Thursday, April 30, 2009

Consumer Segmentation?

Two weeks ago I published an article with the title “The death of Consumer Segmentation?” in AdAge. I argued primarily that quite a few marketers don’t balance sufficiently their focus between an increasing sophisticated consumer segmentation approach and the enablement of self-segmentation by consumers. A lot of marketers are wasting investment dollars by trying to micro-segment their consumers in smaller and smaller clusters without realizing that today’s consumer are tougher and tougher to be identified within one particular stable segment for a longer period of time. 

The article got quite a few reactions, a lot of positive comments but also a significant amount of negative comments. The negative comments focused on three main areas:

  1. The title of the article was misleading, since the article itself did not postulate the end of consumer segmentation but rather some of its limitations. My reply is that the question mark in the title was a true question mark. The answer to the question: “Is Consumer Segmentation dead” is “No, but…”. It’s amazing how many marketers fall into a knee-jerk reaction of defending their age long efforts in consumer segmentation work without reflecting sufficiently on its limitations in today’s world.
  2. I supposedly misunderstood what Consumer Segmentation is trying to do. I don’t think that this correct. I did not argue against building Consumer Clusters based on similar geo-demographic, attitudinal, needs-based, psychographic, or behavioral dimensions to better design segment specific products or services or even tailor communication against these segments. I did argue against the tremendous expense into huge database solutions that allow for targeted communication against smaller and smaller consumer clusters without immediate application. I did not speak against behavioral targeting that builds real-time or near-real time insights that can be leveraged against the needs of a particular consumer. But this approach has less to do with consumer segmentation and more with executing 1:1 marketing based on individual, non-aggregated consumer behavior.
  3. Some comments claimed that I have not done any real consumer segmentation in my professional life. I am always amused that the blogosphere is a favorite domain of disrespectful and unprofessional comments. I always believed that the loudness of one’s voice (which is in the blogosphere equals the usage of insulting and derogatory terms) has an inverse correlation to the soundness of the argument. The first segmentation project in which I participated was one for a large automotive brand in the early 90ies, later on I was fortunate enough to co-lead the Lufthansa Miles & More program for which we did regular member segmentations against a member base of close to 10 million members. All together I was able to witness or lead over 50 segmentation projects, some very successful, some wrongly designed, some with moderate impact. I definitely learned quite a bit over the years. And I am still learning. 

The role and function of consumer segmentation will continue to be an interesting one in our marketing discipline. Consumer segmentation is not dead, but its usage and its application will continue to change dramatically. And it will be more and more challenged by consumers who defy any true segmentation methodology and who prefer to self-segment themselves.


Anonymous Paul M. Banas said...

I think you may have been hearing from a great deal of people with a vested self interest in large and expensive survey based consumer segmentations.

Segmentation itself is not obsolete, but when we can gain good insights from clustering consumers into behaviorally based segments from digital or Nielsen/IRI panel data fairly quickly and cheaply, the days of lengthy and expensive custom segmentation studies are starting to fade.

And your point about the marketing utility of such data sets, with the exception of digital or some forms of CRM, is a good one as well.

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Anonymous Anonymous said...

I recommend to your critics a pithy quotation by John Kenneth Galbraith: "The conventional view serves to protect us from the painful job of thinking."

As always, Herr Fassnacht, I appreciate your willingness to think about questions that others assume were answered long ago.

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