The importance of consumer insights and needs for your consumer segmentation

Recently I had the chance to study the consumer segmentations of several big consumer goods companies. To my surprise the majority of the companies were still using a relatively unsophisticated consumer segmentation mainly based on demographics. When I asked the marketers why they used this kind of segmentation they told me that they prefer leveraging the demographics over consumer insights and needs since it is easier and quicker to design a segmentation in that way, furthermore it simplifies the quantification of segments. I argued that it is true that it is usually quicker and easier to quantify but really how efficient is it? I.e. how well does it enable me to design a product according to a consumer segment's needs? How much money is wasted in reaching my target consumer segment due to too wide targeting? They didn't have a straightforward answer to those questions. In the following paragraphs I would like to further elaborate on the advantages and importance of designing your consumer segmentation based on consumer insights and needs rather than demographic consumer characteristics.

The importance of designing a great consumer segmentation cannot be overstated. At the roots of every marketing activity, of every successful company is a consumer inspired segmentation.
The consumer segmentation can and should guide you during every stage of the commercialization process: from product portfolio decisions, to product design, communication strategy, instore strategy, promotional strategy and many more. If a company truly wants to serve it's consumers than every action and decision should be inspired by the consumer segmentation and profiling.

One of the biggest advantages of a need based consumer segmentation is that it enables you to integrate key consumer insights into the segmentation. Essential elements like category usage, consumption habits, product benefit preference, shopping habits should be an integral part of a need based segmentation and can in part influence many marketing decisions from product design to media targeting choices. For instance when a snack producer is developing a new product it is more important to know their target segment's snacking habits (at home or on the go?) than just it's gender and age.

The importance of having a good consumer segmentation in place is especially relevant with today's increasing importance of digital media. Digital media allows advertisers to target their consumers in levels of detail that were previously unimaginable. Having a comprehensive need based consumer segmentation in place helps you to fully utilize and profit from this targeting potential.

The main reason many companies and marketers still prefer to use a demographic based consumer segmentation is the assumption that a need based segmentation is hard or in some cases not at all quantifiable. This assumption combined with the human brain's preference for the easiest solution and the tendency to jump to conclusions means that a lot of opportunities are missed by not having the right consumer segmentation in place.

Designing a consumer need based consumer segmentation does require more effort and resources than a demographic based segmentation. But it does not mean you cannot quantify your consumer segments. Modern day's marketing research solutions allow you to come up with a robust consumer segment size estimation and thorough profiling. Furthermore today's media platforms and targeting options also facilitate easier execution of your need based consumer segmentation. Therefor in my opinion it is definitely worth as a company investing more time and resources in creating a need based and insight grounded consumer segmentation.

Posted by Remco van Kuijk, Managing Partner

2013-02-12

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