The dangers of doing traditional segmentation and targeting poorly are right in front of us at this moment. Retailers of every stripe, from Costco to Target, are currently going through their version of “Stranger Things,” living in a world turned upside down. Despite inflation and double-digit cost increases, retailers are offering deep discounts in an all-out effort to clear the inventory overflowing in their stores and distribution centers. These surpluses are decimating retailers’ working capital and share prices, with no end in sight.
In this era of big data and real-time dashboards, how can retailers and brands have misunderstood their customers’ desires in such a big way?
Marketers and researchers have become heavily focused on understanding and targeting people based on near-term information – current purchases, social posts, comments, and what’s trending. But these data streams leave out key information and perspectives essential for decision making. And they focus on short-term “hits” rather than broader, sustained growth. Selling mass quantities of one or two SKUs to narrowly defined consumer groups will not be enough to drive big-name brand success over the course of three, five, or ten years.
The good news is that, when applied correctly, the building blocks of segmentation give us essential learning that we can leverage to take on that bigger brand picture. Done well, we can play both sides of the game, using some of the same information to achieve narrow targeting wins and longer-term brand acceleration.
So how do we get segmentation right in this age of increasingly complex consumers and almost unlimited brand interactions? First, we need to segment more effectively – and then reach across those groups to find commonalities for broader product and marketing outreach. Here are four essential steps for getting this new approach to segmentation right.
