What is Market Segmentation Research?
In this blog, we look at how market segmentation can help a business identify different consumer profiles within its existing and potential customer base, and how that knowledge ultimately improves sales.
Table of Contents:
- What is market segmentation research?
- The benefits of market segmentation
- Types of market segmentation research
What is market segmentation research?
Market segmentation research takes a sample of people who are representative of a particular target market and then divides them up into segments. Within each segment, individuals share certain traits, needs, or attributes. The most common types of segmentation revealed by market research are:
What customers are looking for in a product. This will include needs that are currently being met, as well as unmet needs that can be tapped into with new products - such as what consumers need out of a breakfast cereal (energy, taste, convenience).
Need-based segmentation is considered the gold standard in segmentation work. That’s because it closely explores what consumers actually want and need out of products and services, making the segmentation outcome super actionable for brands.
What customers do. For example, how much breakfast cereal do they buy per month? How many different varieties of cereal do they have in their kitchen cupboards? How do cereal product choices differ by household members?
How customers think. How do attitudes towards health and wellness impact breakfast cereal purchases? What about practicality? Which emotional associations do consumers have with cereals?
*Behavioral and attitudinal segmentations are often grouped together into ‘Usage and Attitudes’ surveys, as behavior and attitudes are closely related. These types of studies are often referred to as psychographic segmentation studies, focusing on consumer attitudes and values.
Who customers are. Their age, life stage, gender, social class, and where they live (as a few examples).
Often demographic segmentations aren’t enough in themselves to define different segments sufficiently. That’s because individuals tend to show more similarities based on their attitudes and behaviors, not on surface-level characteristics. Demographic information can be used as a secondary means of defining segments, but at their core, segments are better defined by needs, behaviors, and attitudes.
The benefits of market segmentation
Market segmentation moves beyond seeing a customer base as one mass of people toward a deeper understanding of the differences between separate clusters of consumers. While two consumers might be buying the same product, they could be doing so for completely different reasons. Gaining an insight into what those reasons are will reveal how a business can best encourage people to buy into, or more of, a product or service.
More relevant messaging
Knowing who your different groups of consumers are means you can talk to each in the right way. What motivates one group might be different from another, so customer segmentation means you can tailor product development, sales, and marketing strategies accordingly.
Let’s consider a scenario where there are two people who buy the same product but for different reasons. Imagine that both are 45-year-old men and both are in the market for oatmeal. One is buying it because his children love eating oatmeal before they go to school, so he wants a quick-cook product that pours easily from the box and into which he can stir blueberries for one child and honey for the other. He needs something that doesn’t spill everywhere while he’s rushing around the kitchen getting his kids ready for school. The other male consumer is taking his oatmeal into the office and eating it at his desk, so he wants individual pouches that he can grab from home in the morning and then heat up in his office microwave. He needs an oatmeal product that is quick, convenient, and will power him throughout his workday.
These two consumers appear identical on the surface in terms of age and gender, but have two totally unique needs: a product that kids love and that is versatile enough to have other ingredients added to it, and another that is quick and convenient. Brand communication to each of these various oatmeal consumer segments will need to reflect different values and needs to make each consumer feel that the product is right for them.
Tailored messaging tone
Aside from defining the right content of messaging for each group of consumers through segmentation, the method can also be paired with Personality AI to develop the right tone of the messaging. Personality AI is a tool that measures specific personality traits using just one single question. Using this method in conjunction with segmentation allows a brand to map each segment’s personality traits, and use these findings to tailor messaging with the right tone of voice.
Going back to the oatmeal example, let’s suppose one segment is classified as extraverted through the Personality AI tool; for this segment, messaging that is fun, loud, and attention-grabbing would bode well. Meanwhile, Personality AI may identify that another segment ranks high for conscientiousness, so using messaging that is more reserved, focused, and serious might work better for this group.
Standing out from the competition
As seen above with regard to relevant messaging, in-depth knowledge of consumer motivations, needs, and behaviors help make consumers feel heard and understood. As a result, consumers will gravitate toward the brands they feel effectively reach them. A key part of segmentation is identifying the language used by customers; if this is reflected in brand positioning and communication, they are more likely to feel that the brand understands them and that the brand's offer is most relevant amongst the competition.
Improved brand loyalty
Quite simply, when customers feel a brand understands them and meets their needs, they’re more likely to remain loyal to it. Loyalty means a steady stream of income for brands, making segmentation investments well worth it.
Lower acquisition costs
Leveraging segmentation means understanding who people are and what they're like so you can acquire and reach the appropriate group of customers right from the start.
Segmentation can also reveal where customers get information about a brand so that businesses can tap into the channels where the messages will be received. Digital channels such as social media are instrumental in marketing, so if you know where each of your segments is spending the most time digitally, placing messages in those places is a relatively low-cost way to attract new customers.
Driving growth and profit
Knowing each segment in depth helps a brand stay on track with its marketing communication and market development. It identifies which groups are ready to buy more from a brand, which require new products to stoke their interest, and which groups already have what they need and are less likely to spend.on the subject of spend, segmentation also helps identify which price points are likely to appeal to different groups of consumers so that pricing can be set appropriately.
Types of market segmentation research
Segmentations can be carried out through a number of methods, as detailed below.
Quantitative survey research
Perhaps the most common, respondents are interviewed via an online quantitative survey and then responses and demographic data are analyzed using cluster analysis algorithms. Depending on the questions asked, results show how groups differ in terms of factors like behavior, needs, attitudes, and price sensitivity. They also show the relative size of each segment, useful for knowing how valuable a group of people will be to a brand.
Research using company data
Many businesses collect a lot of data on their customers and this can be put to good use in segmentation studies. Much of this type of data reveals purchase behavior - what people buy, where they buy it, how often, and how loyal they are. While it is limited in revealing more emotional dimensions of consumer behavior and limited to just consumers of that brand rather than the entire market, it can be a good starting point for further research.
Qualitative research is adept at putting the ‘flesh’ on segment profiles and is usually carried out in conjunction with quantitative research. It can be used to explore customers’ needs and attitudes before quantitative research, as well as to provide a fully rounded picture of each segment once quantitative research has established what the segments are. As such, qualitative research on its own is not a substitute for quantitative segmentation research, but works great in partnership with it.
Focus groups, in-depth interviews, and ethnography studies are the main qualitative methodologies used for segmentation. All of these allow respondents to explain in their own words what they think, which is invaluable in collecting consumer language for communication strategies. Ethnography even allows researchers to ‘live’ the customer experience as respondents demonstrate how they use a product or what their need is.
quantilope's approach to segmentation research
With quantilope, you can conduct a need-based segmentation study through the online platform from start to finish. Start by selecting respondents from your target audience, then decide on the questions you want to ask in the survey. This stage takes some thought, as you need to make sure your questions reflect the type of segmentation you would like to achieve, and quantilope consultants are always available to help, should you need it. Once responses start coming in from the survey, quantilope’s AI-driven analysis tools will sort respondents into groups of customers and define how they differ from each other.
To gather consumer language and gain a more in-depth experience of consumer attitudes and usage, quantilope’s video research solution, inColor, provides a qualitative lens to segmentation work. Video footage of consumers brings segments to life, and emotional and facial analysis help unearth subconscious needs and views.
To learn more about quantilope's automated, need-based segmentation, get in touch below: