How to create more useful customer segmentation models (with examples)
August 3, 2018
12 min read
Building consumer segmentation models based on real insight, not lazy demographics, is like being given a compass and a map. Find out the very best way to model and understand your audience with our definitive guide to consumer segmentation.
Why does anyone decide to spend their money on buying something? Let’s take Deliveroo takeaways, as an example. While Beth needs fuel for a late stint in the office that shows no signs of ending, Tom’s having a Thai night with his uni pals. Meanwhile Sarah’s given in to her kids’ cries for pizza, and Romesh needs four different cuisines to keep everyone happy at the marketing team lunch.
None of their reasons for reaching for the turquoise kangaroo in the bottom left-hand corner of their phone are quite the same. And yet all these diverse needs and situations are ultimately driving them to the same conclusion: Deliveroo it is.
So while for most brands, the what people are buying is likely to remain constant, the reason why they’re buying it varies wildly.
It’s precisely the reason that your advertising strategy needs to be agile enough to encompass a range of consumer groups. No one winning formula can hit on the needs of every single potential customer; you need to make sure you’re varying the way you’re talking to be sure you’re not missing anyone.
This is where segmentation models come in. Use them right—to properly understand all the different consumer groups you need to be selling to—and they’ll be your best friend. Get them wrong and you could be firing out misaligned messages to all the wrong people.
Think of consumers like an unknown territory, spread out in various different places. How do they relate to one another? Where do they form natural clusters?
An easy answer is often to lump people into demographic groups. But in the above Deliveroo example, all those consumers could very easily all be mid-income (ABC1), London living 30 year olds.
And yet some are in the camp of convenience, others in the land of choice, or the mountains of allergen-negotiation, or on the island of mass-catering.
Think for a second: How do you talk to a London-based Millennial? How do you reach them?
A segment such as ‘Urban Millennial’ is an almost useless segmentation model because it’s so broad and encompasses too many disparate groups and motivations. You need to speak to them, and reach them, in many different ways.
Building customer segmentation models based on real consumer insight, not lazy demographics, is like being given a compass and a map. You can start to chart unknown territory and clearly mark it out so it’s easy to use in the future, and for others across your organisation to access and understand.
It gives you real direction on how to reach your different audiences, and how to speak to them in a way that your message will resonate.
What is customer segmentation?
Segmentation is the process of breaking down the general population into distinct groups (segments), united by certain behaviours or attitudes. By dividing people into distinct segments, you can optimise your offering and communications specifically for this group. Ultimately, in breaking your audience down from a monolith to manageable subsets of the population, you can tailor your brand to the needs, values and characteristics of a specific group of individuals.
While many brands will strive to have ‘their customer’ in mind, it’s important to acknowledge that in real life, there’s never only one type of consumer. With good customer segmentation, you can build out a strategy based on real, actionable insights that allow you to target your product development, messaging, creatives and acquisition plans to the right people, in the right place, at the right time.
Because in modern-day business, context is king.
Customer segments vs consumer segments
The brilliance of segmentation lies in its ability to optimise your strategy for connecting with the maximum number of people who might want your product or service (your Total Addressable Market is often the jargon used). In order for this to work, and to expand your TAM so that growth becomes easier, it’s important to widen your thinking beyond just your current customers.
Customer segments tell you where you’ve previously been success – they’re a snapshot of the past.
Great consumer segments will be expansive and forward-looking, helping you focus on the future. They will help you expand and grow into exciting new territories. Don’t restrict your brand to just mapping it’s existing customer bases, because it might rob you of a stellar brand expansion idea, or spotting a need amongst a group you’d not previously thought about.
The four areas of customer segmentation
There are four main things you need to be thinking about when it comes to segmentation.
1. Attitudinal understanding
This is primarily understanding how consumers view themselves and the world around them. By asking people about their underlying attitudes, their core beliefs, and their likes and dislikes, you can more easily demonstrate to them why your brand would be a good fit for their lifestyle. For example are you target consumers aspirational or worried about their place in the world? Optimists or pessimists? Extrovert or introvert? Do they care about health more than convenience? Provenance over cost? And so on…
Attitudinal understanding will help with messaging. It will tell you what your core mission statement needs to be to engage this segment of the population.
2. Motivational understanding (commonly referred to as need states or jobs to be done)
Diving even deeper than understanding attitudes, there’s a powerful approach to segmentation and consumer understanding known as ‘need states’ (also known as ‘motivational states’). One methodology for discovering these is known as ‘jobs to be done’, which digs under surface motivations to understand why consumers really ‘hire’ different products to do particular ‘jobs’ for them.
For example, you may have two consumer groups that are both concerned about healthy eating and believe it’s important (shared attitudes) but they may still buy protein bars for very different reasons – one as a healthy, filling snack between meals; the other to refuel after an intense workout. Their ‘need states’ are very different, even if their attitudes are similar.
Understanding their motivations down to this level is incredibly powerful for developing messaging and creatives that almost feel personal the individual. If your brand spends a lot on digital acquisition (such as Facebook) then this level of customer segmentation will deliver brilliant ROI for your team as you can easily map it against the granular targeting options available on digital platforms.
3. Behavioural understanding
This is primarily understanding when and how consumers will want to engage with your brand. Having a view of typical behaviour patterns will let you know which pockets of time, or which locations are going to be best for this demographic.
Work out how people live their lives—which social media channels they use and what mode of transport they take, for example—and you can work out where they’ll be most receptive to an advert, or find purchasing your product most convenient.
For example you might have consumers with the same attitudes and need states, but one works from home and lives in the country, while another is a commuter that lives in the city…how they access your products, their shopping habits, day-to-day lives, and even their media habits may be quite distinct, even while attitudes and need states are the same.
4. Demographic understanding
This is primarily understanding what consumers need from your brand. There will be basic demographic factors that screen people in and out of a segment—how many children do they have, or what income bracket are they in, for example. This will make sure you don’t waste your time on people who fundamentally can’t be interested in your brand (you may want to screen out non-parents, if you make baby food, say) and leave you with the golden potential of those who will be.
A look at Tesco’s new creative
Tesco’s messaging has traditionally been centred on families. Their slogan—every little helps—and their large stores, often only accessible by car, with product lines and reductions designed for people buying to feed multiple mouths are certainly family-friendly. In their most recent campaign, however, it becomes obvious that Tesco has used research to identify all the customer segments they might appeal to, and have produced messaging to reflect the diversity of their audience.
They are speaking to their usual demographic…
But also, to the health-conscious millennial…
They maintain their well-established position as a destination for good, reasonably-priced food that can be shared amongst the whole family…
But they also become a destination for occasion food, putting themselves in direct competition with cafés and restaurants…
It’s a campaign that embodies successful customer segmentation: it takes Tesco’s basic offering and parcels it up for a wide range of consumer groups. It demonstrates that Tesco can be your destination whether the pie you want to cook is a high-cost ‘showstopper’, or a corner-cutting, great value ‘all-from-frozen’ affair (both featured in this campaign). They target various age groups, various behaviour patterns, with various attitudes to food, and show that whatever the occasion, Tesco should come to mind.
How to start understanding your audience with customer segmentation
With Attest’s flexible scripting platform, huge audience reach and interactive dashboard, it’s the perfect place to start profiling your audience. A proper customer segmentation requires a number of data sources, but there is no reason that you can’t use Attest to get the ball rolling.
Spread your net wide at the beginning, launching a survey to a nationally representative sample of people, looking at both people who already know of (or use) your brand and those who don’t.
You’ll want to start with a large audience – around 2000-3000 people – to give yourself enough data to dig into niche groups and apply multiple filters. We also recommend using a variety of answer options (especially grid and multiple choice!) to make the most of your 23 questions.
21 Customer segmentations to ask your audience
To learn more about your audience’s attitudes, you can question them about their views on your market, or life in general:
Do you believe that a healthy and balanced diet is something to aim for?
Are you an optimist or a pessimist?
Do you cheer for underdogs and reigning champions?
Would you pay more for something that was environmentally friendly?
To discover your audience’s need states, and even gaps in the market, you can ask more qualitative ‘why’ questions, or test their reaction to key statements:
On a scale of 1-5 how important is to you that you can find healthy snacks on the go?
On a scale of 1-5 how easy do you find it to buy healthy snacks on the go?
What do you wish you could improve about health snacks?
Which of these statements do you most strongly agree with:
On behavioural understanding, you can get a sense of your audience’s media habits with some simple questions:
When did you last watch live TV?
What programme did you watch?
Which radio station(s), if any, do you listen to? [station optoins]
When do you usually listen to them? [time options]
Which social media apps do you have on your phone?
Please rank which you use most to least
Finally you can learn more about your audience’s brand interests and loyalties, such as the brands they use (or know) in your space, and why they feel that way:
Why do you use [brand]?
Please tick all of [brand]’s products that you use on a regular basis.
Please choose the one product that [brand] make that you couldn’t live without.
How likely are you to recommend [brand] to your friends?
Would you recommend [brand] to people who are older/younger than you?
Where do you typically purchase [brand]
As you can see from the above examples, it’s great to mix quantitative and qualitative questions, to give you both statistically robust data and deeper insights that help inform your thinking.
You can use our interactive dashboard to select any of these answers, and map that specific group’s answers to other questions. So you’ll know that, for example, of the consumers whose favourite social media channel is Instagram, most of them usually buy your brand at the weekend.
What’s more, you can split the results by demographic. You’ll be able to split people’s answers by their age, their gender, their postcode, how many children they have, or even whether or not they have pets!
This way you can quickly build up specific profiles based on attitudes, need states, behaviours and demographics.
When it comes to the people who don’t already use your brand, ask questions that will suss what it is that could open them up to your brand. Probe their motivations and mindset, and figure out the role your brand can play in their lives. This is where you might find some incredible opportunities to expand your total addressable market (TAM) with even slight adjustments to your product or positioning.
If you’re a protein brand, for example, who has established a niche of customers who identify as fitness enthusiasts, it doesn’t mean that’s your entire target market. Ask people whether they’d like a healthier breakfast, where they’re most likely to buy snacks on the go, or when they notice themselves feeling tired.
You might find that within a certain demographic, there’s a desire for healthier workplace cupboard snacks to stave off hunger whilst cooking dinner, for example.
This group would share a similar attitude (valuing health), but would respond to different messaging (based on need states) which slots your product more neatly into their lives.
A customer profiling exercise is a great introduction to a proper customer segmentation.
Given the foundational role this kind of exercise can play across your whole organisation, it’s important you get an expensive, large-scale segmentation project right. Hopefully this guide has proved an enlightening resource to get you thinking about the first step – understanding the polarising factors that distinguish your audience.
Our in-house marketing team is always scouring the market for the next big thing. This piece has been lovingly crafted by one of our team members.
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