Consumer Segmentation: Maybe You Could Be Doing It Better

Naira Musallam, PhDJun 28 2018
Maybe You Could Be Doing It Better

Have you ever considered that your customers may be more diverse than your marketing?

How well do you really know them? What do your target segments look like? Do your marketing campaigns reflect what you know about them?

When it comes to consumer segmentation, most brands divide their customers into groups based on common predetermined characteristics, allowing them to change their messaging depending upon the segment. But how can you know for sure if those are the most accurate segments to engage? 

If your sole method of understanding your customers is through demographic segmentation, then at best your understanding is limited and, at worst, it’s incomplete or misleading.

Because of this fact, we believe in letting the data itself reveal the customer personas that naturally exist.

First, Some Context

Today, we live in a “post demographic” world. Simply put, this  means consumers have changed. The way we all interact with brands has evolved considerably in recent years. Consumers continually construct and reconstruct their own identities, rebelling against top-down driven “norms” handed to them by the advertisements of old. The clear delineations between consumers based on gender, age, income, education, or ethnicity are not as useful as they once seemed.

Take, for example, a young woman working in finance with a high level of disposable income and a middle-aged man working in education with a lower level of disposable income. From the outside it might seem that these two wouldn’t have much in common. However, they very well may have more values or experiences in common than demographic data alone would suggest.  

In this world, where commonality is not defined by demographics, the ramifications of sub-standard consumer segmentation are massive; ultimately leading to mediocre brand messaging, marketing campaigns, and advertising.

Real World Applications 

Suppose you conduct a market research project to understand how likely consumers are to purchase a new household good. For this project, you collect data from 1,000 respondents, from general demographic information to price, brand image, and quality sensitivity. 

Traditional consumer segmentation methods may have revealed that females are much more likely to purchase your new household product than their male counterparts . Or perhaps when you cut the data according to age, you found out that Gen Z cared more about brand image than Gen X did.

But, is that truly the only way these consumers are similar? Age and gender alone? Let’s circle back to our original suggestion and let the data to do all the talking. We can do this by using a type of machine learning algorithm known as unsupervised learning. This allows us to segment the data according to how the data behaves and cluster consumers into the most homogenous and efficient groups.

The results may show something like the graph below; a three-dimensional cluster analysis where the similarities shared in each group are based on how important quality, image, and price were, not based on a predetermined demographic split. With this information mapped out, each persona tells us a different story.

The first cluster, denoted in red on the graph above, scored low on sensitivity to price, but higher on product quality and brand image. The second cluster, in blue, scored much higher on price sensitivity, lower on caring about product quality and lower on brand image, while the third cluster, in yellow on the graph, scored medium on price, and the highest on caring about both product quality and brand image.

 

 

The interesting part? Each cluster is a mix of demographic variables!

All of these unique personas can tell us what these consumers value and, by extension, what type of messaging resonates with them.

Best Practices to Keep in Mind

Remember, the purpose of learning is growth. So collecting the right data is only half of the equation, you’ve then got to make sure you use that data in the right ways. To do just that, keep in mind the following:  

  • Demographics never tell us the whole story. To understand your audience, you have to collect data related to who they are, what they value, and what motivates them.
  • Consumer  behavior is constantly shifting and evolving. If you want to keep pace, conduct market segmentation frequently to ensure your marketing is up to date and on target for results.
  • By collecting data about consumer’s online habits, you can refine your strategies further. Just make sure to adapt your marketing plan to meet the motivations of these newly discovered market segments.
  • Complement traditional consumer segmentation with machine learning processes, like those applied by SightX. Every statistical method comes with its own set of assumptions. Even "no assumption" is an assumption. 
  • Always be open to learning from the data you collect, whether it confirms your strategy or challenges your thinking.

When it comes down to it, staying relevant to your audience is the only way to build long-term brand equity and loyalty. SightX allows you to use multiple tools to create and discover your consumer segments. Manually develop predetermined segments, or let our platform automatically create them for you based on behavioral or psychographic data. 

It really can be that simple.

 

Naira Musallam, PhD

Naira Musallam, PhD

Ready to meet the next generation
of market research technology?

More from SightX

The Myth and Reality of Predictions and Forecasting

The Myth and Reality of Predictions and Forecasting

If we are really able to predict, how is it that we repeatedly fail?

by Naira Musallam, PhD

Five Ways to Get Creative with Heatmaps

We’ve said it before- and we'll most likely say it again: consumers are changing.

It should come as no surprise that consumer behavior has evolved quite a bit in recent years, but that evolution was fast-tracked in 2020. From where they shop to how they want to connect with their favorite brands- consumers demand engagement on their terms.

Effective engagement can mean speed and efficiency, but more often than not, it also demands creativity.

For insights teams, in particular, this can be a challenge. However, a modern, effective, and creative way to get impactful feedback from consumers is through a heatmap experiment.

A heatmap is a visual storytelling exercise. It organizes data about an image using color-coded zones representing the frequency of activities, interactions, or sentiments.

Historically, heatmaps have been a popular visualization tool with data-driven researchers across industries. Given current consumer trends, it shouldn’t come as a surprise that heatmaps have been gaining popularity in recent years amongst leading researchers. While they remain a key tool in user interface and experience research, their usage in concept and product testing research continues to gain popularity.

To help spark some creativity and curiosity, we’ve put together a list of simple ways you can incorporate heatmap techniques in your own research:

Whitespace & Prototype Testing
Exploring white space and researching prototypes are important initial steps in the product innovation process. If you have some initial ideas or mock-ups for a product, heatmaps can be an important early indicator about which attributes your potential customers would be compelled by, or (just as importantly) be repelled by.

Efficient and effective prototype feedback allows you to refine your products earlier in the development process- before you even begin building your minimum viable product (MVP).

Design Testing
Getting feedback on visual design elements like fonts, colors, layouts, and imagery is an important step in the research process, and heatmap experiments are one of the most cost- and time-efficient ways to do it.

Using heatmaps for design testing allows you to identify what works and what doesn’t for any customer-facing visuals.


Package Testing
Most products go through many iterations of packaging designs before launch. Testing various concepts with heat mapping allows you to gain detailed insights into potential customers' preferences surrounding specific packaging attributes.

Respondents have the opportunity to select and react to design elements, logo placements, packaging types, and other details - allowing you to understand where consumers focus their attention and in what order.

Ad & Message Testing
Your go-to-market messaging and content strategy can make or break your product launch. However, message testing isn’t just about the words themselves - the taglines, logos, and other copy in the ad are just as important as the package and product designs.

Using heatmaps, you can test which ad or message garners the most positive or frequent interaction, and which drives more viewers to engage with the Call-to-Action. Consumers indicate to researchers where the messaging is catching their attention, if that attention is positive or negative, and why they feel that way.

Shelf Placement
Even though most of us are primarily shopping online, the in-store experience cannot be overlooked. Pandemics aside, consumers will continue walking into stores for the foreseeable future. By testing how a consumer responds to different shopping environments, you can understand how to maximize value both for the customer and your brand during in-store shopping experiences.

Of course, the shelf is a critical point in the in-store customer journey. Heatmaps are a great way to understand optimal shelf placement and product combinations that will entice consumers to reach for your products. They can also help with the design of the shelf itself!

These are just five primary examples of how heatmaps can enhance your consumer research to provide visual, data-driven insights. They are a quick, fun way for consumers to provide insights in a survey setting, and make a great addition to any research report.

Start exploring new use cases and research projects with heatmaps! And of course, reach out to the team at SightX to learn more.

by Naira Musallam, PhD
Image of the SightX market research glossary, with graphics and scatter plots in the background.

Market Research Glossary

Diving into the world of consumer and market research can be a challenge. To help, we’ve put together a glossary of some of the most common terms you will come across. 

by Savannah Trotter
SightX

Research Services

Business