First, let’s talk about obtaining insights. Marketers today are the kings and queens of data analytics. Every spec of small to big data is being used to derive the nuggets of knowledge that give a competitive edge. Marketing strategies are becoming less about demographics and more about psychographics, the ways in which people’s choices are driven by their interests, attitudes, values, and desires.
In a world where media and advertising influence the way consumers interact with products, marketers have shifted from simple demographics to more complex psychographics and behavioral segmentation principles.
Think of it like this. Previously, businesses would cut their customers into demographics: a simple look at Jane Doe, who makes a median household income, is a single college graduate, lives in the suburbs, owns one car, and spends X amount of dollars on Y products/categories.
Today, segmentation allows us to truly understand Jane, not just list facts about her. Although Jane lives in the suburbs, she aspires to one day own real estate in a more urban environment. However, she is saving money so that she can enjoy her current disposable income while saving for her future.
Segmentation allows us to paint a picture of who the customer is. By understanding the mindset of Jane Doe, we can now develop insights and, subsequently, a brand strategy that is most likely to resonate with Jane at this stage of her life. Because Jane is cost conscious, she is deemed a “value shopper.” We now know that Jane is more likely to spend on smaller pleasures than bigger purchases, so demonstrating that our brand respects a hard-earned dollar is a better way to connect with Jane than offering her luxury goods. Jane is now more understood as a whole person than as a “median income shopper.” That is the power of good market segmentation.
Some of the best in “breakthrough” segmentation insights comes from Nike, a company that has evolved fitness to wellbeing. Nike grew from humble beginnings into a mass market favorite and now a cult leader. However, to grow from a small brand to a national brand was only part of the strategy. The second part of the strategy was to cannibalize leadership by investing in its experimental marketing efforts and creating a cult appeal. The way that Nike went about this? Segmentation. Nike realized that out of its total customers only a fraction behaved like true fanatics. Rather than build out traditional loyalty programs they did a psychographic assessment on these “brand loyals” and realized that they behaved as “high speed sneakerheads,” eager for the release of new products and more tied to building out the brand because of its ability to connect and placate the thirst of the “newness, now” generation of buyers. Had Nike stuck to more traditional segmentation it would not have been able to connect with these sneakerheads and have them become the brand evangelizers that they are today. Its because of these few key brand loyals that the brand has become a cult favorite and by investing in them due to their personality, behavior, attributes, and aspirations, Nike has been able to amass a cult and mass market following.
As we’ve come to see over the years, great companies are not built on mass appeal, but they are built on cult-like appeal. By understanding a key market segment, a business has the potential to create a brand that incites evangelists and increase its market appeal without having to please the masses- just by pleasing the segments that matter.