Digitize Segmentation

Each revolution has its own lingo. The current digital transformation and subsequent phases have plenty ‘hacking’ ‘disruptions’ and ‘social media’ terms that often obfuscate time-tested marketing strategy principles.

One of those terms is segmentation. The answer to the question “Who is your target market?” is the foundation of any marketing strategy. The hard work behind a good answer is often attained through rigorous segmentation analysis. Sound strategists listen but do not believe a simple snapshot in time about the market, but rather carefully:

• observe and track trends both quantitatively and qualitatively
• proactively divide markets in segments to identify those with common characteristics that are measurable, quantifiable, reachable and with purchasing power for the intended product/service category
• use more than one dimension in understanding consumer/audience behavior; purchasing behavior is only one of the dimensions of segmentation, cultural influences, traditional psychographics, demographics still apply as well as the cross-tabulation of more than one dimension together
• avoid the proliferation of big data that automatically stirs towards big numbers, often missing nuanced behaviors that point to new profitable segments of diverse sizes
• And lastly, of course, find the right fit and competitive advantage with the product/service offered or to be developed.

Segmentation oversight and/or skimming results in an under-optimized view of many current markets. For example, the financial markets judge a service like Twitter the same way as Facebook. The former may have a highly successful play as the number #1 augmenter of media advertising from the experts circles (journalists, actors/actresses, industry critics). The universe of those may be 500M people, for the sake of an example. Facebook, on the other hand, has an equally successful play as the number #1 connector between families and friends circles who also recommend brands but from a personal perspective. Its market universe size, by definition is larger in countries — mostly Western — with billions of regular people. Mathematically, each’s market share epitomizes the definition of a market leader. Profitability measures and expectations may not be comparable, which could lead to the wrong business strategy.

It is true that the lines in the digital world are easily blurred, providing ease of meddling with similar services through the same back-end technology platforms. For example, Facebook is moving into shopping with ‘Buy Now’ buttons and Amazon into streaming with Primer as an umbrella. Yet the point is precisely that segmentation adds clarity of who would likely be the best target market for both the basic service as well as potential new service lines. The market size opportunity and positioning is likely to differ.

Just as in the physical world mass segmentation gave way to target segmentation and, for the most sophisticated, to personal marketing, the digital transformation is overdue to leverage technology into solid, disciplined market segmentation analysis that will enlighten strategy. A disciplined approach that allows for multi-level segmentation analysis, and that both addresses group segments and one-on-one marketing would be the optimal result of a sound Big Data analysis.

Segmentation has many implications in any industry. As a result of the demarcation between physical and digital worlds, something gets missed. For example, the fashion industry is now learning that given the speed in which new fashion propagate online to the masses, it needs to change how Fashion 100-year tradition shows are conducted. Currently, many designers are experimenting with new ways of segmenting the market to attract both the high-end bread-and-butter established segment, and the newer many, highly fashion-conscious segments of men and women who expect immediate access to the latest online, original or imitated.

There are more tools today for answering the question “Who is your target market?” Disciplined, old-fashioned segmentation analysis that leverages digital data could make multibillion financial investment less fickle, trickling more consistent profits in a digital transformed world.