After the pandemic hit in 2020, many of our clients were hesitant to undertake foundational research. They worried that the scale of change was so vast — yet hopefully temporary — that it threatened the very relevance of research and its ability to guide their brand and corporate strategy for several years.
Market segmentation is one such type of foundational research. With the changes wrought by the pandemic, the size of market segments may have shifted, creating a need to revisit and reassess them, says Hilary DeCamp, Chief Research Officer for Material’s Insights Division and one of the world’s foremost market segmentation experts. Circumstances also vary by brand and by category, so we asked Hilary to clarify why now is the time to revisit your segmentation strategy. Below are edited excerpts of the conversation.
Is now the time to re-do or refresh your market segmentation?
Q: Let’s cut right to it. Is now the time to redo a segmentation? How do you know when the right time is? Hilary DeCamp (HD): For a few months, we not only had nobody coming to request segmentations, but we had segmentations that had been ready to launch data collection press pause in March or April of last year. When the world shut down, so did foundational research. People determined that it wasn’t the time to figure out a framework or structure to guide their business for anywhere from three to eight years. But let’s put this into perspective. Some segmentations stay relevant for an incredibly long time. For instance, one of the world’s biggest tire brands used their tire segmentation for a decade, because not much has changed in tires. But as the market shifts and consumers change their views about things that are relevant to your category, you may need to understand those shifts and have a segment that reflects them.
Just think of the kinds of things where something substantive has changed in the marketplace. Organic became a major factor in baby food. Rideshare services now exist. Tablets were introduced. People have grown concerned about the credibility of news sources. Meat substitutes became more popular. These are the kinds of emerging trends unrelated to the pandemic that may not have factored in when you did your last segmentation, and now ought to be. Your category may not be radically different, but if something big happens, you need to revisit your segmentation, even if you just finished it six months ago.
Q: Does everyone need to re-do their segmentation from scratch? HD: You're raising an excellent point about re-doing vs. evolving vs. refreshing a segmentation. If the market has evolved, your segmentation should evolve. We have techniques that make it easier to find a new solution that is an evolution of the one you already know and love as opposed to a revolutionary new framework that would require the organization learning it from scratch.
More often than not, the decision to completely redo a segmentation is driven by a change in management. The new CMO may believe it’s better to segment on behavior vs. attitudes and needs, or thinks the category boundaries should be wider than those used last time. For example, we did a series of segmentations for a chip manufacturer over the course of about a decade. First it was based on the computer category. Later, they wanted to broaden their segmentation to include all of consumer electronics. And the next time they settled in the middle on all internet access devices. The point is, they were redefining the market they wanted to compete in, and adapted their segmentation accordingly. That’s when you get radical change.
How the COVID-19 pandemic has affected market segmentation
Q: How do you think these lessons apply to our current environment and circumstances? HD: There is a distinct possibility that something relevant in your category has changed to make you evolve. If you sell food or beverages, and your previous segmentation was defined in part by how people research or buy your category before delivery services went through the roof, it's likely not relevant anymore. In that kind of situation, you probably need to bring in omnichannel elements of the category to have your segmentation framework still work. It's also possible that your segmentation was based on stable, transcendent views, attitudes, and needs that tin foil still meets, for example. In that case, the framework may still hold. But you probably want to refresh your understanding of how your target segments are using this product.
Regardless, now is the time to look at your segmentation, and it’s a two-step decision process. Do these groups still make sense and are they still relevant and actionable for you? Or do you think something is missing that has emerged, changed, or evolved? If you fundamentally think the framework still holds, but that people may have moved from one segment to another, it could be time to resize your existing segments, keeping the framework but refreshing your understanding by getting a more recent understanding of how people behave, what they care about, how they're shopping, and so on.
Q: How can we tell if segment sizes have shifted as a result of the pandemic? HD: If you don’t have a typing tool in your tracker, you can first apply the sniff test. Look at the typing tool and see if there’s anything the questions measure that is likely to have shifted between pre- and post-COVID. If so, segment sizes have likely changed and you should do a study to resize them. As long as you’re resizing, you should re-profile and capture advertising diagnostics and targeting information so you can do digital activation, building custom audiences to target segments through advertising and communication.
Q: How do we know if behaviors and attitudes have stabilized enough to do a segmentation? HD: A lot of people believe their segments have changed, but are simply saying it’s too soon to do the research again. One of the critiques of segmentation is that it’s so strategic and such a large investment that organizations spend months executing the study instead of weeks. Given that, you probably need to kick start the work now, since you didn’t a few months ago! If you want your segmentation to be based on behaviors, and those are impacted by the state of the pandemic, then you should wait a while to actually collect the data for the segmentation, once those behaviors start to look consistently like what we think they’ll be for the next two to four years. But if you’re segmenting on attitudes, needs, values, or psychographics, those are slow to change, unless there is a shock to the system. That shock has already happened. We’ve had economic collapse, racial justice discussions, health concerns, adoption of omnichannel alternatives to traditional shopping and eating patterns. Those attitudes are now baked into the equation, so if you can segment on mindsets, you should be able to build a stable framework using data you collect right now.
Why your brand tracker should include your target segments
Q: How does segmentation tie to other types of research? HD: Here’s a big one for me, and a huge missed opportunity. Only a small percentage of brand trackers have segment classifications built-in. If you’re tracking the performance of a brand, why not track how your brand is performing specifically among your target segments? If you’ve done a market segmentation, you’re choosing a priority target to design strategies and tactics around, then doing activation work to deliver personalized messages. If you don’t know what segments respondents belong to when doing your tracking, then how do you know that the people you’re moving the needle with are the people you’ve intended to target? That’s why I recommend including a typing tool in brand tracking surveys.
Q: Any final thoughts? HD: I think you're going to get left behind if you don’t have a current view of your category because one of your competitors is thinking ahead and investing in understanding the market. If you sit back and wait to evolve or refresh your segmentation, you’ll be working with out of date information and thus not be as successful. We all need help getting out of this mess and some help in defining the competitive landscape to make progress. Don’t be shy. Don’t wait. Get in there. Get started. Maybe what you have is fine, but you likely still need to refresh your profiling and behavioral information. The only way to know is to look at it and test it.