History of Segmentation


Segmentation first arose as a marketing term one year before Sputnik 1 was launched into space. Wendell R Smith wrote in the Journal of Marketing in 1956:

“Market segmentation involves viewing a heterogeneous market as a number of smaller homogeneous markets in response to differing preferences, attributable to the desires of consumers for more precise satisfaction of their varying wants”.

Smith compared other product differentiation strategies to attempting to cut a layer of the marketing “cake” and knifing crudely across all parts of the market. Segmentation, meanwhile, he suggested was more akin to taking a slice: cutting vertically into one area of the marketplace and so producing: “a depth of market position in the segments that are effectively defined and penetrated.”

These ideas went off like an A-bomb in the late 1950s and early 1960s.  The world of Mad Men was predicated on hitting consumers directly in their aspirations. Manufacturers developed ever more complex iterations of the product “range”. Consumers got used to being targeted from cradle to grave.  A nerdy boy reading a comic would find adverts from Charles Atlas inside, telling him he could overcome bullies by subscribing to his exercise system.   A young girl would find adverts for toy Hoovers. A teenage girl would find adverts telling her how to “Get your man and hold him” by wearing the right brand of cologne. A teenage boy would still find adverts for Charles Atlas, alongside adverts for pimple removing creams, fake diplomas and record racks.

Okay, some of those examples speak of a lost era, especially when set against the arsenal of databases, complicated algorithms and psychometric surveys we use today. Now that the process of segmentation has become as aggregated, convoluted and fiendishly complicated as cloud technology can make it, it”s easy to congratulate ourselves for reaching an apogee of sophistication. It”s also easy to think that this such segmentation is a modern phenomenon.

Yet while the techniques are new, the essential principles behind modern segmentation are not. If you believe that segmentation is the art of finding out what people want and giving it to them, you might even argue that merchants carrying salt to farmers who needed meat have always followed this principle. And following on from that, you could say that segmentation has been around since before humans even learned to write.

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Why your decisions may not be as rational as you believe


If you believe your decisions are rational, you’re probably not listening to reason. Hidden biases and faulty thinking unbalance the decision-making process without us being aware of their influence.

Who shot JFK? Was it Lee Harvey Oswald, alone in the Texas School Book Depository? Was it the Cubans? The Soviets? The CIA? Or could it have been Lyndon Johnson, who succeeded JFK and therefore had the most to gain? Since Kennedy’s assassination in 1963 a small industry has grown up dedicated to unravelling the circumstances of his death. According to ABC, in the last 50 years more than 2,000 books have been written on the subject. Each amasses an argument and presents the evidence to support its case. Or, more accurately, each begins with a conclusion and then seeks the evidence to support it.

We are Pleased to Confirm

This is an example of confirmation bias and it illustrates a startling flaw in our reasoning. A large proportion of our decisions are based not on a clear reading of the facts, but in hidden biases and dodgy reasoning. And if you think that only applies to our private decisions, think again. Decision-making in business can be just as irrational, and is subject to a whole range of factors that distort our better judgement.

In his book Thinking Fast And Slow, the Nobel Prize-winning behavioural psychologist Professor Daniel Kahneman notes that we have two modes of thought. One is logical, analytical and unhurried, and we’re aware of its gears grinding away whenever we approach a complex problem. The other is fast, intuitive and hidden from us. Bad decisions and the biases that drive them are a result of us thinking fast when we need to think slow.

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The Psychology of Price


“It’s like when a 39-year-old turns 40, the birthday feels like a big deal,” says Robert Schindler, a professor of marketing at UCLA. He’s talking about the effect of prices that end .99, how just a single penny between two larger amounts creates this symbolic buffer in our minds. So we perceive £3.99 as being closer to £3 than £4, just as the 39-year-old man still believes he’s in his mid-30s: it’s both completely irrational and perfectly understandable. Welcome to the world of psychological pricing.

Shoppers have to process a lot of prices, especially online, to the point where it becomes overwhelming. Our memories only process the first couple of digits of a figure at a time so pounds inevitably take precedence over the trifles of pence. The effect is powerful. When a Chicago grocery store dropped the price of margarine from 89 cents to 71 cents it saw sales rise by a modest 65%. But then it lowered the price again, by just two cents, to 69 cents. The result was a sales jump of 222%. Subtracting that single penny or dollar to reveal a pair of nines is a magic trick for retailers, but it can come at a larger price.

What the industry calls ‘just-below’ prices are linked in our minds with special offers and promotions. According to marketing professor Robert Schindler, the format was introduced in the 1870s as a way for retailers to distinguish discounted products from their full price stock. But at some point the just-below prices simply became the norm, sale or no sale. And so, in 1894, James Eaton & Co could assure the public that its $9.99 check suits were ‘Always the Cheapest’ in newspaper adverts that did away with whole number prices altogether. Today, however, certain stores still retain the approach’s original meaning.

Take Nordstrom, by Wikipedia’s admission an upscale fashion retailer. They price their clothes in whole numbers: a pair of swimming trunks can be yours for precisely $152 and a bow tie will set you back exactly $55. There are cheaper places to buy your swimwear but even Nordstrom have clearance sales. Then you’ll see all sorts of prices: a wool fit suit is now $465.65 and a pair of toe cap boots are down to $126.96. The discounted prices are left with ragged edges. So why use whole numbers in the first place? [Read more…]

Customers are for life, not just for Christmas

Christmas Segments from VisualDNAMany brands and retailers face Christmas with both excitement and fear. Excitement for the possibilities of peak, and fear that seasonal discounting may hurt the bottom line.

In the run-up to Christmas, brands and retailers traditionally spend on marketing and discounting via generic festive messages they hope will convert enough potential buyers to beat the competition. But budgets could be spent far more effectively if it were possible to understand customers and prospects – and the Christmas buying experience they’re after.

People engage with Christmas shopping very differently: some have it all wrapped up by December 1, while others are still rushing around like headless turkeys on Christmas Eve. There’s Bargain Hunters who scour the web for the best deals, Family Shoppers who browse and browse to find perfect gifts for their nearest and dearest. There’s The Early Birds who enjoy a clinical Christmas and The Bohemians: those who buy big for a shock and awe season.

Conventional data might reveal what online customers are doing, where and when but it glosses over the fact that every consumer – offline and online – is a living, breathing human being with a lifetime of experiences and a distinctive set of character traits which shape their behaviour. Personality plays a huge role in governing how people respond to products, brands, advertising, promotions, onsite design, selection, pricing and much more besides.

If brands and retailers’ ultimate aim is to reach prospects on an emotional level – for Christmas or at any other time – then personality is vital information for advertisers to segment customers based on who they are, how they’ll shop, and what message will best resonate.

New approaches are now emerging that can provide a much broader picture of each online consumer, including insight into their psychology. As a result, a growing number of brands and retailers are now taking their first steps into a new world of market segmentation based on what truly motivates people and on what drives their purchasing behaviour. Researchers in psychology have spent decades building rich models based on the “Big Five” personality factors – Openness, Conscientiousness, Extraversion, Agreeableness and Neuroticism.

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Psychtech ‘outsiders’ challenge research insiders to change

This article was originally posted on research-live.com.


There are much better tools and theories to understand people today than there were in the years when focus groups, shopper panels and use and attitude studies were first devised. Big data allows us to capture observational truths as opposed to claims. And psychology has moved on from psychoanalysis and behaviourism, to decision theory and behavioural economics. 

This shouldn’t be news to anyone in the research industry.  But it’s also true that despite what is discussed in the research journals and blogs, industry insiders definitively lag outsiders in the tech industry when it comes to putting new advances to work.  Why is this?

Some, like Dr Benny Cheung, a director at Decision Technology, suggest many don’t understand the limitations of the old approaches and so don’t see the advantages of these emerging techniques.

“As psychologists we know that two key pillars of existing approaches to market research – asking consumers to extrapolate decision making outside of its natural context/environment, and asking them to tell us why they acted in a certain way – are both flawed. Humans simply are very poor at doing these things.”

People can’t explain their behaviour, but there are tests that can accurately measure an individual’s personality in terms of the ‘big five’ traits, which in turn can predict their future behaviour. [Read more…]

How psychologists cope with cheating on personality tests

By Tomas Chamorro-Premuzic, PhD. 

Cheating a personality test

Are you cynical about personality tests? Do you worry that they may be a waste of time because the people filling them in are likely to fake their answers? Do you think that you might be able to skew the test results yourself? Does that make you think the results of all tests are therefore likely to be bogus?

Well, don’t worry. The chances are that if you’re given a well designed survey, all of those questions will have been factored in and effectively countered.

personality testPersonality tests have been used for clinical, educational, and employment assessment for more than 100 years – information I provide not only to show that they have a proven track record, but also because during that time the tests themselves have been submitted to rigorous assessment. These studies have produced three key findings and strategies for taking the faking out of the equation:

  1. Most people try to skew their results to the same degree. So, for instance, in high stakes tests such as those relating to job interviews, people tend to inflate the points they assume to be positive by around 10-20%. But because most people bend things in the same direction, it’s easy to see where meaningful differences remain.
  2. The best tests conceal their true intentions: people taking them don’t know what is really being assessed, or why certain questions are being asked. What’s more, plenty of tests can also assess how long people take to answer each question and alert assessors to any unusual response patterns or internal inconsistencies. The net result is that it’s generally better to answer honestly than try to game the system. [Read more…]

What makes a disruptive technology?

This article was first seen on – http://betanews.com/2014/08/12/what-makes-a-disruptive-technology/ 

black swan

According to Clayton M Christensen, author of The Innovator’s Dilemma, disruptive innovations are characterized by their ability to create entirely new markets rather than merely update existing markets with new products. They are black swans, rare events where new thinking and changing markets combine to create radical change.

A common example is the light bulb and Pearl Street Station — a major gamble by Thomas Edison. Within years of its development the kerosene lighting industry was all but non-existent, and the world was a brighter place. (The kerosene industry had similarly put an end to the whaling industry — thankfully — a few decades earlier).

Disruptive innovations also tend to involve making things simpler and cheaper than the alternatives, with unexpected results on multiple sectors. The motor car in the late 1800s was too expensive to be disruptive, but Henry Ford’s innovations in the 20th century made it cheap enough to replace the horse drawn carriage (and suddenly there were no more street dung collectors providing manure for farmer’s crops…)

My company, VisualDNA, sits at the intersection of (at least) four disruptive innovations that have arisen over the last five years and that are already making their impact on global society.

I believe that as these four innovations continue to evolve over the second half of this decade, they will create the perfect conditions for VisualDNA’s unique approach to understanding people to create disruptive change on a global scale, across all industry sectors.

1. Big data

Five years ago this term almost didn’t exist but it is now one of the fastest growing ‘most searched for’ terms on the internet (according to Google Data Trends). Analysts Wikibon predict this new sector will grow from almost nothing in 2010 to $50bn dollars by 2017. A report by PAC predicts big data will impact on every aspect of the global economy during the same period.

PAC also found that the fastest growing area of all will be in services to understand big data. Most big data is historical and transactional. Understanding personality, psychology and motivation are the missing ingredients that will enable deep understanding of intent and truly predictive analytics.

VisualDNA’s unique ability to engage users and turn their personality into digital form will be at the forefront of providing this vital information to power conventional big data.

2. Psychology

Psychology is undergoing a number of dramatic changes as new technology allows us to understand how the brain and personality are linked. Neuroimaging allows us to visually track the workings of the brain and identify how different responses and our emotions work at a chemical and neuron-level. Daniel Kahneman’s work on decision-making and behavioral economics is just starting to make itself felt in the mainstream and will become increasingly influential as real-time big data allows us to understand and model human responses at a macro level. Computer scientists are developing ever more sophisticated simulations and models of the brain allowing experiments and analysis to be performed, changing the way we see the brain and raising the possibility of truly understanding ‘what makes us tick’.

As this understanding develops, it will have a major impact on our understanding of people and how they behave. VisualDNA is already leading the way in understanding how individuals behave online, and through our partnerships and research we will continue to be at the forefront of these developments. [Read more…]

The Most Useful Personality Quiz You’ll Take This Week

This article was first seen on The Muse on the 31st of July-  www.themuse.com/advice/the-most-useful-personality-quiz-youll-take-this-week 

Screen Shot 2014-07-31 at 13.32.48

It was after spending 10 minutes taking a “what kind of sloth are you?” quiz that I knew I had a problem.


Those little BuzzFeed-style quizzes are so addictive (who doesn’t want to know more about their personality?), but unfortunately aren’t really helping any of us get further in life. (I don’t think my co-workers knowing that I’m a “cuddle sloth” is going to help us best online casino work better together.)

But, thanks to VisualDNA, us aspirational careerists who also have an unfortunate penchant for taking quizzes have a happy medium: the “Who Am I” assessment.

While it’s built in a similar style to your favorite BuzzFeed quiz—a series of questions that have you choose a photo that correlates with your answer—the results of this one are actually based on a well-respected model of personality assessment called “The Big Five.” [Read more…]

The Language of Feelings

In this inspiring talk, Alex the CEO and founder of VisualDNA, shows how today’s internet is powered by naivety.  People don’t understand the value of what they give away for free, i.e. their data.   Alex paints a picture of the foreseeable future where the ‘Internet of Feelings’ transforms our interactions between each other and suggests that from it all will develop a far better connectivity and understanding between people, and a better value exchange between services and their users.

Alex Willcock was recently described by The Guardian newspaper as ‘an Internet visionary’ for his leadership of VisualDNA, one of ‘Five British Tech Companies to Watch’. Alex and his team of 150 people based in London, have pioneered a movement to combine big data and psychology to deliver better understanding across the digital ecosystem including unlocking credit to tens of millions of people.

“Not everyone has a credit score, but everyone has a personality type”

unnamedBig data lends new Zest to banks’ credit judgments

By Patrick Jenkins



When Douglas Merrill left Google, he made the kind of move into financial services that many believe the tech giant itself may one day make.

Mr Merrill, the internet group’s former chief information officer founded Zest Finance to develop a simple theory: that consumers’ online behaviour can be a decent proxy for their reliability in managing money. “All data is credit data,” he once told the New York Times. “We just don’t know how to use it yet.”

Zest is one of a fast-growing coterie of financial technology companies – “fintech”, to use the jargon – that are aiming to revolutionise the way banks and other financial services companies operate.

Talk of fintech investment is all the rage these days, as banks try desperately to focus attention on a positive forward-looking agenda, and draw a line under the legacy woes. This is partly spin, of course. But investment in technology is also genuinely needed after seven years of crisis and post-crisis regulatory reform that distracted focus – and funding – away from the pipes and cables that make everything work. Who knows? Done right, it could even help prevent some of the scandals of the past. And, as with so much in the mass market internet world, it can claim to be an agent of democratisation.

Zest and companies like it claim that many people who have traditionally been denied credit – either because they lack a record of previous borrowing, or because that record is bad – will be validated by their broader approach to credit scoring. By using “big data” records sourced from individuals’ social network and internet footprints, typical credit scores can end up 40 per cent higher, Zest says. [Read more…]