A practical challenge when working out how to segment is that there are usually lots of possible variables, and you need to reduce that number. For example, if you use all the techniques in How to identify Relevant Variables for Market Segmentation, you will often end up with a very long list of segmentation variables.  The list will probably be too long for you to measure them all, so the next decision is how to reduce the list in size. 

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Only use theoretically sensible variables

A useful segmentation variable should either:

  • Explain a difference in how or why people buy
  • Explain a difference in terms of how attractive customers are to a firm

If your variables do not relate to the benefits that people seek, how they intact, what prevents them from buying, purchase power, or customer value/profitability, they are unlikely to be useful. See Which Segmentation Variables Should You Use and Why?.

Use variables that are known to describe differences between people

Only include variables where there is a good reason to believe people differ.  Virtually everybody considers taste important when buying food, so there is little point in measuring the importance of taste in any market, since measured differences will likely just reflect measurement error. Similarly, everybody wants “good value”, so if you ask that question you will be measuring differences in how people like to tick boxes in a questionnaire, not real differences that you can use to build a segmentation strategy.

Relate to marketing activities

Good variables often relate to the type of marketing activities that will need to be employed and the degree of marketing effort required.  If a variable is measuring a difference between consumers that is not obvious in its marketing implications, serious thought should be given to excluding the variable.

Good variables are ones that are easy to measure

If it is hard to measure, this means that the resulting data is noisy, which makes it poor for segmentation. Most psychological variables fall into this category, which is why while people often describe consumers in terms of personality, few segmentations end up being successfully created around personality.

Align variables with strategic plans

Include variables that explicitly relate to the strategic planning of the company.  For example, if key marketing issues relate to advertising, then awareness, knowledge and product experience are useful for identifying target consumers, while psychographics and lifestyle are useful in tailoring the message.  If the priority of the firm is new product development, then the focus should be on demand-creating conditions (e.g., jobs-to-be-done) and preferences for different products.

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