Tuesday, November 17, 2009

Segmenting by Motivation: Q&A with Sawtooth Technologies

This is the second in a series of Q&As with Erika Bruhn, a partner with Sawtooth Technologies Consulting Group. In yesterday's post, Erika discussed the importance of understanding the motivations of customers in different market segments. In today's Q&A, she explains how to use such motivations as you segment a market.

Question #2 for Erica Bruhn: How do you identify the attitudes and lifestyle preferences that affect customer behavior toward a particular product or brand?

Erika's answer:

First, you must identify the level at which to segment. If your client is a chocolate bar company, you may think that you should segment the market for chocolate bars. However, that would be a very narrow definition of the competitive space in which your client operates.

You need to go broader to include substitute products. How about a candy segmentation or a snacking segmentation? Either of those may be appropriate. How about a food segmentation? Now we're getting too broad. There is not always one right answer here, but the principle is to expand the thinking beyond the immediate product category to include products which represent substitutes.

Second, you must identify the segmentation dimensions. What are the broad "buckets" of attitudes which will likely define key differences across segments? The segmentation dimensions are hypothesized and can be developed in a team brainstorming session or through qualitative research, such as focus groups. Think of segmenting dimensions as the polar opposites which may define different segments of the market. Some examples are Price Sensitivity (from high to low), Innovative (from early adopter to late adopter), Convenience-Driven vs. Service-Driven, Status-Driven vs. Function-Driven, etc. These dimensions will vary from category to category.

Finally, you must express each of the segmenting dimensions in a variety of ways. A market research survey will be written with a long list of attitudinal statements with which the respondent must agree or disagree. These statements need to capture the nuances of what drives a particular segment and how segments differ from each other.

For example, let's focus on the Price Sensitivity dimension. A very simple price statement might read: "Price is very important to me." When we express price in a variety of ways, the list of statements will be broader and more varied, such as:
  • Quality is more important than price.
  • I always buy the lowest priced product.
  • I frequently use coupons.
  • I never buy anything on sale.
  • A low price means low quality.
These statements may come directly from qualitative research by asking consumers what is important to them and how they make purchase decisions.

Now that we have a variety of statements, when we have identified our segments, and one (perhaps) is a price-driven segment, we will have richer information as to which specific statements most drive that segment and which statements most differentiate our price-driven segment from other segments. This richness is the key to arriving at a full picture of the segments and their motivations.

The final Q&A post in this series will focus on selecting segments to target.

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