Article by Patrick Fiorenza, RMS Director of Research Analytics –
Segmentation, clusters, personas, profiles – what’s the difference in these terms? All the terms have some nuances, but generally, they complement one another and, quite often, are used interchangeably. The underlying goal of each of these approaches is to understand groups of your customers with similar traits. The power of segmentation is that you can use it to define traits to “group together” and can build out certain personas, profiles, or constructs of a user/consumer of your services or products.
There are numerous benefits to segmentation, such as fine-tune marketing campaigns or assessing the viability of a new product within a target market. But segmentation is not always a straightforward path; it relies on either having existing consumer data on key attributes or collecting information from customers (or in some cases, both activities are required).
What kind of data do you need for segmentation?
Segmentation could come from many different variables or data sources, but typically four main types of data drive segmentation efforts:
- Demographic Data: examples of this would include age, gender, household income, education status, race, ethnicity, etc.
- Psychographic data: examples include variables like values, attitudes, interests, personality traits
- Geographic data: zip code, state, country, urban/rural setting
- Behavioral data: this could be a whole suite of variables, everything from technology use, purchasing behaviors, brand loyalty, motivations, etc.
There is no “right” way to create a segmentation, and different analysts have different opinions on how to get the right segments/clusters. However, one of the ways I would suggest is by starting to look at some historical data. You might see natural clusters or segments emerge (i.e., lots of sales in a certain geography, renewals/sales during a particular time of year, customer gender). These can be starting points to segment data and understand the right clusters, or what to ask further in a survey.
Segmentation – Example
Please note, the example below is fictitious! We take pride in the quality, confidentiality, and authenticity of the data we collect, so when I can make up a hypothetical situation, it’s a relief! The example below, hopefully, contextualizes how you can use segmentation.
Imagine a company that sells a wearable device and was introducing a new product to their existing line-up. The company desired to identify their customer segments to tailor their marketing efforts to reach their customers. Working with RMS, we recommend conducting an analysis using key variables we discussed earlier (demographic, psychographic, behavioral, geographic). By grouping their consumers based on these variables, the organization could best understand its customers and, in theory, improve their marketing campaigns.
The first challenge was how to collect the data. RMS partnered with the organization to conduct a customer survey, which included questions about demographics, purchase history, and adoption of new technology. Using an advanced statistical software package (RMS can do this in our survey software), tests were run to identify several unique clusters, and the data was then partitioned based on similar profiles/behaviors, creating the clusters of similar users.
After running the algorithm, RMS identified three clusters:
- Early adopters: young adults, like the latest and greatest, disposable income. Like to be the first to get information.
- Practical Purchasers: Only really care about simplicity, less likely to buy first generation, don’t want anything complex, cautious on budget.
- Luddites: Will never buy the new technology, but they expressed a need for it and may be likely to receive the device as a gift but may or may not be a potential consumer.
Each group will require a different marketing campaign and outreach to promote the new device. In our example, cluster analysis was a way for the company to identify commonality among potential purchasers, and then tailor marketing efforts towards their product. Clustering and building personas can also help build empathy and understand different perspectives of different buyers/users of a product or service. All this information is critical to help connect with consumers. With cluster analysis, organizations can use data to make stronger decisions and drive more growth and loyalty around their products/services.
About the Author – Patrick Fiorenza
Patrick is passionate about helping clients achieve their goals and designing effective strategies through customized market research projects. He has extensive experience in survey design, data analysis, and qualitative, quantitative, and mixed-methods research. As the Director of Research Analytics, Patrick monitors all aspects of the research project, assuring validated and high-quality results are provided to RMS clients. He is also passionate about providing coaching to analytic staff and collaborating closely with clients to ensure needs are met. Pat holds a master’s in public administration from Syracuse University and is pursuing his doctorate in curriculum, instruction, and science of learning from the University at Buffalo.
It’s good to know. We’re here for you.
Call us today, to see how we can help your organization.
Interested in conducting a market research project with RMS?
Contact our Vice President of Corporate Development, Sandy Baker at SandyB@RMSresults.com or call 1-866-567-5422.
About RMS
Research & Marketing Strategies, Inc. (RMS) is a full-service market research firm in Central New York. Formed in 2002, RMS helps organizations that are looking to know more about their customers and/or potential customers. We conduct surveys, focus groups, mystery shopping, studies, and analyses. Each project is customized and gets personal attention so that actionable, data-driven findings are delivered. RMS has a reputation for getting results. We offer an independent, professional means to conduct telephone, on-line, and mail surveying, as well as in-depth interviews, intercept interviews, and participant recruitment. We also host discussion groups through QualiSight, our onsite call center and focus group facility. We have a proven reputation for successfully recruiting and moderating focus groups, community forums, and town meetings.
