Market segmentation is so yesterday … today, it’s self-selected “tribes”

TakeAway:  The power of the Web is undeniable.  It gives companies access to consumers in ways never thought possible.  Companies enjoy the luxury of leveraging online consumer groups for product development feedback, buzz generation, etc. 

Now, companies are flipping their segmentation strategies upside down and using consumer data gathered from the Web to build their segmentation strategies.  And, these companies are realizing cost and accuracy benefits.

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Excerpted from Strategy & Business, “The Promise of “Self Segmentation”,” By Nick Wreden, October 5, 2009

… Today, a community-based approach to segmentation — which is both less expensive and more effective than the traditional methodologies based on customer relationship management (CRM) systems — is becoming possible …

Self-segmentation provides a foundation for leveraging customer experience and input … The rise in social networks and online communities, combined with the new era of the Web-empowered consumer … consumers are increasingly segmenting themselves into communities, based on common characteristics, passions, interests, or needs. Such “self-segmentation” is likely to be much more accurate and reflective of consumers’ attributes …

Companies can now bind themselves to consumer communities of interest or “tribes,” … such self-selected communities not only reflect consumers’ true interests but also involve their connection to others with the same passions. This opens the door to fostering brand ambassadors, enabling customer collaboration, and facilitating word-of-mouth cross-fertilization …

Since relevant communities represent self-selected groups who share one or more interests, marketers can substantially reduce the costs, time, and toil required to identify, and segment, qualified prospects … and the communities provide a better guide to potential purchasing behavior …

Interactions within communities represent an ideal listening post, enabling marketers to glean direct insights without the filter of market research …

Engaged participants can provide product development guidance and identify shortcomings in service or other areas to help a company improve its brand …

Companies can utilize three approaches to leverage self-segmented communities — engaging with social networks, tracking online communication behavior, and mass customization …

Segmentation is vital as mass marketing slips into irrelevancy, with information overload causing consumers to block out many corporate communications … But CRM-based market segmentation can be expensive, complex, one-dimensional, and static. It fails to accommodate the multidimensional nature of consumers … It leads to top-down initiatives that view potential customers as targets to be blitzed with campaigns, ambushed with messages, and subjected to guerrilla marketing.

In this new era of branding, companies must focus on ethnic, cultural, religious, sports, or other segments, not markets. This pivot could be achieved through CRM systems, but self-segmented communities of interest provide a more effective alternative. Such communities can provide fast, low-cost market research, generate ideas and feedback about new offerings, help improve corporate and customer-to-customer service, strengthen relationships, provide an early warning system about problems, and promote favorable word-of-mouth. It all starts with finding communities united by a passion or an interest, and talking with them, not at them.

Edit by TJS

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One Response to “Market segmentation is so yesterday … today, it’s self-selected “tribes””

  1. Laj Says:

    Professor, in case you’re interested, here is (to me at least) a very astute essay on Malcolm Gladwell by psychologist Steven Pinker:

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