The importance of Market Segmentation

Steve Hyde, 
CEO, 

Do I look like someone that’s about to go into a retirement home?

I was recently sent a brochure for a retirement home in the post; now I know I’ve got a polo neck on, and some of you might think I’m ready for shipping off to play croquet on the lawn.

But I’d like to think I’m probably not that person just yet. It can certainly wait a few years. When you think about that kind of old approach to direct marketing or direct mail, then think of the alternative options that you’ve got.

Just imagine how much Google, Facebook, Instagram, and Amazon know about me.

Google knows the searches that I make. It can tell, for example, it can tell that I’ve got young kids at school. It can tell what type of purchases I’m looking to make.

Instagram, Facebook, that group would know for example, that my likes are around things like snowboarding, football and triathlons. Amazon can see directly what I’ve been purchasing and can look at the stuff that I’m buying for myself and for my kids. They can make all sorts of inferences.

 


That type of knowledge is around and it’s been around for a long time now in digital, and it’s still surprising to see so many businesses that take that very blunt approach.

What we’re really talking about here is marketing segmentation. As a concept, you know, it’s been around for a long while.

I remember studying it back in the eighties; a book by Philip Kotler (Marketing Management), which was considered to be a bit of a bible of marketing. In it, he talks about segmentation, he talks even then about the cruder forms of segmentation being geographic and demographic.

In the direct mail example I mentioned earlier, it’s thinking, this guy’s of a certain age, he lives in a certain postcode. Therefore we’ll send in some direct mail around our particular retirement home.

What Kotler recommends is to really understand what he calls behavioristic or psychographic segmentation variables, but it’s basically a smart way of looking at how people actually behave. An example he gives in the book back from the 1970s is how, when Ford first introduced the Mustang, they got their marketing campaign kind of wrong.

 

They found that whilst the marketing media and messages were aimed at young people, it was older people that ended up buying the Mustang.

What they concluded was their targeting shouldn’t be chronologically young, but it should be psychologically young.

I certainly include myself in that bracket, as an avid fifties snowboarder, I’m still psychologically young.

I’m sure all of us still get a similar kind of direct mail approach still, and it’s frustrating. But it’s an old approach and I’m still surprised by people using it.