Market management consultants Stefan Grafe and Alan Fairnington provide Research News with their thoughts on segmentation, bringing a three-pronged perspective – as a client, user and supplier.
In our work across many categories we see two key challenges facing segmentation and its future relevance.
Challenge 1: Most segmentations use the same approaches of socio-demographics, U&A and geographic data. Not surprisingly the segments they produce tend to look much the same as anyone else’s (including their competitors).
Challenge 2: Segmentation is done to identify client’s opportunity to grow most efficiently. Clients demand practical guidance and inspiration deeper into the organisation and further into the future. Segmentation around the usual criteria doesn’t offer a lot of insight when it comes to creative, product development and sales and service. It doesn’t provide enough help in changing people’s behaviours.
Integrating deep psychological needs into the segmentation
The integration of deep psychological needs into the segmentation has a number of advantages:
- Usage and attitudes are merely symptoms of the underlying needs and motivations. Segmentations become really valuable if we can understand the depth of ‘why’.
- By modelling the needs for the client’s specific category and business strategy, clients get to understand the future needs in their category, as well as the current – making the segmentation far more valuable in future-oriented strategy development.
- Need states are not static. Including a needs perspective into the segmentation enables us to understand likely needs changes and become active in transitioning customers.
The client perspective
“We wanted to develop a comprehensive understanding of Singapore residents' needs drivers for health. A new, deeper level of insight which would allow us to understand resulting behaviours and attitudes.
We adopted this unique needs-based segmentation framework as a basis to craft all our outreach programs, allowing us to streamline our campaigns and optimise efforts.
Our marketing and communication programs targeted specific needs and as a result have proved much more effective and cost efficient.
The Singapore Tourism Board and Work Development Agency followed our lead, and have also been able to refine their marketing strategies, and gain a clearer understanding of market trends”.
Vernon Vasu, Director, Corporate Marketing & Communications Division
Health Promotion Board, Singapore
A case study
- For this client the first decision was the supplier and methodology choice. After reviewing the different approaches, the client chose one supplier for the needs-modelling and one supplier for the quantitative modelling work.
- The needs-modelling specialist developed the category needs model and psychological dynamics.
- Together the two suppliers optimised the statements representing the needs identified and combined them with the rest of the segmentation questionnaire.
The initial factor analysis showed that the needs identified provided half of the factors that determined the different segments. The subsequent segmentation resulted in six segments that could be described in terms of socio-demographic, U&A and geographic aspects.
The needs-modelling supplier then went back and reconciled the segments with the underlying needs and described the psycho-dynamics at work in the segment, bringing in the ‘why’.
Furthermore, the needs specialists reviewed the segments based on the needs and developed segment profiles of how well these needs were fulfilled and how this could be improved, providing strategic pathways for the client.
Finally, the two suppliers and client together developed workshop formats and playbooks to help every function and partner to understand the ‘who’ and the ‘why’, the opportunities and how to get the most out of them.
If we want to change behaviours, we need to know why people behave the way they do.
Including the needs perspective into segmentation provides our clients with a more potent tool to manage and shape their markets.