Segmentation & Targeting

Definition

Segmentation is analysing the differences and commonalities in buyer behaviour in order to identify unique and exclusive target segments of consumers.

Targeting is adjusting the marketing mix to cater for different target segments or choosing not to serve some segments.

Key Findings

  • Law of buyer moderation (a regression to the mean phenomenon): in subsequent time periods heavy buyers buy less often than in the base period that was initially used to categorise them as heavy buyers. Also, light buyers buy more often and some non-buyers become buyers. This naturally occurs even when there has been no real change in buyer behaviour.
  • Users of directly competing brands seldom differ in their profiles.
  • Brand segmentation generally does not exist – substitutable brands usually compete in what for them is a single unsegmented mass market, whatever its overall size and structure may be.
  • The main determinant of competition between brands is their size, not their segmentation, targeting or positioning.
  • More of any brand’s buyers will also buy the bigger brands in the category and fewer will also buy the smaller brands. This pattern is so universal as to be called the Duplication of Purchase Law which holds almost irrespective of the positioning of the brands; it is dictated solely by the number of people who buy each brand (brand size).
  • Deviations from the Duplication of Purchase pattern do sometimes exist, where the sharing of customers between brands is higher than one might expect merely based on the brands’ sizes. Such deviations are called market partitions, but are rare and generally relate to submarkets which clearly are functionally different, such as caffeinated versus decaffeinated coffee.
  • Brands operate in a large, unsegmented mass market, or at least in a large sub-market like luxury cars or dry cat food; and are not restricted to a small segment.
  • Segmentation and Targeting does not guarantee the maximum return from marketing expenditure.
  • Even where Segmentation and Targeting might guarantee the maximum sales response from an individual segment, this does not guarantee the maximum overall response from the entire market. There are always conditions under which segmentation will not necessarily be the most profitable course of action.
  • Targeting is like adding salt in cooking: a little bit can do some good, but using a lot will ruin the dish.
  • Brands, even though they are usually slightly differentiated, mainly compete as if they are near lookalikes, but varying only in popularity.

Best Practice

  • No brand should adopt narrow targeting; brands sell to all buyers of the category.
  • Brands cannot isolate themselves from competition by portraying themselves as different, or even by being different. Competition for every brand comes more from big brands that have many customers, and less from small ones.
  • Not being limited to a small niche means that a brand has more direct competitors: there is therefore more scope, and more need, for plain marketing.
  • Brands should not deliberately and needlessly restrict their market, if it cannot be seen to be segmented with the naked eye from well-presented data (ie without CHAID or AID or Conjoint analyses).
  • Advertising does not seem to create segmentation by differentiating a brand from functionally similar competitors and “adding values”
  • Marketers still need to publicise and sell their brand, make it memorable and look and sound interesting, refresh brand associations, sustain its quality and availability, deal well with complaints, and generally keep the brand salient with purchasers of the category.