Erika specializes in developing insights to drive complex product development and pricing decisions. Given Erika's expertise, I asked her to talk about some of the key issues marketers face in segmentation and targeting.
First, a quick review: Segmentation is the process of grouping customers within a market according to similar needs, habits, or attitudes that can be addressed through marketing. Segmentation enables you to understand customers' needs, wants, and preferences, segment by segment, so you can focus your resources on the most promising opportunities--improving your marketing effectiveness and efficiency. In general, you can segment by customer behaviors, attitudes, demographics, geography, and/or psychographics.
Question #1 for Erika Bruhn: What are the benefits of segmenting a market according to needs, lifestyle, and attitudes, rather than relying on demographic and geographic variables?
Motivations drive behavior, and by understanding the motivations of different segments of the market, one can reasonably predict how those segments will behave. Products which save time will likely appeal to a high convenience segment, products with strong design will appeal to status-driven consumers, and so on. There may be demographic similarities of those within a segment, but demographics don't define a segment. So those valuing good design may skew higher income, but not all higher income people value good design.
Product development efforts in particular will be more successful when executed with a specific attitudinal segment in mind. How do you design a new shampoo for a woman, 50 to 65 years old, who lives on the West Coast? I don't know either. But now imagine there's a segment called the Whole Beauty segment. This (hypothetical) segment sees personal beauty as a larger part of the beauty and longevity of the Planet Earth. Can you imagine the type of shampoo which would appeal to this segment? The product's ingredients, packaging, and positioning would all be driven by the segment's motivations and values.
Tomorrow's Q&A will focus on segmenting a market according to customers' attitudes and lifestyles.