Segmentation Study- A Vital Tool for any Business to Succeed

In the dynamic, competitive marketing landscape, no business can move a step further without having a clear picture of the market it is entering into and the consumers associated with it. Marketers hence invest resources in ‘Segmentation Studies’ to understand which consumer segment to target and how to target them to develop tailored products/services, tailor marketing strategies better, design customer experience and tap growth opportunities.

Let’s start with the basics of a segmentation study.

A segmentation study identifies a set of criteria based on which a market is divided into segments, including consumers with homogenous purchasing traits, needs and expectations. The study allows marketers to pick identical benefits associated with the segments so that the most promising one can be focused on to create an effective brand portfolio. The ultimate aim of segmentation research is to design market strategies and tactics for the different segments to optimize products and services for different customers.

All businesses, irrespective of size and the industry it is functional in, practice segmentation study to read consumers’ minds. The first step to the segmentation study is to learn about the various ways a market can be segmented. Segmentation can be of the following types:

• Geographic 

• Demographic 

• Behavioural 

• Psychographic 

Getting started with segmentation study

An effective segmentation study is a high-stakes venture. Hence, it is important to plan the study strategically to obtain high-quality segmentation insights by making optimum usage of a firm’s resources.

• Set Objectives and goals of the segmentation study. 

• Set criteria to Decide the Type of Segmentation to go for. Create a hypothesis based on the identified segmentation variables.

• Design the study through questionnaires to obtain quantitative and qualitative responses.

• Conduct Preliminary Research to familiarize with the potential customers.

• Create customer segments by analyzing the responses either manually or using appropriate statistical software.

• Analyze the created segments and pick the most relevant one

• Develop a Segmentation Strategy for the selected target segment.

• Execute the strategy to identify key stakeholders and Repeat what works. 

How is a good segmentation characterized?

Even though a segmentation study aims to tackle the complexities of a competitive market, a poorly conducted study can complicate things. So, how should an approachable market segment look like?

• It should be relevant and unique

• Measurable

• Accessible by promotion, communication, and distribution channels

• Substantial

• Actionable

• Differentiable 

• Conducive to the prediction of customer choice

• Easy to implement strategies 

Why does segmentation matter?

Looking in time, some of the world's most successful brands have failed miserably in specific markets. Walmart’s low-price strategy and the convenience of finding great deals under a roof, was not much effective in Japan as it is in the US. Hence, after more than a decade in the market, the American retail giant was forced to exit Japan. Likewise, Walmart did not consider the cultural nuances of Germany, specifically in the personal space and had to pull out with a hefty loss. 

Another US giant, Home Depot failed to dip its toes into the Chinese market because the concept of DIY didn't fit the preference of the locals. Starbucks' failure to adapt its offerings to Australia's rich coffee culture proved to be a marketing blunder.

Where did things go wrong? Because each consumer is unique and the ‘one-product-for-everyone' approach has never worked, marketers must thoroughly understand the target segment before entering it. That is the importance of segmentation studies.

Segmentation study allows to focus on a group that matters and to tailor marketing strategies and ad campaign messages that resonate with the needs of that particular segment of consumers. Segmentation insights provide a deeper level of understanding about the consumers to develop better products.

Let us dive into some more benefits of segmentation studies.

• Enhanced customer support

• Enables efficient marketing and better brand strategy

• Enact data-driven changes

• Optimized pricing strategy 

• Better customer retention 

• Unravel new areas to expand in 

• Allows to forecast future trends and shape a forecast model accordingly.

• Ensures higher ROI and CRO

• Helps to stay competitive within a domain.

Pitfalls to avoid during a segmentation study

• Segmentation study being a complicated practice is vulnerable to various common mistakes that marketers and researchers tend to make. 

• Too small or specialized segments are difficult to organize. This can hence disrupt the objective and can yield data with no statistical or directional significance.

• Inflexible segments curb switching strategies that usually costs a lot to the firm.

• Not evolving with the dynamic market trends and remaining too attached to a particular segment defeats the whole purpose of a segmentation study.

Let us see how Borderless Access helped a leading media channel find out a potential audience to target with the following case study.

Case study: Segmentation study to yield qualitative insights about audiences’ behavioural traits against quantitative demographic data

This case study describes how BA Insightz helped our client obtain in-depth insights about a spectrum of attributes of each audience segment of the Subscription Video on Demand (SVOD) category. 

A leading entertainment channel leveraged the research expertise of Borderless Access to segment SVOD users and obtain game-changing segmentation insights. The objective of the study was to understand the general streaming behaviour of each of the audience segments in the US to tap the opportunity hence created. 

Subscription video on demand (SVOD) is a subscription-based service using which consumers can access pre-designated video content, streamed through an internet connection on the service provider’s platform at a certain chargeable fee. SVOD gives users the freedom to select the video content they prefer to watch in this service and consume at convenience.  Hence, we can say that consumer preferences, to a great extent, design SVOD services. Here comes segmentation into play as to know consumer preferences better, they need to be sorted based on several defined criteria.

The Borderless Access research team, BA Insightz, had employed a hybrid method of assessment in the geographical region of the US to yield the desired insights about the attitude and behaviour of current SVOD users from the lens of the consumer segments. 

Measures Used for Segmentation

Following are the measures used for segmenting consumers, plotted against demographics and behaviour to identify the unique features of each of the segments.

• Psychographics

• Attitude towards Technology

• Streaming Behavior

• Personality Statements

• Media, Social & Cultural Attitudes 

• Attitude towards Content

Variables Used for Segmentation 

Each measure stated above was then given a set of criterions such as preferences, varied interests and perceptions. 

The target group, subjected to a set of criteria furthered with categorizing the target audience into 5 actionable segments covering the spectrum of demographics as well as psychographics in the SVOD landscape.

Primary target segments 

• Streaming Advocates (16%)- This segment consisted mostly of mid-aged couples whose top watch list contains movies streaming and live and recorded TV shows.

• Exploring Early Adopters (22%)- This male-dominated segment likes to explore almost all types of content except news. 

Secondary target segments 

• Conscious Original Seekers (22%)- This has a greater number of females who are interested in TV shows and movies.

• Trend Followers (21%)- This segment mostly has young males and females who showed interest in all types of content including sports.

Tertiary target segments 

Legacy Loyalists (19%)- A female-dominated segment that inclines more toward live TV shows and news.

Findings

• Each segment has been studied thoroughly and the following are the key findings-

• Streaming advocates and exploring early adopters should be the key segments to target.

• Exploring Early Adopters’ and ‘Streaming Advocates’ can be the target groups for kids’ content.

• All except ‘Exploring Early Adopters’ can be targeted for mainstream content.

• ‘Exploring Early Adopters’ and ‘Streaming Advocates’ can be the potential targets segment for any new online streaming services.

• The high price of SVOD services is one major factor that stops the segments- ‘Exploring Early Adopters’ ‘Conscious Original Seekers’ and ‘Legacy Loyalists’ from continuing the streaming services. 

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A wide range of content is a prominent reason behind consumers continuing with the services.

With SVOD, as we see, consumers are increasingly calling the shots. Hence the marketers should laser-focus on the customer experience to keep satisfaction and engagement levels high as streaming services flourish. Customer-centricity is the way to go for SVOD service providers.

BA Insightz – our consumer research vertical, helped the client with in-depth insights into each audience segment about attributes such as streaming behaviour, entertainment and content consumption habits, triggers and barriers for streaming, and most important, opportunities to tap into each segment. 

The insights can be used to access and define the audience segments, thus helping the client deliver exceptional and consistent customer experiences, improved consumer engagement and a key opportunity to stand out. 

Final Thoughts

Segmentation can be tricky and complex. However, segmenting your customers can provide tremendous returns when compared to ‘one-size-fits-all’ approaches. Segmentation study defines target audiences and ideal customers; identifies the right market to place a product/service, and allows designing effective marketing strategies.