Customer Insight

The segmentation graveyard teems with sorry creatures. Most large organizations – and many small ones – have such a graveyard buried within past market research and strategic plans. Among its disused inhabitants are schemes that:

• Lack explanatory power for observed behaviors
• Are incomprehensible due to the dozen-plus variables used to define them
• Incorporate large “unexplained” buckets for groups that fall outside statistically-derived clusters
• Have substantial overlap among segments

This moment in time is unlike anything America has experienced since the 1960s. During that period over half a century and a couple of generations ago, lifestyle values were changing rapidly. Individuality was in ascendance. More and more people were rejecting institutional authority and relocating their loyalty and identity from society to self.

Disruptive events always feel momentous and world-changing in the heat of the moment. It feels like everything is of consequence and nothing will ever be the same. But of course, it never works out like that. A few things change, some for the better and some for the worse, but most things stay the same. We look back later and much of what we thought would change has been forgotten like a New Year’s resolution. Which is why older executives can settle into the cynical view that all dreams are pipe dreams. Too often they’ve seen too much change too little.

Habits are hard to break, but not impossible. Some sort of change occurs after every marketplace disruption. But where changes happen, what changes happen, how many embrace change, and whether change is small, large or far-reaching depends upon the quality of the experience consumers have with whatever is new and different. The asymmetry principle is the way to sort this out.

Market segmentation can trace its origins back to the 1930s when the prevailing theories of perfect competition and pure monopoly no longer seemed to fit the situation. A new monopolistic theory emerged based around the idea that every firm was in itself in some important way unique. Every business was in effect able to create its own local monopolistic position by offering a product different in some way from others. That differentiation could be based on certain product characteristics, packaging, distribution or the real or imagined value associated with, for example, a brand name.