THE NEED FOR TARGET AUDIENCE AND SEGMENTATION ANALYSIS
Many brands avoid costly business decisions and marketing communications by obtaining a better understanding of their target audience and customer segments. Trying to design business and marketing strategy and tactics that address an entire customer base is akin to playing darts without aiming. To better aim their “darts” (business and marketing strategy and tactics), brands profile their customers to better understand them.
There are many ways to profile customers, but two of the most powerful methodologies are target audience analysis and customer segmentation.
APPROACHES TO TARGET AUDIENCE ANALYSIS AND SEGMENTATION
With target audience analysis, the end goal is to identify the group most likely to use your brand, product or service. Target audience identification is often addressed using quantitative methodologies. Quantitative methodologies can be as simple as marrying consumption data to an existing customer database or more complex such as deploying survey research and multivariate statistical analysis.
With segmentation studies, the end goal is to divide the entire customer base (the whole pie) into smaller, more manageable pie slices (typically four to six segments). Typically, segmentation studies use a quantitative survey and multivariate statistical methods. Questionnaires for the survey are often designed on the basis of qualitative research findings. Using these methodologies allows a researcher to determine patterns in survey responses among different respondents. Patterns in the data that are identified using multivariate statistical techniques are used to identify customer segments.
THE RELATIONSHIP BETWEEN THE TARGET AUDIENCE AND CUSTOMER SEGMENTS
The graphic below with five segments provides a visual that roughly describes the relationship between the target audience and customer segments. It is not a perfect depiction, but it does provide those without a statistical background with a rudimentary understanding of the distinction between the target audience and customer segments.
What is most critical to understand is that the target audience is not a different population; it may have overlap with each of the segments. The target audience should not to be considered an additional segment. Also, the target audience is not equally represented in the segments. In most cases, each segment contains varying numbers of those in the target audience.
In the following example, the entire customer base is shown in the pie chart as in the previous example. However, in this case, the internal divisions of the pie chart show the percentage of each segment that is also in the target audience. In this example, the target audience constitutes 73% of the entire customer base. The internal divisions demonstrate that some segments include greater portion of the target audience than others.
WHY IDENTIFY BOTH THE TARGET AUDIENCE AND CUSTOMER SEGMENTS?
Understanding of the target audience may be used in different ways. For example, some brands use the target audience definition in their brand positioning and strategy development. In the absence of a customer segmentation, the target audience is a powerful tool for developing targeted marketing and communications.
From a hierarchical perspective, the next step up from the target audience in level of sophistication is a customer segmentation. Typically, four to six customer segments are identified and, most importantly, the value of each segment to the brand is identified. Brands with a customer segmentation can focus their attention, and marketing and communications to each of the segments independently. To further improve their focus, marrying consumption and spend data to the segments will allow brands to focus on their most valuable segments. Brands that understand their most valuable segments will want to work to retain those customers as well as attract potential customers with the same profile. When developing strategic and marketing plans, some companies elect to focus exclusively on the top one or two segments while others will develop approaches to address all the segments.
Kirsty Nunez is the President and Chief Research Strategist at Q2 Insights, Inc., a research and innovation consulting firm with offices in San Diego and New Orleans. She can be reached at (760) 230-2950 ext. 1 or firstname.lastname@example.org.
This entry was posted in Data Analysis and tagged on January 27, 2017 by Q2 Insights