The Blog

Segmentation VS Demographics

19th Aug 2016

CMO

Chris Cowan, Managing Director at Clusters

 

What’s wrong with demographics?
For many businesses, grouping customers for targeting purposes simply means looking at demographics such as gender and age. However, this provides neither an accurate nor a useful snapshot of the customers in your market as most buying decisions derive from attitudes and behaviours and not from peoples’ age nor their gender.

To demonstrate this, let’s first take a look at the audiences for four different TV channels, split by gender and age alone. Here, our client has two TV channels and there are also two key competitor channels:

 

 

By using demographics alone, we cannot see any distinct channel audiences: each channel has pretty much the same audience profile. So how does any channel know which audience they should target for share steal and growth?

 

How can segmentation help?
This is where segmentation comes in; a true segmentation provides a far more accurate and actionable snapshot of actual TV audiences. Using the same client, we carried out a market segmentation based on TV viewing data rather than demographics, revealing six distinct segments. Let’s now look at same four channels, but this time using the segments from the study:

 

 

Using this segmentation, we can now clearly see distinct audiences to target for growth. There are two key insights that we can derive from the above chart:

1.    Our client’s channels A and B both rely on the same two segments (Dual Screeners and Night Owls) for a large proportion of their audiences. Put simply, our client’s two channels are competing with and cannibalising each other by targeting the same two segments. 
2.    Bulk Indulgers account for a large proportion of competitor 1’s audience, and Weekenders for competitor 2, but these two segments hardly watch our client’s channels at all.

So as a result of our market segmentation, our client changed their targeting strategy to reduce cannibalisation and target share growth from the competitors. Here’s how they used the segments to grow:
•    Channel A: keep targeting Night Owls but leave Dual Screeners to channel B and instead target Bulk Indulgers to take share from competitor 1
•    Channel B: keep targeting Dual Screeners but leave Night Owls to channel A and instead target Weekenders to take share from competitor 2

 

The impact of targeting using segmentation
Simple. They grew share by over 50% across channels A and B within under one year, as all growth avoided cannibalisation and was at the expense of competitors. Without carrying out the market segmentation, they would not have known how to do this; the segmentation provided the hard evidence to accurately target a new audience.

This process can work just the same in any market or category. Segmentation is equally important when positioning a new B2C brand or trying to grow B2B market share, as only segmentation can tell you your highest value, highest potential audience: who to target, how to communicate with them, and where to find them.

 

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