In the dynamic realm of market segmentation strategy, adopting a people-centric perspective is essential. The Sound’s style transcends the simplicity of static categories, embracing the complexity of human behavior and the importance of situational context. Our approach is both insightful and practical, aimed at not just understanding your audience but also pinpointing where they can be found.
The Sound’s approach to segmentation strategy is people-centric. Life is messy. Context matters. You can’t put people in a box.
We also know that actionability is critical for a market segmentation to succeed. You need to understand people. You also need to be able to find them.
What is a Market Segmentation Strategy and why is it Important?
Market segmentation strategy is the art of dividing your potential customer base into distinct groups with shared needs, interests, and priorities. This strategic division enables businesses to tailor their marketing efforts more effectively, making sure resources are wisely allocated to engage different segments. By honing in on specific groups, companies can significantly enhance product or service appeal, fostering brand growth.
5 Key Considerations for Effective Segmentation
The Business Objectives
A segmentation strategy is essential for aligning your business objectives with your understanding of the market. Key questions to consider include: What are your goals? How will you use your segmentation insights? These considerations are the backbone of your strategy, determining its direction and application.
Depending on your objectives, the optimal segmentation approach varies. For example, if you’re looking to optimize your strategic understanding or growth opportunities, deeply understanding the motivations driving people’s choices is critical. If, on the other hand, you want to optimize media placement, designing a segmentation to the way you can buy media may be more important (and actionable) than deeply understanding the motivations in the moment.
What’s your business objective? What’s your primary objective for your segmentation? What will you do with it? How will you action it?
The Purchase Cycle
Understanding the purchase cycle of your category is crucial as the cycle’s speed influences which factors may be indicative of people’s behavior.
In categories with slower purchase cycles, such as homes or cars, and even high-end luxury goods, people often have more predictable behavior patterns. In these instances, looking at macro-people factors, such as attitudes and values are likely more telling.
In faster-moving categories, everything from FMCG to entertainment, a person’s behavior is less habitual or predictable. Humans seek variety. We don’t make the same choices in every situation we experience. In these instances, the situational context and motivations in the moment are more telling than macro factors.
The Quality of Inputs
The effectiveness of a segmentation strategy is directly linked to the quality of its inputs. This involves leveraging experience and expertise to explore new variables and ask pertinent questions, making sure that relevant factors are considered in the segmentation process.
General Segmentation Factors to Consider
- Demographics: Such as age, gender identity, income, education, occupation, and family size.
- Geography: Things like region, country, city size, climate, and population density.
- Psychographics: Personality traits, lifestyle, opinions, and interests
- Social and Cultural Factors: Cultural background, social norms, and values
- Category Attitudes and Beliefs: About the broader category and your specific brand
- Category Behaviors and Engagement: Usage frequency, brand loyalty, purchase occasions.
- Journey Stage: Where they are in the buying process – awareness, consideration, decision-making, or loyalty.
- Aspirations and Challenges: Within your category and immediate adjacencies
- Motivations in the Moment: What they’re emotionally seeking in that moment
- Mood State: Including positive and negative affect as well as low and high arousal
- Price and Value Sensitivity: Some people are highly price-sensitive, while others are willing to pay a premium for quality
- Situational Context: Such as the time of day, day of week, location, and who with
And beyond including the right factors, how you ask the questions is critical. When crafting the questions to ask, we keep three principles in mind.
- Start with people’s lives: In the flow of questioning, we start with people and their lives, rather than starting with a product, allowing us to understand where your brand fits in.
- Ask the obvious and the less obvious: We leverage hypotheses sessions and psychological theories to cover the full range of possibilities, intuitive and those less so. This helps alleviate articulation bias and reduces surface responses.
- Capture discrete data: We develop flexible datasets by capturing info at the most discrete level possible. This allows us to capture macro and micro views as well as see the unexpected, avoiding potential researcher bias.
The Value and Viability of the Segments
Before diving into data collection, think critically about the prioritization metrics that will signal potential growth. How will you determine which segments are the most valuable, practical, and winnable for your brand? Engagement with the brand? Future behavior? Concept interest? Competitive presence? This foresight enables effective evaluation and prioritization of segments to pursue.
The Analytic Approach
We know that people are complex and it’s way too simple to put them in a box based on one dimension. Today’s segmentation approaches should transcend simple demographics or single constructs.
A sophisticated, multi-dimensional approach, underpinned by a robust dataset and an open-minded analytical process, guides us to uncover less obvious, yet profoundly impactful insights. Multivariate analyses allow us to look for pattens in the data and uncover latent themes that would be harder to measure and difficult for people to articulate.
The most actionable market segmentations will be a multi-dimensional approach, integrating various aspects of people’s lives, allowing for the discovery of segments that align best with your prioritization metrics.
Conclusion
Crafting an effective market segmentation strategy demands a delicate balance between deep human insights and practical actionability. The Sound’s approach, rooted in a nuanced understanding of human behavior, guides businesses through the complexities of market segmentation. Ready to explore your market and uncover actionable insights? Reach out for a consultation to collaboratively craft a segmentation strategy that not only comprehends the depth of consumer experiences but also effectively connects with them.
