To Understand Your Customers, First You Need to Talk with Them
A robust customer segmentation framework allows companies to better understand distinct groups of consumers for their product – customer demographics, motivations for usage, behaviors and needs.
By establishing a solid understanding of the consumer landscape, brand leaders can then position their brands to win with key segments by tailoring brand communication, product offerings and growth strategies to meet the needs of those target segments.
There are many different types of customer segmentation frameworks organizations can employ. Below are just a few…
- Demographic segmentation framework uses demographic factors such as age, gender, marital status, etc.
- Geographic segmentation framework uses location as an input
- Behavioral segmentation framework uses behavioral information such as number of purchases, products purchased, etc.
- Psychographic segmentation framework uses attitudes, values, interests, motivations, etc.
Each of these frameworks leverage different types of characteristics to create clusters of consumers, and some even require advanced analytics. However, before diving into a massive quantitative undertaking, what I have found most helpful is to first conduct qualitative research among the target audience.
Why Start with Qualitative Research for a Customer Segmentation Framework?
Qualitative research in the form of in-depth consumer interviews, focus groups or online diaries/chats is beneficial for a number of reasons, including:
- Allows teams to tease out characteristics and themes that matter to the target audience when purchasing or using the category
- Allows teams to better understand the customer-defined competitive set/ frame of reference for the product
- Allows teams to build a battery of motivations, needs, information sources, etc. in consumer-friendly language to use in the quantitative phase.
Using qualitative findings, teams can then build a hypothesized customer segmentation framework to pressure test and size with quantitative research. Below is a recent example of a hypothesized segmentation using qualitative research
Example of Hypothesized Customer Segmentation Framework
Insight to Action recently conducted a due-diligence effort among first time parents. A total of 18 high-income online shoppers of luxury baby products were recruited for in-depth consumer interviews. The goal was to understand the different types of online consumers for luxury baby products and their online shopping journey/needs.
Based on the qualitative research, we were able to identify four distinct groups of online shoppers of luxury baby products.
|Value Conscious||Convenient Quality||Style & Innovative Trendsetters||Curated Experience Seekers|
|“I like to get quality products for my baby, but that doesn’t always mean spending top dollar. I look for the best price and discounts to get the most for my money”||“My baby deserves the best, but time is money, so I save time by doing all my research and shopping online – preferably in one site”||“Budget is not a concern for me. I do my research to find the best products with the features and aesthetics I want, so I don’t have to comprise style or functionality”||“I shop for my baby differently – I prefer to shop smaller stores or websites that offer curated, high-quality products”|
Value, Convenience, Feature assortment, and Product expertise/specialty were defining dimensions for product and online retailer selection. While we were not able to quantify the value associated with each segment, this hypothesized customer segmentation framework provided a good starting point for building a deeper understanding of the online baby market target audience, brand perceptions and ways to improve the online shopper experience.
With this information, the client was able to move forward with preliminary targeting recommendations and appropriate dimensions/inputs to include in a Phase II quantitative study.