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It’s a different world: is your segmentation still valid?

Craig Strudley Director 10 February 2022

Customer segmentations have been around for a long time. Over the years, pretty much every customer driven business will have created at least one segmentation to help them get closer to their existing customers and, indeed, their prospects.

Although some business leaders still seem to cling on to the idea of a time when things are ‘back to normal’, the reality is that many attitudes, behaviours and circumstances are changed forever.

Many businesses would have developed various iterations for different business needs and then refreshed their segments umpteen times. Updating a segmentation and then embedding it throughout a business is an expensive and time-consuming exercise but it’s often the right thing to do – consumer preferences, attitudes and behaviours are constantly evolving. And none of us need reminding that the past two years have seen unprecedented change.

Very few industries, if any, can say they have not been affected by the pandemic. Although some business leaders still seem to cling on to the idea of a time when things are ‘back to normal’, the reality is that many attitudes, behaviours and circumstances are changed forever. No matter how they were created and their purpose, no segmentations would have been designed with a global pandemic in mind. Even those created during the height of the crisis will need looking at again – things continue to move quickly!

Therefore, can any business in any sector confidently say that their segmentation is fit for purpose in 2022? It’s no wonder that many businesses are looking at their segmentations yet again.

Many segmentations are going to need a refresh

The ‘factor groups’ used to differentiate segments have traditionally been similar across sectors. For example:

  • Demographic / Socio-Economic – age, gender, ethnicity, class, income, occupation, education…
  • Geographic – house type, location e.g. post code, urban vs rural or North/ Midlands/ South
  • Psychographic – sharing similar attitudes e.g. to the environment, price sensitivity, risk….
  • Behavioural – sharing similar behaviours e.g. purchase, travel, social…

Some segmentations will rely heavily on one factor group or another, others will incorporate a mix; however, what is clear is that the Covid-19 crisis will have had a substantial effect on every segmentation. It seems obvious that many will need a substantial refresh and, in some cases, a complete re-think. Segmentations derived purely from demographic, socio-economic or geographic factors may be less affected; however, if these are the only building blocks, you probably should be thinking about updating your segments anyway, Covid-19 or not.

So, what should businesses be doing right now? The trick to every successful segmentation is to start at the end; or, in other words, be very clear about what the segmentation will predominantly be used for. For example, for those industries very badly affected by the pandemic, such as travel, transport and leisure, there is a huge rebuilding job to do. For the time being at least, these industries may need to focus on bringing back past customers rather than winning brand new ones.

Uncovering the new factors in play

As alluded to above, the key considerations are going to relate to changes in attitudes and behaviours shaped by the pandemic. These may not always be obvious and will not be uniform across sectors.

Therefore, a sensible first step is to speak to your customers to help build a list of factors that could differentiate segments in 2022. Qualitative research is ideal for this. New behaviours and attitudes will, of course, sit alongside more traditional factors that will still be relevant; however, we need to be sure that we are not missing anything that could help shape our segments in 2022.

Next, we need to collect extensive datasets to actually build our new segments or, at the very least, sense check what we already have. Primary quantitative research conducted by specialists such as Savanta is required for this.

The ultimate goal is to establish if new segments exist and/ or how previous segments may have evolved. Importantly, we also need to determine the most effective way of communicating with individual segments in the new world.

Don’t Leave it Too Late

The temptation for many businesses might be to see how things play out, wait until a prolonged period of stability seems assured and then think about a segmentation refresh. But that could be a risky strategy with months or even years lost. Creating a segmentation that can help you be successful in the here and now should be the priority.

Yes, another refresh might then be required in a year or two. That might sound painful (and expensive) but it’s not just the wish of an agency that specialises in creating actionable segmentations for our customers. In a period of change, constantly reviewing your customer understanding is a necessity, not a nice-to-have.

If you want to communicate effectively with your customers and successfully market your services, your existing segmentation may not cut it. We are here to help.

At Savanta we have a team of analysts with a wide variety of backgrounds, including data processing, statistics, management consulting and scripting. Our bespoke reporting offers a fully customisable design to ensure your insights are valuable to you, your internal stakeholders, and clients.

To find out more about our advanced analytics offering you can download our rate card here or get in touch with one of the team at [email protected]

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