Through a special arrangement, what follows is an excerpt of an article from WayfinD, a quarterly e-magazine filled with insights, trends and predictions from the retail and foodservice experts at WD Partners.
Too much information, running through my brain.
Too much information, driving me insane.
— The Police
Segmentation can help a retailer or brand make better marketing and design decisions by better understanding what makes their customers tick and sizing up opportunity segments. But it's important to know, going in to a segmentation program, what you can realistically expect and accomplish.
Here are four objectives segmentation can't deliver:
Creating a monolithic target segment: Unless you offer extremely niche products or services, your segmentation will be a bit messy. The most effective segments typically divide the total addressable market (TAM) into 6-10 segments, and then highlight 3-4 of those as the target segments. A segmentation helps organizations makes choices — it does not dictate decisions.
Defining your brand strategy: Your brand strategy needs to be the core of your organization. It should define everything you do, from product development to SKU rationalization to ad campaigns. The goal of segmentation is to highlight differences between groups. Your brand strategy needs to be the consistent idea that unites and spans across segments and geographies. Your segmentation should be one input when creating a relevant and differentiated brand strategy. Creating a modular brand strategy for different segments and geographies is a potential recipe for disaster.
Determining innovation: Segmentation is a snapshot in time that can help drive innovation by highlighting the key attitudes and behaviors of your priority segments. Creating innovation in products and customer experiences requires an understanding of your audience coupled with future thinking that takes into account a variety of inputs — both tangible and intangible.
Replacing ongoing consumer/shopper research: Segmentation is typically done when an organization is at a pivot point, whether it's a new store design or a comprehensive rebranding effort. This holistic assessment of your customers and your business strategies helps your organization make big decisions. As a rule of thumb, a segmentation remains relevant for 3-5 years and then needs to be refreshed to account for shifts in your customers' lifestyles and market fluctuations. In addition to segmentation, an organization needs to consistently collect data (in various forms) to make sure your brand, your product, and your stores are aligning with the ever-evolving needs and wants of your customers.
Like any tool, consumer segmentation needs to be used appropriately and in the right situations. Any information, including segmentation, needs to be used judiciously with ample amounts of common sense.