey people who they think are using their category or brand, ignoring other segments out there that could be important. We call those "ghost segments," and you need to identify and account for them because they could be some of your brand's best prospective customers.
How to avoid it
Ensure that your segmentation is far reaching and future looking by challenging assumptions and incorporating your company's two- or three-year plan and market trends into your segmentation blueprint.
Look at your noncustomers. Is there an easy opportunity to convert them with the right messaging and specific offering? If so, shouldn't they also be represented? Is there a new product on the horizon? If it has the potential to attract a different consumer group, examine this as well.
Remember, there was a time when diet beverages were geared toward women. Things change, and consumers can quickly break out of the boxes we squeeze them into.
Mistake 4: Misusing Big Data
How can we effectively use Big Data? It's a question that keeps marketers and researchers up at night.
Regarding segmentation, companies often start off with whatever customer Big Data sets they have handy. That is a risky approach because it ignores ghost segments and 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 its being additive or counterproductive.
How to avoid it
Instead of starting with Big Data, create your segments using primary research and other relevant inputs. Use Big Data to round out your segments and target them efficiently. Plugging your segments into a data management platforms will give you insight into the other products, services, interests, and media your segments gravitate toward. Try leveraging Big Data at the tail end to add dimension to your segments. Think also how these platforms can help you target your specific audiences with media buys.
Mistake 5: Segmentation Complete. Now We're Done.
It's common (and maddening) that companies 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.
How to avoid it
Before the ink is dry on your segmentation, think about how the insights relate to each department, and brainstorm ways to make them come to life for different teams. Plan workshops to educate employees on the importance of the initiative to the organization—and, specifically, to their specific department.
Create 360-degree personas and promote them in a variety of ways. Schedule check-ins to show team members how they are being utilized and what their benefits are. Do anything and everything to make the segments sticky and relatable to ensure they're used and embraced across the organization.
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Much like effective marketing, segmentation studies should be tailored and unique. Off-the-shelf segmentations fail to consider the nuances of your specific business; however, in messaging and engagement efforts, distinctions and shades of gray are important.
Avoiding these five pitfalls requires care, customization, and collaboration with experts. At the outset it may be intriguing to skip steps and to take the easy route, but it helps to remember that relevant and meaningful consumer engagements hang in the balance.