Most segmentation suffers from being inside-out. You grab the nearest off-the shelf dataset such as age, socio-economic class or spend and use that as a means to segment your audience whether the data is truly differentiating or not. Unfortunately this approach is not an effective means of segmenting and frequently fails to maximise the true revenue earning potential inherent in your experience.
To understand why this is the case, let’s firstly remember why we are doing segmentation. The whole objective is to find homogenous groups of customers who we can target through crafting a differentiated customer experience that meets their needs and encourages others of their type to use our services. So, using spend, age or socio-economic data alone immediately suffers from the prior assumption that this IS the bases by which our customers hold those differential needs.
Now clearly in some cases that is true but many times it is not.
For us a better way to resolve this problem is therefore to segment on the experience. Hence, food and drink can be adapted to the specific experience in mind, whether this means kegs of beer for Barbeques or expensive wine for a celebration this brings with it greater opportunities for market growth than just assuming the difference is on demographics or spend alone.
Experience based segmentation is not just about the occasion though. It is about looking at finding the best basis for segmentation in the ‘whole experience’ wherever this may come from.
Perhaps segmenting by occasion is best for maximising beer consumption, but maybe there are some other less obvious ways. Take the example of an insurance call centre, perhaps tone of voice is a critical base for segmentation, although customers will never tell you that this was of influence, perhaps subconsciously it is this that provides the best bases for crafting a new experience.
Alternatively, how about something emotionally engaging, a moment of delight perhaps? To give an example, business travellers on a plane might be buzzed by the nice chocolate given out on the flight especially as they are not paying! Will they tell you that was important to their buying decision – probably not – but you need to understand that it is.
Or consider how Harley-Davidson identified their most loyal customers and then created new experiences that resonated with them; experiences that were not down to age, social class or spend but something else related this time to lifestyle.
All we are saying is that the effectiveness of segmentation depends on your information base. So why not use experience research techniques to understand the full experience your customers have with you – whether this is rational, emotional, conscious, subconscious, desired and undesired – and then use that information to craft a differentiated experience.
Management Implications
- Beyond Philosophy recommends running research that gives this full level of information i.e., using Emotional Signature®
- Then segment against this information.
- Then craft and wrap experiences around the most valuable segments based upon their differentiated experience drivers i.e., move from analysis to creativity.
- Understand that there are targeting issues – how do you target bikers buzzed by the Harley experience – but this becomes less of an issue if you focus on the pull of your experience rather than a direct mail approach.
- Critically, we focus also on developing heard instinct; attracting others to an experience means you can grow market word-of-mouth and loyalty.
