Contextual Segmentation - A New Way to Understand Your Market

If you're trying to segment your market in the
traditional way, what you may be looking for would be groups of
consumers sorted out in such a way that a certain likeness exists
within each group, and a difference exists between them. The variable
determining the meaningful likeness or difference between those groups
would be the segmentation variable. A trivial segmentation variable,
just for the sake of demonstration, would be hair color.

However,
after having segmented the customers into groups, it is reasonable to
assume that you would expect to do something with it. Let's say that
you have decided to target a certain segment. You would probably want
to do some marketing activities that will appeal to this segment, or
else, to communicate some kind of enticing message to it. Sometimes,
the segmentation variable could suffice for the purpose, ("listen to
me, all you red-heads out there..."). In most cases (for instance, the
segment of those who consume beer only out side their home), you would
have to characterize your segment before you could address them.

In
other words, you would have to define what describes the customers in
that segment, beyond your segmentation variable, and also, what makes
them different from consumers in other market segments. The
characterization of your segment is a task that is not the same as
defining your segment. It is a distinct next step. But now, if you can
be truly sincere with yourself, I'm convinced that you have already
found out that it does not work.

In the distant past, and in
traditional societies (sectarian) the people's behavioral patterns were
pretty much modeled by their affiliation to a certain gender, a
nationality/tribe/race, a certain religion, a social/economic status, a
profession, and an age group - much more than today, anyway. There were
clear clusters of elements pertaining to appearance, general behavior
and particularly consumption. Then, back in those days, if you knew one
element of a particular cluster, you could quite easily guess the
others. But all this has changed. As people are becoming gradually more
individualistic, and as possibilities have multiplied, people have
become less and less definable as types.

First of all, let's face
it, our consumer refuses almost completely to abide by segments that
create homogeneous groups (heterogeneous from others) according to
demographic, socio-economic variables, or even according to lifestyle.
Our customer will not behave and consume under our stereotypical
forecasts. He is a "collector", and therefore I call him the 'eclectic
consumer'. He likes the old (Frank Sinatra), as well as the new (fast
internet), the expensive (BMW) as well as the economical (hardware
do-it-yourself stores), the international (Giorgio Armani) as well as
the locally rooted (folk dancing), the epicure (a double Makiato) as
well as the crude (football).

The eclectic consumer has become
frenzied by the abundance of opportunities, and is now addicted to the
concept. He does not want to miss anything and so, his life is
multiplex, yet laden.

So, how do you market to the eclectic
customer who is afraid of missing out? One central insight for the
re-designing of market segmentation is as follows: the eclectic
consumer, who will not miss anything, 'connects' to different, even
contradictory, motivations he has at different times. Because these
motivations are not necessarily compatible with one another, the
eclectic consumer is constantly in motion from one stereotype to
another, from one lifestyle to another.

In order to adapt to this
consumer reality, our segmentation (and subsequently, our products and
services, our advertising and so on) should be formulated not according
to groups of people, but according to motivations and uses. Note that
when I refer to 'uses' I mean, among other things, psychological uses,
such as mood control, self-esteem enhancement, and fantasy support, and
I also mean social uses, such as signaling others things like group
affiliation, specific atmospheres, or impression control. The new
method is called "Contextual Segmentation" - segmentation according to
contexts of purchasing or using/consuming.

Note that this
constitutes a formation of a real revolution in segmentation thinking.
Some of you would probably comment that this is not so much about
segmentation as it is about consumer behavior analysis. Well, let me
answer you. Let us recall the original purpose of market segmentation.
It is the furcation of the market into smaller units enabling us to
focus our marketing/branding/advertising activities, and to achieve
differentiation, so that we could win advantages we could not get when
working with the entire market. The search for small consumer groups
has evidently stopped delivering results. However, the pursuit after
groups of 'purchases/consumptions' rather than of people, could offer
new horizons.

Let us sharpen things a little. According to the
old segmentation, each group is characterized by a
need/preference/motivation. The new approach preserves this concept.
Yet, in the new reality, and according to the new approach, the
motivation is no longer common within a defined consumer group. A
'segment' is now a group of 'purchases/consumptions' qualified by a
certain context of purchasing or consuming a product plus a specific
motivation.

When we segment according to this approach, we
analyze consumer behavior; we identify the various contexts of product
consumption, and the different motivations that characterize consumers
who experience those contexts. The new relevant segments could consist
of certain moods (such as the 'I'm going to teach that husband of mine
a lesson he's never going to forget' segment), certain social
situations (such as the 'Wow, I haven't seen YOU in a long time'
segment), all according to what is relevant to that specific product
category. Note that when we meet a given purchasing context (a dinner
at a restaurant) there are varied consumer motivations that exist
('tonight we're going out solo, no kids', versus 'we're celebrating
grandpa's birthday'), and they would be considered different market
segments. A specific consumer is likely to participate in one segment,
few segments, or no segment. Nevertheless, much like the old
segmentation, every segment accounts for a share of our sales, and we
can do our profitability calculations accordingly.

According to
Contextual Segmentation, then, our marketing activities, at all levels,
should be aimed towards a context of purchasing/consumption plus a
certain motivation, and not towards groups of consumers.