Well …… segmentation works well for worms, oranges and grapefruits.

But it has also been a staple of marketing for decades.

In a brief history, Wendell R. Smith is generally credited to be the first to introduce the concept of market segmentation into marketing literature, releasing his publication of the article, “Product Differentiation and Market Segmentation as Alternative Marketing Strategies” in 1956.

Today’s challenge for marketeers is to know which type of segmentation to use.

Demographic Segmentation

The traditional ‘demographic segmentation’ is often the 1^st port of call for marketeers, looking at age, gender, ethnicity, income, level of education, religion etc. But nowadays, that feels too broad, as not all people who share many of the same demographic characteristics, behave the same way.

Take a look at these 2 stalwarts of the UK for example:

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Then we come to another challenge for demographic segmentation; What do you do when your chosen segment changes?

Today’s 23-year-old female is nothing like a 23-year-old female from the 80’s. So, within your businesses, how often are you changing your target demographic profiles, and what assumptions are implicit in them?

Psychographic Segmentation

With a number of strengths, one of the more recent segmentation tools has been Psychographic segmentation.

Psychographic segmentation involves categorising people by activities, interests, and opinions (AIOs), personality, social class, and lifestyle, which serves a purposeful role to marketing efforts. It uncovers the traits of those most likely to buy products or services, meaning marketeers can adjust their product features and messaging to better fit their target audiences.

However, it’s quite difficult to set up and relies on survey data, which can also lead to assumptions based on your own biases of which questions to ask, which can often lead to misunderstandings.

Psychological segmentation MAY tell you why customers buy your products, but it may not. So, it’s a good indicator but not necessarily a direct cause.

Behavioural Segmentation

Which leads me to my favourite, Behavioural Segmentation.

People are different from each other.

We agree!

However, research suggests that people might also be different from themselves over time and across situations. In other words, human behaviour is time and context specific.

Why are you more likely to join a gym in January than you are in May? Why is your online shopping behaviour different from how you act in a bricks and mortar store (I’ll cover online behaviours in a future blog)? Does the way you pay also affect what you buy?

Simply swiping a card now provides immediate pleasure in the form of the products bought, and we only realise the prices once we receive the bill weeks later… which means we are likely to spend more on a card than we would with cold hard cash. Are you more likely to ask for extra pizza toppings online or instore? (research suggests it’s online).

And if you hadn’t guessed, the masters of this, at the moment at least, are Google and Amazon.

The adverts you see, the products that are recommended to you, and in some cases, even the prices that you get are all a function of their observations of your behaviour, not cues or inferred correlates of your behaviour.

Behavioural science is making new discoveries daily, but marketing seems to be locked into a segmentation world that no longer, if it ever did, exist.

So how do we move forward?

Whilst I acknowledge that the 1^st three forms of segmentation I talked about do have their place in marketing, the ‘new kid on the block’ acknowledges that we are different from each other, and from ourselves, and segmentation should, wherever possible, be based on what our consumers actually do, not where they live, not some fantasy of all people with a certain demographic characteristic behaving the same, and certainly not what they say they do or think.

I’ll explore this opportunity to fill the gap in market research in my next blog.