segmentation: what’s it for?

There’s a healthy debate going on over at AdAge.com this week — a POV by Michael Fassnacht, Chief Customer Intelligence Officer at DRAFTFCB entitled “The Death of Consumer Segmentation?has prompted a lot of comments.  While the traditional consumer segmentation vs. “self-segmentation” discussion is interesting, I found myself wanting to return to the basics of segmentation.  It seems that, before we debate the merits of any segmentation approach, we should revisit why segment at all.

Broadly speaking, segmentation is a tool intended to guide strategy — but which strategy?  Different segmentation approaches are appropriate for different strategies.

The most common strategy is brand positioning — that is, segmentation is used to help determine how you want people to think of your brand.  You need to determine a prevailing attitude about your category (or frame of reference) which is held by a group of customers that spend enough to make them an appealing target, and then position your brand to appeal to that target mindset.  As such, an attitudinal or mindset-based segmentation is the appropriate approach to use in brand positioning strategy.

It’s important to note, though, that such an approach is limiting when it comes to the development of other strategies.  Media planning relies on primarily on demographic/firmographic and media usage variables, so a segmentation based on those factors is what is needed for media strategy.  In the same vein, customer relationship management relies on primarily on purchase data, so a segmentation based on current purchase behaviors and projected lifetime value is appropriate for CRM strategy.  Segmentation by technology adoption (e.g., pioneers vs. early adopters vs. early majority, etc.) is a useful framework when planning product introductions and product development/life cycle strategies.  And so on, and so on.

So when it comes to segmentation, one size does not fit all.  As such, a debate of the merits of traditional consumer segmentation (that is, in Fassnacht’s words, “brand-controlled segmentation” — i.e., marketers decide which customers they want to engage with) should consider what the segmentation is used for.

Despite the emergence of new ways to engage consumers and the rapid rate of change in today’s business environment, most segmentation approaches still serve the valuable purposes outlined above.

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