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Is Your Market Segmentation Future-Proof? Answer These 3 Questions to Find Out

Posted On  February 24, 2021
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In 2015, I wrote a piece titled Segmentation: Retire, Refresh, or Retain to address the age-old question “Do I need a new segmentation?” A lot has changed since 2015 (duh!), but this question has only become more pressing in our new consumer landscape. Many of the new habits that have emerged during this pandemic are likely to become permanent, and new consumer attitudes will impact how they respond to new products.

Will your segmentation give you the insights you need to meet your consumers’ evolving needs? Here are three ways to gauge if your segmentation is ready for the new era.

1. Can I use my current market segmentation to improve my ad targeting?

For years, marketers embraced their segmentations as strategic planning tools and organizational alignment mechanisms. However, they simultaneously shunned them as “not actionable,” since rudimentary ad targeting tools made it difficult to easily and accurately deliver personalized messages to target segments. But as people’s media consumption has become increasingly digital over the last few years, more and more of the advertising they are exposed to is addressable via big data-driven targeting tools that vastly improve the ability to deliver ads to target segments. Clients leveraging this capability have experienced massive increases in their advertising efficiency.

Does wanting to deliver acquisition-oriented marketing messages to your target segment mean that you need to do a new segmentation? No.  But, you do need to do a piece of research among your target segments to capture the relevant advertising hooks that will work within your organization’s marketing system and platforms.

If you’ve not profiled your segments recently, this survey also provides an opportunity to update your understanding of who they are as people, what they value in your category, and how they are shopping for your product or service, because many of those things may have permanently changed due to the pandemic. If this survey uncovers surprisingly large shifts on strategically important dimensions, you might decide it’s time to evolve your solution into something just a little bit more current based on the big shift(s).

2. Can I use my segmentation to leverage a Customer Data Platform (CDP) system for personalization?

At the same time that media has become more addressable, a very small number of players have come to dominate the advertising space. An increasing number of clients have chosen to embrace customer data platforms that meld their own first party data with other third party data. This helps them understand and target retention-oriented and volume-stimulation advertising to current customers and prospects. Once the purview of only relationship-based businesses like financial services and telecommunications, first party data is rapidly expanding in breadth and depth as nearly everyone has recently launched DTC selling, loyalty programs, and/or logged-in premium experiences that allow them to harvest first party data about customers. This data, in turn, is used to deepen customer knowledge, predict outcomes, and fuel personalization and targeting efforts.

Does wanting to leverage a CDP system for personalization mean that you need to do a new segmentation? Probably. If your segmentation was built using survey-based attitudes and needs without access to behavioral data about your customer base, it’s likely that you have been unable to predict segment membership within your database. If you conduct a fresh segmentation with a large sample of customers and assess the findability of alternative survey-based segmentation solutions, you will be able to build a better predictive model for scoring the segment membership of your customers.

3. Does my market segmentation include first party behavioral segments?

With the wealth of transactional data captured by some loyalty programs, and the even greater wealth of behavioral data captured by websites and apps, you may decide to form segments based only on your first party data. This doesn’t help you acquire new customers, but it can help you personalize messages and experiences in a way that boosts engagement and encourages advocacy.

Does building first party behavioral segments mean you can go it alone and do the work internally? Maybe. Any dataset has an infinite number of statistically valid segmentation solutions that can be created from it. The most actionable behavioral segmentation for marketing is one that allows you to understand why people are doing what they’re doing, so you can try to influence their actions in ways that favor you. To choose the best behavior-based segmentation solution, your data scientist (or ours) needs access not only to the behaviors in your CRM system, but also to relevant survey-based attitudes, needs and profiling measures. That additional information lets you better understand who the segments are and why they’re doing what they’re doing, as well as helping you tell the difference between a good solution and a great one!

Build a market segmentation that adapts to the pace of change

And of course, all markets have been shifting rapidly in this technology-driven world, but also due to the seismic shocks the pandemic caused. If the appeal of the marketing tools discussed above are not enough to motivate you to refresh your segmentation, perhaps the simple fear that it may be obsolete is enough to keep you awake at night.

I’d like to help you sleep more soundly. Download our latest ebook, Build a Market Segmentation You Can Live In: Constructing a Segmentation for 2021 and Beyond, to learn how you can build a segmentation that will help you understand, engage with, and respond to your customers’ evolving needs… regardless of what the next year brings.

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