Working “backwards:” A blueprint for better segmentation

Despite knowing many of its shortcomings, marketers remain addicted to traditional market segmentation approaches based partly, sometimes largely, on rather mundane demographic factors (e.g., age, education, family makeup, household income, or geographic location). Psychographic segmentation — based on consumers’ attitudes and opinions, interests, and values — and lifestyle segmentation are improvements, but still fail to deliver a deep understanding of consumers’ mindsets and what fundamentally motivates their behavior.

There are all sorts and styles of segmentation. Many are based on “surface level” factors that are fairly easy to measure via large-scale quantitative surveys. Those approaches work well for addressing basic, surface level marketing issues and problems. For instance, Target, in analyzing its huge shopper database, noticed certain product purchase patterns of buyers who appeared to be pregnant. So Target included offers for baby-related products in flyers sent to women who were assumed to be in “the pregnant segment.” Sales for such items increased. Certainly, companies need to know surface level facts such as where people live, how much money they make, how old they are, their gender, how much they spend in a product category, or how often they buy certain brands. But such surface level knowledge reveals precious little about WHY a product is relevant in consumers’ lives.

We need better information to develop marketing strategies that connect consumers to brands in deeply relevant and enduring ways. We need to understand consumers’ distinctive psychological orientations regarding a problem, a product category or a brand. We need to know what a product or brand really means to consumers in terms of both conscious and unconscious thoughts and feelings. Consumers’ fundamental, and usually unconscious orientations (mental frames in the language of mind science) are critical because they directly influence brand purchase choice, product use, and other behaviors of marketing interest such as shopping, information search, or word-of-mouth. Those mental frames reveal why a product or brand or activity is personally relevant to someone. Demographic and psychographic variables are merely surrogates for those fundamental orientations…and imperfect ones at that. Although everyone “knows” this, some marketers find it easy to rely on a surface level understanding of consumer characteristics and behaviors to guide strategic thinking. Unfortunately, a shallow understanding of consumers yields shallow marketing strategies.

Even companies that have an advanced understanding of consumers still tend to begin the market strategy process with a more or less standard quantitative (and expensive) segmentation study. Quite often this approach fails to provide sufficient insight to inform their marketing decisions. Managers then must commission a deep dive qualitative study to reveal the foundational orientations (mental frames) of consumers within each segment. Such deep dive studies often reveal a weak relationship between the original segments and consumers’ basic psychological orientations. Instead of the 6 to 8 (or even more) consumer segments identified by a quantitative study, a qualitative deep dive might identify only 2 or 3 distinctive psychological orientations. Those perspectives tend to “cut across” the previously identified segments. Managers then find themselves in the quite uncomfortable situation of not fully leveraging an expensive segmentation project and having to cobble together some combination of qualitative and quantitative insights to guide their strategic thinking.

For the many segmentation projects seeking a deeper “why” understanding, one solution is to work “backwards. ” Marketers could start by focusing on the most important thing. They can begin by identifying the most common psychological orientations — the shared mental frames — that guide consumers thinking and emotions about the primary topic (whether a product category or brand or the consumer’s problem). Since many of those orientations operate at unconscious levels of awareness, we need a qualitative method capable of digging below the surface. Typically such a tool uncovers just a “handful” of unconscious orientations. (This is not surprising. Ask yourself: How many deeply fundamental ways are there, really, to think about hand lotion or beer or motor oil?) Then, after gaining an understanding of consumers’ deep mental frames, managers can mount a large-scale survey-type “segmentation study” to identify the demographic, psychographic and behavioral correlates of those orientations, determine their prevalence within a larger population, and gauge the profit potential of each perspective.

There is a fair chance that no demographic or psychographic factors will be closely associated with the key deep orientations. In fact, if we dig deep enough, we arrive at the universal mental frames used by all people to structure their thinking and guide their behaviors. Those deepest orientations are likely present in every market segment. For example, in a study of motor oil, we interviewed owners of several types of vehicles in six countries. Virtually every customer expressed, metaphorically, the same deep orientations: “My vehicle is “alive” and I am responsible for its wellbeing. I “feed” my vehicle good motor oil (nutrition) to keep it healthy. In return, my vehicle will take care of me.“ Although the various customer groups had somewhat different ways of talking about those deep orientations (which could cause some analysts to believe the differences were meaningful), the same metaphoric orientation was shared across segments. Thus the client company was able to develop a simple, consistent and less costly messaging strategy for their products.

In summary, I want to emphasize four points:

1. Traditional approaches to market segmentation cannot reveal consumers’ foundational, mostly unconscious, psychological orientations regarding a product or a problem. Nor do they reveal much about the broader life context into which a product must fit. And they do poorly at understanding the personal relevance of the product category or a brand in consumers’ lives. Because consumers are not fully aware of the most relevant, and thus most potent, of these orientations, we cannot ask about them directly. A qualitative insight study that can tap into consumers’ unconscious minds is needed to uncover those primal orientations.

2. Typical segmentation approaches reflect marketing’s over emphasis on differences. Managers often treat relatively minor differences between people (or markets or situations) as more strategically important than is warranted. Managers should focus equally on commonalities. People are more alike than different. Their shared perspectives become obvious when we are able to look below the surface and uncover the deeper orientations or mental frames for a topic, product category, or brand.

3. Designing a segmentation project requires deciding on the appropriate “level of analysis.” Managers should ask themselves: what level of consumer insight do I need to address my marketing problem? Creating an effective brand positioning strategy requires a qualitative study of consumers’ unconscious orientations to the product category. Managers need to know why/how the product category is relevant to consumers so they can imagine how their brand can be relevant in that context. For example, if the problem is to determine if cruise packages for elderly people can be profitable, managers first want to know how many elderly people take cruises, where they go, and how much they spend. For such surface issues, a traditional quantitative approach is appropriate. If the decision is to proceed, managers will need a deep qualitative study to understand how cruise trips are relevant to this group so they can craft an effective positioning for the offering.

4. Traditional segmentation is company-oriented; it is not truly customer oriented. It reveals a fisherman’s perspective, “Where are the fish? How can I catch more of them?” It does not seek to understand what fish want and need to thrive. Traditional segmentation is much more focused on how to make managers’ (or the company’s) life better, and less about how to improve the lives of customers. In today’s culture of increasing consumer power and control, that self-serving stance is not likely to have legs.

Jerry Olson is Managing Partner of Olson Zaltman.