We often hear from clients that they have spent a lot of time and money developing a segmentation model, and yet are struggling to find ways to make it relevant to their business. Unfortunately, not all segmentations are created equal — and different segmentation types are relevant to different business problems. One of the biggest mistakes we find is that people develop purely descriptive segmentations and expect them to inform all their business problems. However, it’s not always enough to say what people within a segment are like. To remedy this we often recommend a two-layer approach, combining a descriptive segmentation (with an emphasis on motivations and gap analysis) with a reach strategy, an optimum way to reach individuals within key descriptive segments through targetable attributes.
- Descriptive Segmentation: The first layer we propose is to develop a descriptive segmentation that allows us to discuss, reason and quantify the primary groups of interest. In addition to the usual attitudinal and behavioral factors typically included in such descriptive segmentations, we recommend including a motivational dimension, that measure what factors motivate individuals to participate in a relevant activities, e.g., purchasing, community involvement, etc.. From this we are not only be able to describe and size the segments, but we are able to identify gaps that show where the current offerings are meeting the motivational needs of individuals, and where there is opportunity for deeper engagement.
- Reach Strategy: While descriptive segmentation is a powerful tool for describing segments and reasoning about opportunities for improved penetration, the factors used are often not targetable from a marketing viewpoint. We recommend that a reach strategy algorithm is developed in order to inform how best to reach specific groups of interest. While this is informed by the descriptive segmentation, it is distinct from it as it focuses solely on targetable attributes. Often, this insight can be joined with database information to develop concrete targeting strategies using CRM or other commercially-available data.
- Descriptive Segmentation: In addition to standard demographic and geographic questions we include short batteries of Likert scale attitudinal and behavioral questions. These are analyzed in the usual way through Exploratory Factor Analysis (EFA) and rotation. These question sets are often augmented by a Discrete Choice Exercise in order to measure motivational factors. Respondents would be grouped into segments using standard clustering techniques.
- Reach Strategy: Reach strategies are then developed by using appropriate analysis techniques, e.g., Tree Analysis (CRT, CHAID or similar) to identify where to find segment members based on targetable factors that optimize a specific variable (e.g., likelihood to purchase or participate in offers). Strategy can be documented and reach efficiency (effectiveness) measured through ROC curves or similar.