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Careful segmentation pays dividends

News, 08 July 2016

LONDON: Careful segmentation of audiences can not only improve the allocation of marketing resources but help build longer and stronger relationships with customers.

In a Warc Best Practice paper, How to use segmentation effectively, planning consultant Merry Baskin acknowledges that the practice does have limitations.

For example, it can be difficult to buy media against the unique segments a brand may have identified, while consumers typically have multiple identities which depend on the context in which they find themselves.

But none of these arguments should detract from the fact that many businesses are generating profits as a result of pinpointing valuable segments and adjusting their business and marketing strategies accordingly.

A problem for marketers, however, is that while the idea of clustering an audience may be fundamental to marketing, there is no recognised process to develop an effective segmentation strategy.

Client-side marketers, Baskin notes, will generally start with a hypothetical idea of the groupings in their market, which could be based around the particular benefits consumers look for in the product – all of which can be easily tested using existing data on the behaviour of existing customers.

The next stage is a two-step process using in-depth, qualitative techniques to pursue and tease out trends to start with, backed by quantitative techniques on attitudes and behaviours to confirm that they are representative of the whole market.

Segmentation criteria can range from basic demographic and socio-economic factors through more specific ones such as usage, location, life stage, psychographics and context.

"The most successful/popular are behaviourally rooted, because behaviours deliver tangible value to the bottom line of the business," Baskin observes.

And, vitally, "segmentation should shape more than just marketing": the rest of the organisation needs to be on board with the concept if it is to be successful.

That's because the segmentation arrived at can be applied across multiple areas, not just communications.

For example, segmentation can turn pricing from an accounting exercise into a market-based one, or help deliver a more personal and helpful customer care experience.

"It is hard to imagine creating effective communications, developing innovative products or building successful brands without using some version of it [segmentation] to inform your decision making," says Baskin.

Data sourced from Warc