New approach to market segmentation

Segmentation identifies groups that are internally homogeneous and externally heterogeneous, so that products and services can be specifically targeted. Segmentation is normally either geographic, demographic, psychographic or behavioural in nature.
– Geographic- region, population density etc.
– Demographic-age, education, occupation, income, Socio Economic Category, age cohorts etc.
– Psychographic – Attitude, interests, opinions, activities etc.
– Behavioural - benefits sought, usage rate, user status: potential, first-time, regular, etc.

Typically segmentation is done using the demographic data of SEC, age along with certain behavioural/age cohort understanding. In some cases/categories, marketers tend to overlay psychographic understanding on top of the demographic understanding to target better. Segmentation of this nature primarily gives a good snapshot understanding of the customer and holds good if there are no major shifts happening in the economy.
An age cohort comprises any group of people born at roughly the same time-over a decade, in the same country. As a consequence, they have experienced the same major social, political and economic waves and upheavals at about the same age. Their lives were punctuated by the same crises. Therefore, analysing the cultural impact of sudden change in the environment, at the level of age cohorts can help one to understand ‘ways’ in which shared lifetime experiences of members of an age cohort affect their world view

In an economy which is growing, there are bound to be major demographic shifts; age continuum shifts, new segments tend to get formed or the nature and tenor of existing segments could change by the sheer force of new entrants coming into that segment. All these could potentially get masked or not picked up if one looks at segmenting using the traditional variables. These also have implication on how marketers approach/ communicate to these traditional segments.

A case in point - in the last one decade, in various projects, Centre of Gravity has seen the emergence of a new segment. This segment is typically of individuals who are not that educated and would have belonged to the SEC C/D of the population. These are the individuals who have been on the periphery, dabbling with different kinds of businesses and have suddenly hit pay dirt because of the economic boom. They were well poised to ride the economic boom because of the businesses they were in and have rapidly moved up the economic and income scale. Examples of occupation are contractors (real estate, painters etc.), service providers to the service industry (individuals who rent

out vehicles to the BPO sector, running the canteens in big organisations etc.), trading etc. This segment in fact forms a significant proportion of the urban population.

From the traditional lens, these individuals would be part of SEC A/ B1 or middle/upper middle class segment and expected to show the segment traits. In reality, they exhibit behaviour which is atypical of that segment. Especially in terms of buying behaviour, affinity towards brands, trading up or down etc. E.g. this individual would trade up in categories like interiors, vacations, house etc. and trade down in categories like mobile phones/ cars etc. which would be more functional in nature.

Or take for instance the behaviour shown by the ’exposed’ salaried segment who would again be part of SEC A. This is again completely in contrast with the expected norm or the behaviour of old timers (50+ years of age) who have working unmarried daughters at home.

In our experience, what works powerfully in terms of segmentation is a life history/ life context based segmentation.

Here, we study random sample of population with a clean slate and understand the motivations/ behaviour of people through the lens of their history - their family background (from their parents’ time onwards), how they came up in life, their memories of childhood and life, what has been their source of strengths, who do they look up to, what are their motivations, what are their anxieties, aspirations, beliefs, value system etc. At this point, it is a qualitative assessment.

Typically there is a pattern and about 5-6 generic and significant segments emerge, over which the traditional demographic variables are overlaid. Normally these traditional variables too get divided in a logical and coherent manner.

Also, given that it is the coming together of behaviour, demographic and to a certain extent psychographic aspects, an apt metaphor is used to represent and bring alive the characteristics of the different segments.
If required a quantitative assessment is then done through secondary/ primary research to get a sense of the proportion of each segment.

One of the main advantages of lifescript based segmentation is prediction. Since we know the past/ life context of each segment, it enables us to predict clearly how each segment would potentially behave across certain product categories like cars, mobiles, house, paints, clothing, personal accessories – essentially self-expression categories; while across certain others like banking, hospitality etc. it helps us take some educated guesses.

This is unlike the traditional segmentation which gives either a snapshot view or is restricted to a particular category where the behaviour can be predicted.

Notes: McKinsey Global Institute – ‘Bird Of Gold’. McKinsey’s forecast on the demographic shifts. Implication for the existing segments