The practice of market and customer segmentation is based on an economic theory developed in the 1990’s. The RA (resource advantage) theory, in part, states: In order for an organization to exist, it needs to consider consumers’ needs and expectations.(1) When we approach the subject of segmentation, I think it is important to revisit this very simple idea.
There are many approaches to segmentation. Needs-based segmentation is the clustering of consumers according to a common set of needs and expectations that relate to your brand, product and/or category.
A needs-based segmentation approach is one of the best ways to create marketing strategies based on meeting the needs of specific consumer types. Defining consumer segments has more to do with critical evaluation than it does with a prescribed process or system.
Think of it this way. Consumers hire products to fill their needs. Needs-based segmentation is based on the idea that consumers have jobs that need to get accomplished. When consumers become aware of such a job, they look around for a product or service they can hire to get the job done.
Let’s take shaving as an example. The men’s shaving category has gone through big changes in the past few years. Things like “No-shave November” and Manscaping (it must be a real thing...it’s in the dictionary!) have had a dramatic impact on the market landscape in the blades and razor category.
Shaving habits are not the same for every man. Variables in this category include age, hair type, and culture. But, what happens when we look at male shavers by what they need? What is the job they are looking to fill?
Recently, Unilever paid $1 billion for Dollar Shave Club. They recognized the value of this innovative and disruptive male grooming brand known for its deep connections to its diverse consumer base. The Dollar Shave Club appealed to a highly engaged consumer segment that was interested in hiring a new brand to do the job – they were looking for high quality, affordable, razor blades that are convenient to buy.
A needs-based segmentation approach helps companies focus on consumers that are looking for innovation. This makes the innovation pipeline much more efficient and effective versus companies looking for people to buy their products.
Beth Harris is co-founder of Trek Solutions, a Dayton based market research and strategy consultancy. Trek Solutions works with small business to Fortune 500 companies around the globe. She specializes in helping companies overcome the challenges of product homogenization, data overload and one-size fits all solutions.
(1) Article by Uludag University, Faculty of Economics and Administrative Sciences in its journal Business and Economics Research Journal Volume (Year): 1 (2010), Issue (Month): 2 (April)