Writing in Advertising Age, Michael Fassnacht claims traditional customer segmentation techniques are either antiquated or have never been efficient enough in the first place. Rather, the chief customer intelligence officer at DraftFCB urges marketers to make "a stronger focus on enabling the consumer to self-segment."
For retailers, this means mimicking Amazon in segmenting identities by linking interests in one product to another.
"An investment in a smart product-affinity recommendation engine could be more worthwhile than spending huge dollars against micro-segmenting the consumer base," wrote Mr. Fassnacht.
He listed Amazon and Apple as two experts at finding relevance around products for consumers rather than "micro-segmenting consumers by any kind of attributes."
He also believes that Facebook, MySpace and Google are behaving similarly.
"They are enablers of self-segmentation and self-identification through group and interest identities," wrote Mr. Fassnacht. "They do not place targeted, direct communications at the center of their marketing activities, but rather enable consumers to self-target by their own individual choices and network preferences."
Not surprisingly, Mr. Fassnacht spent considerable ink bashing customer segmentation practices. First, he said an underlying problem with any consumer segmentation approach is that most consumers belong to several segments rather than one.
Second, the "static definition of consumer segments" is becoming less reliable in today's "extremely volatile society." Plunging housing, stock or bank account values over the last six months could have "significantly decreased" purchasing patterns for many consumers, said Mr. Fassnacht. But life-changing events, such as a divorce or first child, that often transform buying patterns "are becoming more difficult to predict because consumers live their lives on a much less traditional path than they did 10 or 20 years ago."
Finally, Mr. Fassnacht argued that consumers are gaining more control over marketing and directing the information they want to receive. He writes, "In truth, it's easier to let them choose and decide what is relevant for them than to predict relevance based on any expensively calculated segment identity."
Mr. Fassnacht said consumer segmentation will continue to play a "critical role" in marketing, especially in identifying the right segment for a new product and incorporating segment-specific needs into the design of the product or service.
"But consumer segmentation and self-segmentation have now entered the stage of becoming equal forces in today's marketing discipline," writes Mr. Fassnacht. "And this new reality will force marketers to better balance marketing investments between targeting vs. enabling self-segmenting capabilities."
Discussion Question: What have you thought about the limitations of consumer segmentation techniques? On the other hand, what do you make of the merits of 'self-segmenting strategies' as represented by Amazon and Apple in the article?