How to design a great segmentation study

According to Harvard Business School professor Clayton Christensen, more than 30,000 new products are launched each year. 95% of them ultimately fail.

It’s not that all of the 28,500 products that fail are bad products. Failure is more likely attributed to the fact that these products may have been trying to fix non-existent problems rather than the real problems experienced by the target audience. A product without a real consumer need is doomed from the start.

Or maybe the companies picked the wrong target audience – or worse yet, they believed that everyone is a target customer. A product that tries to be all things to all people is also doomed from the start.

How can you be sure you’ve identified the right target audience and that you know what the problems really are? My answer will always be the same: Invest in a great segmentation study.

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What is a good segmentation study?

The first two steps in our Four-Part Process are to know the prime prospect and to know the prime prospect’s problem. These two steps can help you avoid being part of the 95% that fail.

At the most basic level, a segmentation study divides your target market into more discreet groups. It is the process of dividing a large population into subgroups based on a clearly defined set of shared behaviors.

A great segmentation helps you understand who the prime prospects are (demographics), what they do (behaviors), and why they do it (psychographics).

Some of this is fundamental, but it is also surprisingly overlooked by many marketers. For example, if your product or service is only sold through online channels, then you want to be sure you are targeting frequent online shoppers. A company that makes sustainable products would want to target consumers that are the most actively involved in recycling.

A great segmentation study provides insights into customer motives, preferences, and need states that your product or service can target. It allows you to align brand attributes and messaging with the specific needs and wants of the target segment.

The different types of segmentation studies.

We’re often asked about the differences between behavioral segmentation, customer segmentation, and psychographic segmentation. The differences might really come down to nuances.

A customer segmentation looks at the basic differences between groups, such as age, gender, family size, home ownership, and household income. Based on my experience, a customer segmentation is better than nothing, but it alone often does not provide enough utility to properly inform marketing strategy and tactics.

When you include psychographics in your segmentation, you’re incorporating attitudes, aspirations, values, and emotions. These help you identify segments based on lifestyle, personality traits, opinions, beliefs, and interests.

The reality is that a well-designed segmentation study will include psychographics, demographics, and brand usage behaviors. The demographic data will help you visualize the different segments (for example, are they young/old, male/female?), which can be very helpful as you roll out the results of the segmentation study across the organization. The psychographic information will help you understand the emotions associated with the behaviors – is the target segment motivated by fear of failure, the need to feel more confident, or some other emotion? Being able to tap into the emotions that drive behavior allows you to create more relevant and meaningful marketing and communication strategies.

Survey design is critical.

One thing that I teach my team is the importance of asking the right person the right questions in the right way. In other words, the quality of the survey instrument used in a segmentation study will greatly impact the quality of the results. A well-designed survey should always include the voice of the customer.

There are many inputs that can help you optimize your survey, and they include secondary and syndicated research as well as qualitative research. These inputs will help you understand the types of psychographics and behaviors to include in the quantitative survey.

The value of a good segmentation study.

When it comes to the 4 Ps of marketing, so many of the critical decisions that marketers make in each area hinge on a great understanding of the target audience. A great segmentation study can open your eyes to new, untapped opportunities, and perhaps, more importantly, it can save you from making costly mistakes.

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