Why the Industry Still Gets Market Segmentation Wrong

Here’s how it can be fixed

Market researchers need to pay attention to the drivers of behavior, not who is driving each car. Photo by chuttersnap on Unsplash

“Our customers are women aged between 35 and 45 with blonde hair and blue eyes who drive Toyota Priuses and leave in these select zip codes”

This a sentence that companies pay thousands and thousands of dollars to have a market researcher discover.

The problem is that these detailed descriptions of the customers end up describing exactly no one.

Market segmentation. In the land of marketing thought-candy and Marketing 101 textbooks and classes, the term “market segmentation” has come to be one of the ten commandments, an invaluable foundation point of marketing. In this world, you have to segment your market and define your customer. That’s accurate, but current market segmentation practices are backwards.

Companies take these general principles and drill down, drill down, drill down to the point of uselessness.

The end goal of market segmentation is to have a very specific definition of your customer, not unlike the example I provided in the beginning. I’ve sat through many presentations where all sorts of research is done relative to “Our customer is… and therefore we’re going to target them by…”.

Yet they fail to see that this incredibly descriptive avatar describes precisely no one.

This isn’t to say that market segmentation is not important. It can be helpful to companies if it is done in a meaningfully structured way. Rather than use static descriptors, it would be much more beneficial to use drivers of behavior. We need to replace “Our customer is…” with “Our customer is driven by…”.

Let’s face it — it doesn’t matter whether they’re young, they’re old, they’re male, they’re female, they’re professional or they’re not professional, etc. Not all of your customers will have blonde hair, blue eyes and Toyota Priuses.

If your market looks like this, you’ve probably done it wrong.

Wouldn’t it be much more helpful to have a series of attributes that drive their behavior? This is where market segmentation begins to overlap with behavioral economics — knowing the psychology, the sociology and the anthropology that drives your collective group of non-homogeneously defined customers.

For example, imagine a driver for your customer is that they care about pets. A group of people that care about their pets and spend a large amount of money on their pets cannot be defined by a unified theory of descriptors. And again, they don’t all have blonde hair and blues eyes.

Rather than narrowly defining our customers in our terms and in our world, we can find out what drives action by our customer, and therefore by us, to insert and immerse ourselves into their world.

This brings us to one of the major problems with the current approach. Companies are trying to bring consumers to them, rather than meet the consumers where they currently are. We need to be a part of what drives them, not in some static, boring and uninteresting way by narrowly defining them in a way that creates absolute obsolescence and irrelevancy in our definition of them.

We need to find them where they are, to join their club and align our drivers with their drivers. Attempting to force them to join ours won’t get us anywhere. Think about your customers’ drivers rather than descriptions in your market segmentation and you’ll get much more valuable and usable data.

Aaron Webber is a serial entrepreneur and CEO of Webber Investments LLC, as well as a Managing Partner at Madison Wall Agencies.

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