Deep-Dive Behavioral Segmentation is the Key to Understanding Consumers

Ground your data analysis in consumer behavior and more specific, dynamic insights will follow

Today, it’s a truism that the world has gotten more complex, especially for consumers and brands. On the one hand, consumers have more options than ever. Amazon and other large online retailers have expanded product availability to previously unimaginable levels. And it’s not just the range of products available; consumers also have more access than ever to information about your brand and your competitors.

At the same time, brands have more data about consumers. For online direct-to-consumer brands, this data can be tracked at individual levels, following consumers among various touchpoints on the path to purchase, and measuring the effectiveness of these channels through analytics. Similarly, large online retailers may know more about your brand’s sales than you do, as they’re able to track user behavior, related products and other metrics.

For many CPG companies that still rely heavily on brick-and-mortar sales that might be several distribution steps away from the brand, this puts them at a serious disadvantage, without access to the individualized consumer data that fuels many leading-edge analytic approaches.

So what’s a large, established CPG brand to do?

Demographic Segmentation and Psychographics

In order to better understand customers, CPG brands must find ways to look at consumers in the aggregate while still finding ways to address them personally. Brands need segments that serve as useful stand-ins for the consumers whose data they’re missing. Category-level segmentation provides a critical tool for delivering this point of view on consumer habits.

Different approaches to segmentation vary in complexity and effectiveness. Perhaps the most basic level is demographic segmentation, relying on basic demographic metrics (e.g., Midwestern moms, ages 18-49) to create an addressable audience. More complexly, segmentation can also be built on psychographics, creating clusters of attitudes that describe the lifestyles and habits of potential marketing audiences.

Both of these approaches result in insights that are fairly crude, providing broad segments with a somewhat higher propensity to purchase. This might provide guidance to the creative team, but it’s limited as a map of the consumer landscape. Within these demographic or lifestyle segments, some consumers will like your brand, while others will never touch it.

Behavioral Segmentation

A better approach grounds the analysis in consumer behavior. Such behavioral segmentation starts from consumers in your category, and builds a model of how different consumers purchase. Rather than lifestyle attributes that may softly correlate with sales, a behavioral approach begins with the consumer and attempts to provide something akin to the personalized marketing available to digital-native brands. While any segmentation is obviously built on some amount of generalization, generalizing from behavior rather than attitudes helps to ground segments in your category.

Segmentations also need to be dynamic. As mentioned, the world has changed for both consumers and brands, and that process is ongoing. If you’re a grocery store or a food and beverage brand, you see this in real time, as food and diet trends shift and new products replace old ones. If the goal is to track consumer behavior, a segmentation from up to five years ago may no longer accurately represent the category landscape the brand inhabits. When segmentations grow stale, they can become ossified and restrictive. A more dynamic approach ensures that segments are current and relevant to consumers in the category.

Make It Specific

Finally, segmentations need to be specific. Many syndicated products exist on the market, whether driven by demographics, psychographics or behavior. However, these can often be generic and focused on a broad audience that may not necessarily represent your brand’s consumers. While purchasing an off-the-shelf solution can be cost-effective, its utility will be lesser to consumer segmentation that bridges the gap between consumers in the category and the specifics of your brand.

Segmentation provides a valuable method for understanding consumers in offline contexts where individual-level, digitally tracked data is impossible to obtain. It’s important to avoid the potential pitfalls by ensuring your segmentation is:

• Behavioral: Focusing on behavior over psychographics and demographics helps to ground the segments in real consumer behavior and avoids broad generalizations that may not help to convert consumers to customers.
• Dynamic: Segmentations can grow stale when they sit on the shelf for too long. Regular updates ensure that insights don’t become dated or restrictive.
• Specific: Grounding your segmentation in behaviors that drive consumption of your brand ensures that the segments will provide insights that can impact bottom-line sale.

Segmentation is a powerful tool, but it needs to be built correctly from the ground up to get the most actionable insights for your brand. Especially when consumer-level data is unavailable, segmentation can generate lessons about your consumers that can be impossible to uncover otherwise.

Photo by Ryoji Iwata on Unsplash.