Four Reasons Segmentations Fail—and How to Avoid Them

This article was written by Eric Asch, SVP, Growth

A recent survey found that 91% of consumers are served at least one irrelevant ad every single day — and 76% of consumers take a negative view of brands that target them with irrelevant messaging. In an evolving business landscape where personalization is the mandate, this comes as no surprise.

Brands that leverage segmentation solutions to deeply know their audiences are positioned to replace irrelevant messaging with differentiated, personalized customer engagement and experiences, helping to win new customers and increase the lifetime value of existing ones. Yet these are not the only benefits of successful segmentation. Insights gleaned can reveal new markets or categories to explore, unmet consumer needs or opportunities for product innovation.

Still, far too often we’ll hear from brand and marketing leaders who have stumbled into traps that cause their segmentation efforts to fail, costing them time and resources while leaving market share and untapped growth opportunities on the table.

At Material, we’ve been an industry leader in segmentation for decades, so we understand the primary causes of failed segmentation efforts — and just as important, how to prevent them. On a fundamental level, drivers of failure in segmentation can be broken down into four categories: two leading to a segmentation that is unusable, and two resulting in a segmentation that, usable or not, is ultimately left unused by the organization.

Let’s explore these four key pitfalls and strategies to avoid them.

Reason #1: Poor Design

Well-designed segmentations rely on a clear conception of the business outcomes an organization is trying to achieve, and the tactics and activations necessary to achieve them. In other words, the “how” must follow the “why” — in order to be an effective driver of bottom-line outcomes, a segmentation solution must be designed to support decisions that address specific business priorities. Absent these elements, your segmentation may deliver consumer understanding, but it is unlikely to enable ROI or measurable business impact.

For instance, an energy-drink brand looking to expand its customer base might segment the consumer landscape by attitudes to determine which types of consumers it should try to win, how best to reach them and how to differentiate itself from the competition. Such an attitudinal segmentation probably would not be effective for a brand trying to grow sales of a commodity product such as sugar or salt, since attitude has little, if any, bearing on how consumers select these items.

Reason #2: Poor Execution

Poor execution in a segmentation can take many forms, but they can all yield an end product that is unusable in the marketplace. A solution that results in too many segments, leading to an unfeasibly complex marketing plan, is one example of poor execution. Other examples are cohorts that are defined too finely or too broadly. Even if the conceptualization or design of a segmentation is solid, getting the nuts and bolts wrong will have a negative impact on your outcomes.

Both poor design and poor execution can result in unusable market segmentations. But sometimes even a viable solution will fail because, despite being well designed and executed, it is never put into practice. Below are two reasons for this sort of failure.

Reason #3: Lack of Acceptance

Nine times out of 10, this stems from an organizational or cultural issue within the business, one that prevented all the relevant stakeholders from being involved in the segmentation project from the beginning. Because segmentation is both an art and a science, people view the framework and the cohorts subjectively as well as objectively, leaving plenty of room for disagreement. When stakeholders are not included in segmentation conversations until the design or execution are well underway, they may feel the results do not accurately reflect the consumer landscape or adequately address their business needs or goals. These stakeholders might lack confidence in the segmentation, disagree with the cohorts or – having been left out of strategy and planning conversations – feel that it was not needed in the first place.

All these issues may lead to a segmentation being left unused.

Reason #4: Failure to Implement

Sometimes organizations do not have the internal structure, knowledge or resources to implement a segmentation solution effectively. This is often the result of a lack of education and adequate stakeholder engagement to ensure alignment among teams. Other challenges abound. Businesses may lack the systems or digital platforms necessary to support segmented marketing. An absence of quality first-party data may limit the ability to activate a segmentation solution among its customer database; the segments within a new framework might not align with the third-party audiences available to the media buyers. In these and similar instances, the organization is apt to dismiss the solution as not actionable.

How Material Avoids These Pitfalls

At Material, we bake the ingredients of segmentation success into our processes from the very beginning:

• First define and clarify the business objectives and the KPIs to measure success, then design the segmentation with these desired outcomes in mind

• Conduct immersion sessions to ensure the relevant stakeholders — from the C-suite to the internal teams that will be activating the framework — are involved from the earliest stages

• Leverage decades of segmentation experience and modern analytical systems to execute best-in-class solutions with distinct, recognizable segments, and identify the most attractive target segments

• Delineate the resources necessary for activation of the insights, and ensure a comprehensive plan to socialize the segmentation throughout the organization to ensure understanding and adoption

• Provide ongoing support to ensure effective, impactful activations, from idea generation to media planning

Establishing these guardrails and practices from the outset helps to ensure a segmentation is not only usable, but used consistently for maximum business impact.