Segmentation is the process of dividing the market into smaller groups based on shared characteristics. This can be done using a variety of factors, such as demographics, psychographics, or behavior. Good Segmentation allows marketing efforts to be targeted more effectively for a considerable period of time.
Most popular market segmentation approaches
There are different ways to segment the market. A common approach is to use demographics. This involves dividing the market into groups based on factors such as age, gender, income, and education. Another common approach is to use psychographics. This involves dividing the market into groups based on their attitudes, interests, and opinions. You can also use behavior to segment your market. This involves dividing the market into groups based on how they behave, such as their purchase history or their online activity.
Need for a new segmentation approach
The traditional approaches to segmentation while serving as good starting points, may miss out key motivations and anxieties driving customer behaviour. We were working on a project to segment the South Asian community in the UK for the purposes of planning interventions to improve health outcomes of the community. It was common among health practitioners (in the NHS) to think of the segments of the South Asian community based on their countries of origin or age – Indian, Pakistani, Bangladeshi, Sri Lankan.
However, when we looked at the health behaviour of different groups, we found significant variations within sub-communities (Indian, Pakistani, Bangladeshi, Sri Lankan) and similarities between different communities. Their backgrounds, families and their own experiences in the UK and other factors had shaped motivations and anxieties that determined their health behaviour.
This approach to segmentation – segmentation based on their life journeys – relates to customers as human beings with a deep dive into their life history, family journeys, key events in their lives, aspirations, anxieties and more. This qualitative understanding of a random sample of people from different sections of the society (relevant to the category) unfolds a pattern of key segments that is highly relatable and identifiable. This deep understanding of customers, beyond the category behaviour at present, can help predict their behaviour across categories and time.
We also overlay the traditional demographic variables on these segments to make the segments identifiable and measurable. At times we follow up this qualitative segmentation with a quantitative assessment through secondary/primary research. The quantitative assessment helps validate as well as size the customer segments.
When we present the segments derived from a deep understanding of their life journeys, clients often experience an Aha! moment as they begin to recall people they know well and who behave exactly as described in the segment.
We have used this approach for clients across categories – Accessories, Automotive, Durables, Education, FMCG, Health, Home Decor, Housing, Livelihoods, Technology, Finance and more. We have used it for B2B segmentation as well.
Illustrative example
We were engaged by a client in the UK to understand the attitude and behaviour of South Asian community in the UK with a view to design interventions that help change health behaviour in the migrant community.
We started with the universe of some pre-existing segments that were popularly used. Typically they were based on country of origin (India, Pakistan, Bangaladesh, Sri Lanka), socio-economic groups (religion, income levels, jobs etc) and age groups. We derived a sample from the entire universe of South Asian population in the UK.
An in-depth research based on ethnography, in-depth interviews, group discussions, and observations helped us understand few key factors driving health behaviour in the community. We understood the important factors in the universe of customers – backgrounds before migration, education levels, occupation profiles, importance of language, assimilation into the new culture, age, importance of Asian identity. We also understood how these factors are related to each other.Â
An understanding of the macro environment in the UK (society, politics, economy) helped us spot patterns of relationships between factors impacting health behaviour.
Bringing together insights with days of intense brainstorming helped define a compelling and practical segmentation model that identified three distinct groups in the UK South Asian community with different backgrounds, motivations, anxieties that defined their health behaviour. These segments, shaped by individual and familial life journeys, cut across age, country of origin or socio-economic status.
It is important to remember that market segmentation is a theory, not a fact. It is dynamic and cannot be set in stone once it is done. A lifescript-based segmentation can be valid for 5-7 years, but it must be reviewed after that to account for changes in the market context.
Contact us at monika@higheratwork.com if you have any questions around customer segmentation.
