Best Practice Customer Segmentation Drives Top Value
It’s rare to see a leadership team who is confident their brand’s customer segmentation delivers the seven outputs that are highly impactful. When evaluating customer segmentation consulting services, make sure to consider these best practices.
A careful review of these outputs and their related questions will help ensure your organization drives top value from customer segmentation.
- Actionable, quantified target: What is the quantified, actionable and clear picture of the brand’s target customer segment? Is the target customer the same as the purchaser? How much revenue and profit upside remains for your brand with this customer segment?
- Priority usage need state: What’s the most important usage need state or occasion for your brand?
- Priority shopping and purchase occasion: What’s the most important shopping and purchase occasion for your brand?
- Brand portfolio target: If your organization has a portfolio of multiple brands, how is each strategically positioned against distinct customer segments and need states?
At the next level, for organizations with the data and insights to answer the first four questions, there are three additional considerations for a leader to examine to make customer segmentation the most successful:
- Alignment: Is your leadership team aligned and excited to focus on this target customer, usage occasion, purchase occasion and their brand’s strategic role in the portfolio?
- Gut level understanding and persona: Does your team have a gut level understanding of the target customer and a picture of their broader life situation, i.e., a customer persona?
- Integration with brand plan and strategy: How integrated is the target customer, usage need and shopping and purchase need state thinking within the organization’s brand plans and its innovation strategy?
Customer Segmentation Consulting Output 1: Focus and clarity on an actionable, quantified target
The customer segmentation consulting output that is needed will include:
- size of the segment
- incidence in the population
- amount of spending each segment controls
- mix of products and services they purchase
- price point and package choices
- segment shopping habits
- segment motivations and demand drivers for the category (this element is especially critical)
The customer segmentation consulting firm acts as a partner to design the research, lead the analysis and ensure that the work delivers against the most important goals.
Because the same customer will take different approaches depending on their category involvement and other considerations, selecting the correct category frame of reference is critical to the segmentation success. This is one area where a customer segmentation consulting partner can provide helpful perspective.
For instance, a segmentation that defines Velveeta’s category frame of reference as “cheese loaf” is too narrow to be actionable. A segmentation that defines Velveeta’s frame of reference as “foods with protein” is too broad. In the Velveeta example, “cooking cheese” is the appropriate frame of reference.
Another important early question is whether the product is primarily an individual purchase or a household purchase (for use by many in the household). The PGS (primary grocery shopper) may be the correct focus for a household purchase such as toilet paper, but may not be the right focus for individual consumption products, such as hydration beverages like Gatorade. The correct approach will vary by category.
In a typical circumstance of a broadly-used consumer product segmentation, there will be between four to eight customer segments in the market, with a wide range of motivations, behaviors and characteristics, such as their demographic profiles.
The customer segmentation consultant can work with the team to select the segmentation solution and to follow a criteria-based approach to selecting the most relevant target segment. These criteria typically include the attractiveness of the segment (e.g., spending, premium interest, brand loyalty) and also consider the brand’s position in the market and its capabilities to deliver against the customer’s needs.
Customer Segmentation Consulting Output 2: Prioritized usage need state guides innovation and marketing
The usage need state is the occasion when the brand (or its substitute products or services) is deployed. Many innovation teams work with an unmet need in a usage occasion, or “problem to solve,” in addition to a customer target. Some even ignore the target customer and focus exclusively on the usage occasion, which we believe is a mistake.
In some categories, consumers have multiple usage occasions throughout a day, and it’s important to carve out a distinctive brand positioning in a usage occasion, along with a distinctive segment of target consumers.

Beverages provide a good example– at one level, they all provide hydration. It is evident that there are many benefits beyond basic hydration.
For instance, energy drinks provide extra energy, often through caffeine and sugar (or high fructose corn syrup), along with other ingredients like ginseng and vitamin B. The target customer may be a student in a late-night study session who needs to power through it, or a worker looking for a mid-afternoon energy boost.
Gatorade describe its athlete target and usage occasions:
“we offer sports science & hydration innovation to help athletes fuel, recover, and perform.”
By comparison, a mom may provide her child with milk as a beverage at breakfast with a usage occasion of a healthy, nutritious start.
While it may be the case that the same mom will also have an energy-seeking occasion and choose an energy drink, or work out and choose a Gatorade, she will have a different frequency of occasions than the college student or the athlete who works out more than four hours a day.
Part of a customer segmentation consulting engagement is to work with your team to determine the correct balance between customer targets and usage occasions. We’ve typically seen teams successfully identify the “sweet spots,” or the intersection of the two approaches to focus on long-term strategic growth opportunity areas.
Customer Segmentation Consulting Output 3: Shopping and purchase occasion focus
Today, shopping starts online for many categories, but the shopping occasion is still another important consideration.
For parents of infants, diapers can be ordered online through a diaper delivery service, but if diapers are really needed, an “emergency” store shopping trip may be required. Another example is the “fill in” trip that is needed to replenish fresh milk or eggs.
These trips are different than a “shopping expedition” to a store like Costco, where there is an expectation of spending more time (and more money), along with discovering new items that weren’t on the mental or physical shopping list.
The shopping and purchase occasion may or may not be more or less relevant, depending on the product category. At the minimum, we’d suggest understanding where the product is purchased as part of the customer segmentation model.
Customer Segmentation Consulting Output 4: Distinctive targets for each brand in the portfolio and an optimized overall brand portfolio
It’s not uncommon that a company has multiple brands in the same category. The customer segmentation should provide clarity around distinctive targets for each brand.
In one situation, two brands might target the same customer segment, but focus on different usage occasions. In another instance, two brands may target different customer segments and the same usage occasion.
Sometimes, to avoid overlap with another brand, a brand team may need to choose the target customer segment and usage occasion that makes the most sense for the overall organization. This might be a different segment than the one they would select if they were in a stand-alone company.

For example, the Banana Boat and Hawaiian Tropic brands chose to focus on distinctive customer targets, since they are part of a common corporate brand portfolio.
Banana Boat focused on “Alex and Alicia” as a target, adult men and women with active outdoor lifestyles and a commitment to prevent sunburns and sun damage. Hawaiian Tropic focused on “Angelique,” an indulgent sun and beauty seeker (woman). The team pushed the brands apart strategically with this portfolio approach.
In the brand portfolio case, each brand team can be expected to advocate for the most desirable target, and this can result in overlaps. Customer segmentation consultants will work with the teams to find a solution. If a decision is made to allow overlaps between brand targets, this should be accompanied by prioritization and understanding of why each brand is needed for the overlapped customer.
Customer Segmentation Consulting Output 5: Alignment from deeper understanding of the target customer segment
A conceptual understanding of the customer segmentation and target customer comes from analytics and market research insights. But that’s not the same level of understanding that comes from hearing the voice of the customer. Some of the best leaders we’ve worked with have invested so that their entire marketing and sales team get a gut-level understanding of the customer, usually by observing the target customer first hand.
This understanding is typically achieved by attending a focus group together or through ethnographic store or home visits. For instance, when Insight to Action worked on a sun care segmentation under the leadership of Gary Cohen at Energizer Personal Care (now Edgewell Personal Care), the brand and advertising agency teams traveled to attend qualitative focus groups in Florida with the target customer segments, rather than just reading the report or watching video clips. The teams also made store visits to observe the retail environment and shopping consumer. This led to an aligned gut-level understanding of the target customer for the Banana Boat and Hawaiian Tropic Brands.
This deeper, gut-level understanding is not that common in recent years.
Even prior to COVID, given the low cost of online research and budgets, most organizations have migrated to online surveys (with little or no live dialog), or to attending online focus groups.
While remote techniques are cost effective and convenient, many managers will agree that the collaboration and interaction is not at the same level of insight.
One of the most helpful practices after attending focus groups was to debrief together as a team and share perspectives, considering both “what they said,” and “what they meant.”
Customer Segmentation Consulting Output 6: Customer personas shared throughout the team
It’s well known that storytelling and stories are essential to learning. Translating the statistics and data about a customer segment into a persona is a typical approach. At the risk of stating the obvious, this translation should be done intentionally, and it should be grounded in the data.
We previously explored the example of the NatureSweet tomato brand, which personified their target customer as Ana, a mother of 3. CEO Bryant Ambelang explained:
“All of our associates know who Ana is, and have seen her picture. It’s important for the brand that they connect to our customers in a really tangible way.”
There are also pitfalls to avoid. The name of the segment, and the target customer, and how they are pictured is important. One consumer products team made the mistake of naming their target customer segment “Sad Sacks” and showing a droopy stick figure as the illustration. Needless to say, no one was interested to invest in this target segment. As the insights vice president observed, one of the best practices is to name the target segment in a positive, or at least neutral, way.
Customer Segmentation Consulting Output 7: The practice of integrating customer segmentation into planning and management dialog
To be effective, the customer segmentation mindset needs to move beyond the analytics and insights teams to be adopted and integrated with marketing, innovation, research and development, customer experience and sales. Reinforcement from c-suite leaders, such as Gary Cohen and Robert Eckert, is needed to bring the thinking forward in managers’ minds.
One of the first customer segmentation initiatives that I had the privilege to work on at The Cambridge Group was at Kraft, then under the leadership of Robert Eckert. As customer segmentation consultants, we worked with individual brand teams, such as Philadelphia Cream Cheese, Velveeta and Cracker Barrel. This customer segmentation consulting effort ultimately included several segmentations, as cooking cheese is used very differently than snacking cheese.
The segments were first introduced to the brand teams in a meeting of more than 100 marketing and insights leaders.

The number stands out in my mind. For the meeting, my colleague, Gloria Cox and I needed to get more than 100 hard copies printed of the 100-page, and ended up needing to wheel these copies into the meeting using dollies.
After the initial orientation meeting, our consulting team worked with each brand team in workshops to identify their customer target, and the specific goal with this target segment. We then built this into their annual brand plans, using a “bottom up” approach. There were over 20 workshops needed.
On a parallel path, from a “top down” leadership standpoint, Mr. Eckert made a point to specifically inquire about the customer segment target when in more casual dialog with brand teams, and when formally reviewing the brand plans.
With this “top down” reinforcement, along with the “bottom up” work, the customer segmentation was well adopted and integrated into Kraft brand plans. After this effort, the Kraft insights internal lead, Sue Ellen Bohac, went on to form her own customer segmentation consulting firm.
These seven customer segmentation best practices are crucial to getting the most out of your brand’s potential. Customer segmentation done right requires discipline, expertise and company-wide buy-in.
For more perspective on customer segmentation, visit our resources page. Or contact us to start a dialog.