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When to Retire, Refresh or Retain your Market Segmentation

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This article was written by Hilary DeCamp, Chief Methodologist at Material.

Sometimes clients ask, “Should we redo our segmentation?”

The best answer is “it depends,” because at any point in the life of a segmentation, there are choices:

(1) retire and redo

(2) refresh and reframe, or

(3) retain and reinvigorate

A segmentation’s useful life is dependent on how quickly the category is changing and whether your strategic priorities have changed; these issues should guide the path forward.

When to Re-Do Your Market Segmentation Studies

First let’s look at the issue of category change. Sometimes a new product introduction is so disruptive that it changes the category entirely, invalidating the old view of the market, requiring you to retire your existing segmentation. Imagine a transportation segmentation that relies on your frequency of taxi travel as a defining trait… this framework would have been entirely disrupted by the entrance of Uber. In the short form typing tool, you can’t just change “taxi” to “paid ride via taxi, Uber, Lyft, etc.” since the shared ride services fundamentally changed who uses paid rides, why and how often.

Technology categories are, of course, the most susceptible to obsolescence in response to new inventions. But many other categories are also impacted by changes in the technology sector (such as music buying, movie viewing, car shopping, use of maps). I recall a client who asked us to redo their computing segmentation since one of their high priority segments, “Netizens,” had grown to be nearly half their market. How is this possible? “Netizens” were essentially anyone who used the internet, which in the 90’s was a great surrogate for tech-savvy early adopters, but not so just 5 years later! I fear I age myself by revealing how long I’ve been doing segmentations…

Even when the category shifts are not technology-linked, they can be seismic in proportion. Major events like 9/11 or COVID-19 can stimulate change immediately to related categories like air travel and grocery shopping. Alternatively, long-term trends like sustainability, authenticity, and personalization can gradually yet definitively make a segmentation ready for the retirement home. For example, several of our clients recognize the need to rethink the role of “buy organic” in their segmentations, as this trait has gone mainstream. Does drinking almond milk say the same thing about you today as it did five years ago? What about watching short-form video?

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When to Refresh or Retain Your Market Segmentation

On the other hand, sometimes the category remains largely unchanged, but the company has changed its strategic focus. If you have bought or launched a new brand, repositioned one or introduced line extensions, your market segmentation may no longer shed light on all the key segments of interest. Or if your strategy has become stale or been successfully copied, a new direction may be required that was not fully explored in the original segmentation study.

If the existing segments have been widely embraced in the organization and they are generally working well for you, yet the market or priorities have shifted somewhat, a refresh is recommended… a new segmentation that brings in the new issues yet stays close to the original framework. It’s often possible to retain some of the old segments and their names to ease the pain of transition for end users.

Finally, if neither the category nor your segmentation strategy has undergone significant shifts (a rarity in today’s increasingly fast-changing environment) then it may suffice to go out and collect updated profiling information to reinvigorate your existing segmentation by shedding fresh light on the segments in the context of current issues.

And of course, as addressable media have made segmented advertising targeting much easier and more accurate, you may simply want to update (or gather for the first time) the targeting information that lets you get a higher return on marketing investment.

So, take a look around. How has the world or your company strategy changed since your last segmentation? Is it time to retire, refresh, or retain?

Get in touch to learn how Material’s deep segmentation expertise and capabilities can help unlock your business goals.

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