There has been a post-COVID haze as work habits, consumer preferences, and evolving technology have led to rapid changes in where and how people procure goods and how we communicate with them. I’ve spoken with several CEOs recently who have joked about going back to marketing basics as a result. For a while, many companies took a modified ‘spray and pray’ approach because of low CAC and high ROAS. However, technology changes that prioritize consumer privacy, and have led to the need for more first party data, mean that this strategy is no longer cost effective. Finding a reachable and compelling swath of consumers has become more imperative. Segmentation is making a comeback.
The significance of understanding consumer segmentation is vividly illustrated by the contrasting success stories of the Marvel and DC Universe. Marvel and DC Comics are direct competitors and are growing and profitable. They understand consumer segmentation. My younger son is bubbly and outgoing, and he prefers Marvel along with nearly half of all Americans. His older brother is introverted and a bit of a contrarian. He will not go to Marvel movies, preferring DC as do ~10% of Americans (IPSOS, 2017). The remaining segments are other and don’t know/don’t care.
Consumer segmentation helps us attract people who share needs or traits while potentially alienating other consumers. Brands are badges that people use to express who they are and identify those with similar interests. These differences, along with individuals points of view, make people – and brands - interesting. It also makes forming relationships with these brands more compelling and stickier.
The art of segmentation and choosing a target segment can be daunting. Businesses need to choose a segmentation approach that will help them identify a group of consumers who are measurable, accessible, substantial, and differentiable. They also need to consider whether the market is attractive – large enough and profitable, their right to win vs. competition, and their ability to attract and retain these consumers. Counterintuitively, less can be more. Choosing a narrow band of highly motivated and profitable consumers can yield faster traction and growth.
My sons may never agree on the best cinematic universe, making family movie night challenging. However, I continue to delight in their differences and how this compels the brands they choose.