What is behavioral segmentation and how can brands profit from it?

Way back in the '90s, demography was the most common way to define a target audience. We knew the age range, gender, household income, education level and geographic dispersion of the target consumers. It was good information that provided relatively little utility or competitive advantage.

The tools used by today's consumers to learn about and purchase products are far more sophisticated than they were way back when, and marketers need more sophisticated data to know what is most likely to affect consumer behavior. Incorporating psychographics, especially attitudes and aspirations, into the equation provides a complete understanding of consumer segments. This depth and breadth of data is a vital advantage of a behavioral segmentation study.

Why should you use a behavioral segmentation? A practical example.

Perhaps the best way to demonstrate the actual value of a behavioral segmentation study is to look at what's happening with Subway right now.

After seven years of declining sales, Subway is attempting to reintroduce itself to customers in hopes that they will try their subs again. The rebranding relies heavily on the acceptance of the chain's most extensive menu change ever. They also plan on giving away up to one million free subs between 10:00 a.m. and noon on July 13th, which does not sound like a very targeted tactic.

Subway grew by focusing on a core segment – a value-oriented, health-conscious consumer who liked being able to customize their sandwich. Subway and its Eat Fresh positioning were the anti-McDonald's in a day where fast-casual restaurants like Chipotle did not exist. However, the competition has since leaped forward while Subway has stood still, making Subway, well, somewhat irrelevant. America's tastes have changed, but Subway has not kept up.

What is Subway doing to restore growth and profitability? "Focusing on our core menu items," says CEO John Chidsey. "What really differentiates Subway is our ubiquitous nature," he added.

Existing or being everywhere at the same time is the definition of ubiquitous. Being all things to all people is the opposite of what an excellent behavioral segmentation should do, particularly in a category where ubiquity can be considered table stakes rather than a differentiator.

A successful segmentation study should yield more actionable insights that help form a relevant, meaningful, and differentiating marketing strategy – the next iteration of Eat Fresh will revolutionize the Subway brand.

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How a behavioral segmentation can drive growth and profits

A behavioral segmentation study identifies the most salient rational and emotional considerations impacting the decision-making and purchase behavior of various customer clusters or segments. A behavioral segmentation will typically yield between 4 to 6 clusters, and the unique insights derived from customers' actions and attitudes can help you better engage with them throughout their purchase journey. In action, the insights will create value and loyalty within target segments.

A segmentation study is valuable in highly competitive categories or where perceived differences are not significant. It can tell you which strategic levers you can pull to maximum effect, as well as what you can leverage with your target segments and what you might need to change to be more attractive to them.

Effective marketing involves sacrifice, and knowing which customer segments to exclude from your focus is as important as knowing which segments to target. Focusing solely on the most attractive segments allows you to be more efficient and impactful with your resources, which improves the overall ROI of your marketing investments. 

A well-executed segmentation study will serve as your road map for the future. You will know more than anyone else about the customers that can grow your business. Armed with insights, you can develop marketing strategies and tactics that will resonate with your target segments and revolutionize your brand.

They say that knowledge is power, and when it comes to behavioral segmentation, I believe it.  

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