Three Ways to Conduct Smarter Segmentation Research

One reason many segmentation studies are underutilized is that market researchers and their research partners fail to understand the many ways this rich information can be leveraged.

After a segmentation study, we tend to focus on putting individual members into specific buckets. Sounds logical, right? But, there are a number of ways to determine segment assignment, and, if pushed, these tools can provide us with even more information. The more we can get from a segmentation study, the more useful it can be across an organization.

Here are three ways your segmentation can make a greater impact in your organization:

1. Keep Sight of the Big Picture

The primary goal of a segmentation study is to determine whether the market of interest contains meaningful subgroups that require different marketing efforts. The answers to this question can influence not only messaging strategies, products and brands but also the organizational structure necessary to meet these needs. While being able to predict segment membership is important, keep sight of the big picture by making sure the structure providing those segments is also providing the necessary insight.

2. Use Probabilistic Membership to Increase ROI

Most market researchers focus on the specific segment to which an individual is assigned, either through a short survey or a database scoring tool. Although these procedures provide a specific segment membership for each individual, they also provide the probability that they might be a member of another segment. That is, segment membership is assigned to the segment to which the individual has the greatest probability of belonging. Leveraging these probabilities rather than segment membership assignment provides additional ways to gain value from the segmentation findings.

When we project segment membership onto a database, we can use this information to determine targeted marketing efforts. Knowing who is in which segment leads to efficient use of marketing dollars, as there is a greater likelihood of response when the effort is targeted to specific segments.

However, using segment probability can lead to even greater efficiencies. Sorting individuals by probability of membership in a targeted segment will identify the individuals most strongly defined by the segment characteristics. Targeting these individuals will likely lead to greater response to a specific offering. Depending on the response among these individuals, the marketer can decide whether to expand the offering to others within that segment.

Conversely, there are times when a target segment is small, and we need to identify viable targets beyond that segment. Sorting by segment probabilities among members of other segments will identify those in other segments who may share enough similarity to the target segment to be open to the offer. When marketers are looking for the largest ROI on their direct marketing budgets, it is clear they should use the probability of segment membership.

3. Put a Face on Your Segments

Initially, it can be challenging for clients to understand or fully embrace segments. To enhance true buy-in across an organization, market researchers can leverage probabilistic membership to humanize segments. Using a recent project as an example, we sorted the probability of predicted segment membership and presented cases that were most representative of the different segments. But, it was the act of putting a real name and a face on each segment that validated the solution for our client.

Going beyond simple membership information to leverage information about the probability of segment membership will increase the value and utilization of your segmentation research. What can probabilistic membership do for you? Contact me at ray.reno@marketstrategies.com.

This entry was posted in Research Trends, Segmentation and tagged , , by Ray Reno, Ph.D.. Bookmark the permalink.
Ray Reno, Ph.D.

About Ray Reno, Ph.D.

Ray Reno is a senior vice president and senior marketing scientist in Market Strategies International's Marketing Sciences Group. He is recognized as a creative problem-solver with extensive training in analytics and methodology, as well as a keen understanding of the consumer and brand issues businesses face. Ray specializes in the design of consumer segmentations and market frameworks, assessment of the differentiation of brand equities and the identification and quantification of potential brand value propositions. Prior to joining Market Strategies, Ray served the Chicago-based consulting firms of McKinsey & Company and Envision as a marketing/branding expert within the pharmaceutical, insurance and service industries. He also served the University of Notre Dame as an assistant professor of social psychology for seven years. Ray earned a Ph.D. and master's degree in social psychology from Arizona State University as well as a bachelor's degree in psychology and English from Adrian College.

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