Who are your customers and how can you make them spend disproportionately with you are the two most fundamental strategic questions for brands and retailers. Often, companies define their core customers based on demographics, creating a profile that may read something like this: 35-to-50-year-old white males living in suburban markets with deep pockets. But this information is woefully incomplete. Probing beneath the surface of shallow customer profiles reveals critical information that can unlock hidden opportunities and provide the intelligence required to focus strategies on areas with the highest growth potential.
Strategic Consumer Segmentation Approach
True customer segmentation requires sophisticated analysis to look beneath the market’s surface, identify distinct consumer segments and track changes in each consumer group. To do this, S.E.C. Consulting recommends a four-step approach:
1. Discover and define key customer profiles.
In-depth consumer research is critical to quantitatively defining consumer groups based on multidimensional factors, including their attitudes, life styles and behaviors, as they relate to the category. Most important, the output must size each segment and provide clear insights into their wants and needs to understand their purchase triggers.
2. Map brand positioning to market segments.
Following definition, the company must objectively analyze each consumer group’s likely affinity for its business, critically assessing where the company is strong and where it falls flat. This should result in a clear view of where the brand or retailer’s business model is the best fit.
3. Prioritize market opportunities.
With learnings from steps 1 and 2, the business can now understand the relative value potential from each consumer segment. With that information, strategies for each prioritized consumer group can be connected to the triggers most likely to unlock spend (e.g., product assortment, marketing and brand alignment, channel, and pricing strategy).
4. Track behaviors and correct course.
Once the strategy is in place, it is critical to track and monitor success. Ongoing consumer surveys are key to tracking improvements in areas important to each consumer group. Conducting this systematic tracking ensures the focus remains on the most important strategies, and can also help identify new ones.
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