Retirees currently represent a sizeable segment of the U.S. population. As the baby boomers continue their march toward retirement, the population will get even larger. Firms striving to understand the needs of retirees and near-retirees often focus in on specific groups within the population. They typically apply this focus in a number of ways, examining groups based on their age, gender, asset-level, or marital status. While in some ways this may be insightful, the utility of this approach to grouping is limited. For example, let’s take a closer look at two retirees.
Mary and Janet are best friends who have each saved one million dollars for retirement. They’re both 75 years old, widowed, and healthy. Both rely on their retirement savings to make ends meet. Most firms stop here and match a financial product that would work well for this “type” of retiree, given their demographic profile and asset level.
But, taking a closer look may reveal important and unique qualities that Mary and Janet do not share. For starters, Mary didn’t plan very well for medical care. If she were to take ill, most of her savings could be wiped out. She is also very worried about her financial outlook and is scared of running out of savings.
On the other hand, Janet did plan for medical care so much of her savings can be used exclusively for making ends meet. She is comfortable with her financial outlook and likes to play an active role in managing her funds. So, while on the surface it may look like these women are very similar, in fact, the products they might be interested in for retirement will vary dramatically. Most companies use demographic profiling to target particular customers for their products. But this approach to the categorization of a group of people, based on incorrect assumptions, can often lead to hit and miss results. In other words, harnessing your marketing efforts around only a demographic breakdown of the population leaves a lot of unidentified variables out of the equation, namely, how your customers feel and use you and your products.
SEGMENTING YOUR TARGET MARKET
When it comes to marketing, the goal is to identify new customers and enrich existing relationships. Accordingly, from a marketing perspective, the motivation for segmenting consumers is simple: if one is armed with thorough knowledge of a consumer base, it allows for development of better products, creation of more relevant messaging, and, of course, more successful acquisition of new customers. It allows firms to gain a more thorough understanding of how its brand is perceived relative to its competitors. So what are the most effective segmentation efforts? We will focus on two of the most revealing types of segmentation studies that can be relatively easily implemented by any organization: attitudinal and behavioral.
Attitudinal Segmentation
Attitudinal segmentation focuses on consumers’ feelings, interests, and needs in the marketplace. Armed with the knowledge of how our customers and non-customers think and feel, we can gain a better understanding of how best to speak to our audience, either with engaging marketing programs, better packaging, or innovative new products. Attitudinal studies typically expose groups of people who share a similar worldview in terms of shopping attitudes, the marketplace attitudes, and different perceptions of brands that currently occupy the landscape. Identifying how consumers perceive these fundamental metrics is the first step to quantifying desired benefits, brand equity, preference, and overall brand perceptions.
So, how does one go about creating an attitudinal segmentation? There are two vital elements to keep in mind: Moreover, once the data is in, methodical examination of the population is also essential.
- Semantics matter. Creating the set of questions that are most indicative of significant attitudinal differences is one of the most challenging aspects of segmentation analysis. The wording of the statements needs to clearly reflect all the different attitudes that may impact consumers’ usage, needs, and perceptions. It is also important to make sure that the attitudinal statements are specific and clear, not vague or loaded with a double meaning or interpretation. This adds error to the data and can make the interpretation of the statements difficult to determine.
- Remember the basics. Essentially, we need to be able to determine which segments are best to target given your marketing and sales objectives (e.g., how likely is Group A to buy Product X?). Accordingly, segments must be evaluated in terms of some type of outcome measure which allows us to determine the viability of each of the groups. Also, once the segments have been created, they must be profiled on demographics, usage, and any other descriptive variables that are relevant.
- Finding your target. Once target segments have been identified, further investigation may be required to test if any new implementations (product changes, marketing efforts, etc.) are received favorably. This can be done using an algorithm that identifies segments in market.
Behavioral Segmentation
Behavioral segmentation focuses on how consumers behave within the market. What products are they buying? When and how do they purchase products? With what types of media are they aware or familiar? You can also examine which needs are being met and which are not based on specific attributes about the product or brand. In essence, behavioral segmentations allow you to find out:
- Why consumers like you? While attitudinal segmentation is best used to better plan how to speak to consumers, behavioral segmentation identifies groups with different patterns of behavior. This helps you establish better programs to precisely fit the usage and needs of various groups.
- What consumers like about you? The primary benefit of behavioral segmentation is the ability to identify the specific (sometimes different) product features that are used by various groups.
- What is most useful about you? A common and useful outcome of this type of analysis is to identify features that are critical to consumers’ satisfaction with and loyalty to your products and your brand. Conversely, the analysis will also reveal the features that may be outdated and need modification because no segment finds them useful.
- How do consumers find out about you? Examining media usage is an important step, as it provides knowledge about where to best place marketing efforts.
Which segmentation is best for my company?
The type of study you choose to employ should reflect the needs of the company and contribute directly to your objectives. Although Cogent Research believes both approaches are relevant and actionable, there is some debate as to which approach will provide the most insight: is it better to understand product usage patterns and behavior or the differences in attitudes or motivations among your target population?
Let’s reconsider Mary & Janet for some direction. Given their unique circumstances, it is critical to understand their attitudes toward retirement, particularly with Mary. On the other hand, given Janet’s role in her finances, a behavioral segmentation could also be beneficial. It would allow you to better understand Mary’s fears about running out of money and determine Janet’s needs by identifying the products that would benefit her most.
COGENT THOUGHT
Ideally, the segmentation you chose should align with the ultimate goal of your research initiative. A good rule of thumb is to ask the question, “do we want to understand the behavior of consumers or do we want to understand how consumers think?” What matters most is that the purpose of the research is clearly focused and that the resulting segments can be used throughout the organization to positively impact the bottom line.
