Knowledge Paper 030 · Segmentation
The Segmentation Fallacy
Why your customers probably aren't as different as you think.
The short answer
Marketing loves putting people into boxes.
Young professionals. Affluent adventurers. Value-conscious families. Eco-conscious millennials. Premium experience seekers. Blah, blah, blah.
We research them, cluster them, name them and occasionally give them a photograph and a fictional Labrador.
Then we make an enormous strategic leap.
These people are our customers. Those people aren't.
There is just one problem.
Real markets don't behave like that.
Decades of marketing science suggest that directly competing brands tend to be bought by broadly similar kinds of people. Bigger brands don't usually become bigger because they have discovered a uniquely attractive tribe.
They mostly have more buyers.
The market contains enormous human variation.
But variation is not necessarily segmentation.
The brain loves a box.
Categorisation is an extraordinarily useful human capability.
The world contains far too much information for us to process everything from scratch, so brains compress complexity.
Friend or stranger. Food or poison. Safe or dangerous. Us or them.
Categorisation allows fast decisions from incomplete information.
And humans are particularly sensitive to social categories. Age, sex, status, kinship, coalition and group membership could all contain useful information about another person's likely behaviour.
The problem isn't that categorisation is irrational.
It's that we're so good at it that we can discover apparently meaningful groups even where there's scant commercial evidence for those groups.
Give a marketer 5,000 survey respondents, enough variables and some clustering software and clusters will emerge.
Then we give the clusters names.
And suddenly statistical variation has become a tribe.
From data to fictional humans.
This tendency reaches its logical conclusion in the marketing persona.
Research produces a cluster.
The cluster becomes someone like Sophie.
Values experiences over possessions.
Enjoys yoga and travel.
Concerned about sustainability.
Likes discovering authentic brands.
And then something peculiar happens.
Sophie starts attending meetings.
Would Sophie like this packaging?
Would Sophie watch ITV?
Would Sophie pay £8 more?
Is this really for Sophie?
We've taken an average constructed from a collection of people and turned it into an imaginary individual with agency.
What Rachel Kennedy found.
This isn't simply a philosophical objection to segmentation.
There is a substantial body of empirical marketing research behind it.
Professor Rachel Kennedy of the Ehrenberg-Bass Institute has studied segmentation and brand user profiles for decades, including work with Andrew Ehrenberg.
Their provocatively titled 2001 paper, There Is No Brand Segmentation, examined the customer profiles of competing brands.
If conventional segmentation thinking were correct, we might expect differently positioned brands to develop visibly different types of customers.
Generally, they don't.
Buyers of directly competing brands tend to look surprisingly similar across demographic, attitudinal and other identifying variables.
This pattern has subsequently become known as the Law of Brand User Profiles: rival brands' customer profiles seldom differ substantially.
There can, of course, be differences.
A luxury fashion buyer may look different from the average mass-market fashion buyer. But compare competing luxury brands with one another and the differences become much smaller.
The segmentation illusion.
Markets contain differences. That doesn't necessarily mean brands have different customers.
People aren't segments. They're situational.
This is where evolutionary psychology adds another layer.
Human beings are extraordinarily behaviourally flexible.
We change what we do according to our goals, resources, social context, risk, opportunity and immediate circumstances.
Behaviour that appears inconsistent when viewed through a segmentation model may make perfect sense once we understand the problem the person is trying to solve.
Consider one person buying whisky.
A bottle for cocktails at a barbecue.
A malt to drink at home over Christmas.
Something special because his father is visiting.
A retirement present for his boss.
Traditional segmentation is tempted to discover four consumers.
Value Drinker.
Everyday Enthusiast.
Premium Connoisseur.
Luxury Gifter.
There is only one bloke.
What changed?
The situation.
This is what evolutionary psychologists sometimes describe as the context-sensitive nature of human decision-making. Behaviour adapts to circumstances.
The same person can pursue different goals under different conditions without being inconsistent or irrational.
From WHO? to WHEN?
This changes the marketing question.
Traditional segmentation tends to ask:
WHO IS OUR CUSTOMER?
Category Entry Point thinking asks:
WHEN MIGHT A CATEGORY BUYER NEED US?
That is a surprisingly profound difference.
Think about a restaurant.
Anniversary.
Sunday lunch.
Visitors are staying.
Can't be bothered cooking.
Business dinner.
Birthday.
Driving through the area.
The same person may enter the restaurant category for every one of these reasons.
The person hasn't changed.
The buying situation has.
Category Entry Points describe the thoughts, needs and situations that bring buyers into a category.
Rather than trying to own a particular type of human being, brands can build mental availability by becoming associated with more of the situations in which category buying occurs.
Segmentation can shrink your brand.
Segmentation sounds efficient.
Why waste money reaching people who aren't our target?
Perfectly sensible.
If they genuinely aren't potential buyers.
But if the target is largely a fictional construction, targeting has another consequence.
You deliberately stop talking to category buyers.
A hotel decides it is for “affluent experience seekers.”
A whisky becomes “for adventurous millennial explorers.”
A professional-services company targets “ambitious entrepreneurial SMEs.”
Fine.
But what happens to everyone else who might buy?
The danger is mistaking a description of some existing customers for a prescription about who future customers should be.
That runs directly against one of the most consistent findings in marketing science: brands grow primarily by increasing penetration and acquiring more buyers.
But some segments are real.
This is not an argument that all segmentation is useless.
Some markets genuinely contain meaningful partitions.
Cat food and dog food serve different functional requirements.
Children's shoes are not simply adult shoes targeted at a different psychographic tribe.
Gluten-free products can address a specific dietary need.
Geography can determine whether someone can practically buy.
Private aviation requires resources that most consumers do not possess.
Business-to-business products may genuinely be suitable only for organisations with particular technical requirements, structures or scale.
The important distinction is between genuine category or functional differences and the assumption that competing brands somehow attract fundamentally different species of buyer.
So the argument isn't:
SEGMENTATION BAD.
It is:
The Segmentation Reality Test.
Before building a strategy around a segment, ask seven questions.
Do these people actually buy differently, or have we merely described them differently?
Does the pattern persist across time and different datasets, or is it a feature of one particular piece of research?
Is the difference large enough to matter commercially?
Would we genuinely change the product, distribution, pricing or communication because of it?
Are these really separate groups, or do the same people move between different behaviours?
Are we looking at different kinds of people, or the same people buying under different circumstances?
How many plausible category buyers disappear when we define “our customer” too narrowly?
Segment the need before the human.
There is a simpler way to approach the problem.
Don't begin by chopping humanity into tribes.
Start with the market.
What creates demand?
What circumstances change people's requirements?
What functional needs genuinely matter?
What buying situations exist?
Which Category Entry Points bring people into the category?
Which of those situations could the brand become associated with?
This doesn't eliminate differences between consumers.
It simply stops us assuming that every difference is evidence of a stable consumer type.
TheSignalWorksView
Marketing likes segmentation because it makes an untidy world feel manageable.
Real people are inconvenient.
They change their minds.
They buy premium products and cheap ones.
They shop at Aldi and Waitrose.
They drink Champagne and supermarket lager.
They care deeply about sustainability on Tuesday and forget their reusable bag on Wednesday.
They behave differently when buying for themselves, their children, their boss or their mother.
That's not necessarily irrationality.
It's human flexibility.
Marketing science adds another uncomfortable fact: despite all this individual variation, directly competing brands frequently end up with remarkably similar customer bases.
So perhaps we should be rather more cautious before deciding that our brand belongs to one special tribe.
The question isn't whether differences between people exist.
Of course they do.
The question is whether those differences explain enough buying behaviour to justify deliberately making your potential market smaller.
Consumers don't wake up as Premium Experience Seekers, Value-Conscious Traditionalists or Digitally Enabled Explorers.
They wake up as people.
Sometimes they're celebrating. Sometimes they're rushing. Sometimes they're broke. Sometimes they're feeling generous. Sometimes they're buying for themselves. Sometimes they're buying for somebody else.
The customer didn't change. The situation did.
Before making your market smaller by deciding who your brand is “for”, make sure the market really is divided in the way your PowerPoint says it is.
Key Takeaways
- Human variation doesn't automatically mean a market contains commercially meaningful segments.
- Research led by Rachel Kennedy and Andrew Ehrenberg found that directly competing brands tend to have surprisingly similar customer profiles.
- People are highly context-sensitive and can behave very differently across different buying situations.
- A single person can appear to belong to several different “segments” depending on what they are buying, why and for whom.
- Category Entry Points offer a useful alternative perspective: think about buying situations as well as buyer types.
- Over-segmentation can unnecessarily restrict reach and exclude perfectly plausible category buyers.
- Some segmentation is genuinely useful where meaningful functional, behavioural, geographic or category differences exist.
- The important question isn't whether you can identify a segment. It is whether the segment changes anything commercially.
Frequently Asked Questions
Is segmentation useless?
No. Segmentation can be useful when it identifies substantial, stable and commercially meaningful differences in needs or buying behaviour. The problem is assuming that every statistical difference represents a useful market segment.
What is the Law of Brand User Profiles?
Research associated with Rachel Kennedy, Andrew Ehrenberg and the Ehrenberg-Bass Institute has repeatedly found that directly competing brands tend to have similar customer profiles. Rival brands usually differ less in the types of people who buy them than conventional positioning and segmentation theory might suggest.
Doesn't targeting make marketing more efficient?
It can, when the people being excluded genuinely have little or no probability of buying. But narrow targeting can become counterproductive when it excludes category buyers based on weak assumptions about who the brand is “for”.
What is wrong with personas?
Nothing inherently. Personas can help make complex research easier to communicate. The danger comes when a statistical summary is treated as though it were a real, stable person whose imagined preferences can guide every marketing decision.
How does evolutionary psychology relate to segmentation?
Humans evolved to categorise the world because categorisation reduces complexity and supports rapid decision-making. But human behaviour is also highly flexible and sensitive to circumstances. That combination can make marketers eager to categorise people even when behaviour may be better explained by context.
What should marketers look at instead of demographics?
Demographics can sometimes matter, but marketers should also examine actual buying behaviour, category needs, purchase occasions, functional requirements and Category Entry Points.
What's the difference between a segment and a Category Entry Point?
A segment describes a group of people. A Category Entry Point describes a thought, need or situation that brings someone towards a category purchase. One asks primarily who?; the other asks when and why?
Further Reading
- Rachel Kennedy & Andrew Ehrenberg — There Is No Brand Segmentation
- Rachel Kennedy and colleagues — research on brand user profiles and segmentation
- Byron Sharp — How Brands Grow
- Jenni Romaniuk — Better Brand Health
- Jenni Romaniuk — research on Category Entry Points and mental availability
- Andrew Ehrenberg — research on repeat buying, repertoire markets and brand performance
- Douglas Kenrick and colleagues — work on evolutionary psychology, goals and context-sensitive decision-making
Related Knowledge
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