Market segmentation has always been an important tool at all levels of a business. For researchers, segmentation helps to communicate variability in behaviors, needs and attitudes at a large scale to implement market research strategies. For marketers, segmentation helps teams make sense of the consumer landscape, set strategy, develop targeting and be smart with their spending across channels. For product teams, segmentation helps them make sure they are designing the right products, prioritizing the right features and optimizing their portfolio.
Segmentations are helpful in understanding who the unique clusters of consumers are in your market and where you should focus your positioning, communication, market research strategies and innovation to grow as much as possible.
Businesses typically reset their segments every 5 or so years for reasons varying from new leadership with new priorities, changing spheres of relevant consumers or even a desire for a more sophisticated behavioral or attitudinal model rather than a standard demographic one. Resets also help brands keep up as the landscape changes (and some change faster than others). Change is a constant, but sometimes it is accelerated. In the last two years, in particular, everything from exercise equipment to the entertainment industry, restaurants to many food and common household products have seen shifts due to the pandemic or escalation of previous trends. Rare is the vertical that emerged from the COVID experience unscathed.
Businesses typically reset their segments every 5 or so years for reasons varying from new leadership with new priorities, changing spheres of relevant consumers or even a desire for a more sophisticated behavioral or attitudinal model rather than a standard demographic one. Resets also help brands keep up as the landscape changes (and some change faster than others). Change is a constant, but sometimes it is accelerated. In the last two years, in particular, everything from exercise equipment to the entertainment industry, restaurants to many food and common household products have seen shifts due to the pandemic or escalation of previous trends. Rare is the vertical that emerged from the COVID experience unscathed.
The Long Tentacles of WFH
Think about remote work. It changed who was buying computers, monitors, desks, computer chairs and similar things to build home offices. This much is obvious. But what about things like dining? If consumers are not going to the office, they may not need to stop by and pick up their usual cup of coffee in the morning or fast food on their lunch break. What about snacks? On-the-go and pre-packaged snacks are less important when you don’t need to go anywhere. How about clothing? People that work from home typically dress more casually - who needs dress pants when no one can see them? The market share of sweatpants or more casual clothes is on the rise.
Expanding even further, the shift to home has taken place not just in the workplace, but in other aspects of people's lives. Temporary COVID restrictions led to some permanent changes to people's behavior across a breadth of disciplines. Widespread changes can be seen in fitness with home gyms, hobbies, solo outdoor activities like camping and hiking, contactless sports where social distancing can be observed (like tennis), and even people paying for newly released movies in their homes rather than going to the movie theater. The hobbies people picked up during the pandemic to entertain themselves and stay busy are now permanent shifts in their interests, routines and behaviors.
How Temporary Shifts Change Long-Term Priorities for Market Research Strategies
With all of the changes listed above, many industries have seen a big shift in the composition and needs of their audience base, and previous segmentations may not be prepared to account for these lasting changes.
The permanent shift in the values, interests, routines and behaviors of consumers is what is truly important to know when a company needs to reevaluate market segmentation. But along with these habit changes there have also been changes in what is important to consumers. People began to re-evaluate what was valuable to them — they started realizing they were spending too much time commuting to work and they didn’t even need to work in-office to get their work done. Now, you see the need to create a workspace at home that helps them be productive.
Pressing Reset on Market Segmentation
For these reasons, especially while there are many changes brought on or sped up by the pandemic, it is an important time to pay attention to consumers to determine if a segmentation should be reevaluated. In general, market segmentation should be re-evaluated every few years, whether there is a global pandemic or not. Changing a segmentation in the middle of a fast-changing environment, like the height of the pandemic, is not ideal, but as we see the dust settling and we notice fundamental permanent changes to the marketplace, then it is time for action and planning.
Going “All-in” on Market Segmentation
When businesses are considering a reset of their segmentation, companies should reevaluate not just their market segmentation itself, but the full “segmentation cycle.” This includes cycles of qualitative and quantitative research starting with establishing new patterns (qualitative research), segmenting the market (quantitative research), and then deep-diving again into these segments to develop powerful and comprehensive personas (qual again). To be a true leader in business, a company must make sure that they are keeping their research up to date to remain relevant and focus on the right things for growth.