History of Segmentation

DataBlog_150109_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.”

imgo
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.

Perhaps that’s simplifying things. But you can still go a long way back if you want a more involved and rigorous theory of segmented marketing. The Ancient Greeks had plenty to say about the fundamental principles.

For many Ancient Greek philosophers, landing a persuasive point didn’t just depend upon making the right argument. It was about doing so in the right time, place and setting. They had a specific word for this opportune moment: kairos.

DataBlog_150109_aristotle-1

The idea of kairos has its most celebrated explanation in Aristotle’s Rhetoric, a book about the art of persuasion. Here, the philosopher stated arguments should be tailored your argument to suit your audience. He says, for example, that you need to appeal to different ideas and ideals depending on the political milieu in which you find yourself. He says you need to: “understand all the forms of government and to discriminate their respective customs, institutions and interests… We should know the moral qualities characteristic of each form of government, for the special moral character of each is bound to provide us with our most effective means of persuasion in dealing with it.”

If you are talking to democratic men, you need to find out the special moral character of democracy and attune your means of persuasion accordingly. If you are dealing with a tyranny, oligarchy or aristocracy, also act accordingly. Aristotle says that democratic men like arguments that concern freedom, oligarchs are interested in wealth, aristocracies want to know about education and the maintenance of national wealth, tyrants want to hear how best to protect the tyrant.

Thanks to arguments like those, it isn’t entirely far fetched to claim – as some have done – that Aristotle’s Rhetoric is the theoretical genesis of modern marketing. (Just so long as you remember that the man himself disdained commerce and the retail trade.)

Further examples of segmentation in action are scattered through history. Publishers, for instance, would produce plain or ornate bibles, craftsmen design austere or baroque churches depending on whether they were dealing with Catholics or Protestants after the Reformation. But one of the best examples comes more recently (although still long before the arrival of the internet) with the inter-war car trade and the way General Motors knocked Ford from its dominant position.

DataBlog_150109_cars In 1924, Alfred Sloan announced that GM would build a car “for every purse and purpose”, with a different brand of car for each segment of the market. Cadillac, they called “the standard of the world” – top end luxury cars for those who had it and wanted to flaunt it. Buick was for those had almost as much. Pontiac was “chief of the sixes” – a car for people hungry for performance. Chevrolet was “high quality at low coast”. Oldsmobile was “the fine car of low price” – and at this stage you can see that the distinctions are very fine grained. But that’s the point. GM had a product for every slot. And it paid off. By 1931, the company had overtaken Ford to become the largest car manufacturer in the world. Soon after – and not coincidentally – Ford also abandoned their one car strategy.

Alongside such practical innovations, the first half of the 20th century also saw the application of psychological theory into the field of marketing. In 1903, Walter Dill Scott published “The theory and practice of advertising”. a book using the work of psychologists like Freud as a platform to suggest better ways to get through to consumers. “Man has been called the reasoning animal,” he wrote, “but he could with greater truthfulness be called the creature of suggestion. He is reasonable, but he is to a greater extent suggestible.”

Aristotle might well agree.

Scott didn”t have much practical evidence to back up his theories (sceptics could easily contend he had none), but his ideas did set others in motion. Some psychologists, like Harry Hollingworth began to test the impact their adverts had on consumers using scientific surveys, and this research in turn helped generate that first definition for market segmentation from Wendell R Smith.

Yet in spite of the attempts to give it theoretical back-up, segmentation could also be a crude process. The truth is that it was  – and still is – often recommended chiefly as a corner-cutting device. It is, after all, a far cheaper alternative than talking to everyone. Advertisers tended to segment on the basis of age, gender and social class: not least because that was what Nielsen and BARB and their international equivalents measured for TV shows. lego-advertisement

It”s also worth remembering that dividing along class, gender and age lines is not a neutral process. It”s freighted with problems that we are still dealing with today. There”s a famous Lego advert from the 1970s showing a beaming little girl proudly holding a very big and very strange Lego construction, made of bricks of all shapes and sizes. It bears the legend: “What it is is beautiful.”

The advert is possibly even better known today than when it was first used, because it became the focus of discontent when Lego launched its “Friends” line. These were generally pink creations focused around the domestic space and targeted at little girls. “What it is is different” ran the adverts from online mockers. There are similar controversies over boys and girls sections in toy shops, over fashion retailers attempts to dress boys in blue and girls in pink, even over the need to have special casino pink Bic pens for girls. These issues also raise the thorny question of whether retailers employing segmentation are reacting to consumers – or directing them. Do girls have a natural yen for pink fluffy toys that teach them how to stay home and cook? Or are they being railroaded into fulfilling potentially unhealthy gender stereotypes?

To give the theorists some credit, they did at least realise that gender, age and class segmentation brought problems as far back as the 1960s – even if the main focus then was how to cope with the individualism of the Baby Boomer generation. In 1964, Harvard marketing guru Daniel Yankelovich asserted that marketing strategies should no longer just rely on traditional demographic traits such as sex age and education level. Strategists would also have to take account of values tastes and preferences and identify those segments most receptive to a particular brand and product category.

As the 1970s came along, the emphasis moved from the qualities of the product and all the innovations of the space age, to the users. The goal now was to speak to individuals on a level they understood emotionally. Just as the age of therapy reached its peak, we also entered the time of ‘psychographics.’

An amalgamation of “psychology”, and “demographics”, “psychographics” was a term first introduced by market researcher Emanuel Demby in 1974. Neatly enough, it was a term that defined “Baby Boomers”: since the phrase classified them on the basis of their birth years, but also contains associated ideas of attitudes, values and behaviours. (Generations X and Y and the Millennials are similarly psychographic terms.)

DataBlog_150109_vals The most influential moment in psychographics came in 1978, when Arnold Mitchell and his colleagues at the Stanford Research Institute, created the Values Attitudes and Lifestyles psychographic methodology, using statistics and demographic surveys to split American consumers based on factors such as income levels, intelligence, education and self-confidence. They were then split into nine different categories. The idea was to identify the lifestyle factors and personal affinities that make a sale more likely. Critics (Daniel Yankovitch among them) said it was a very weak method of predicting purchase patterns, but even so, Advertising Age named VALS as “one of the ten top market research breakthroughs of the 1980s.”

VALs also helped kick of a trend for splitting people into psychological categories. As recently as 2001 a book called the Hero And The Outlaw came on the scene pushing the idea of Jungian archetypes to marketers. It was a big fat book brimming with theory and ideas -and it was hugely influential. It”s easy to see why brands enjoyed being told that they were brave heroes, wacky and adorable jesters and nurturing caregivers. On the other side, advertisers must have enjoyed being made to feel like the holders of mystical insight and arcane knowledge – and it has the romantic, do-better vibe of all the most successful self-help publications. What it didn”t have was empirical evidence to back up its claims. Just like Walter Dill Scott at the start of the 20th century, 21st century theorists were still relying on wishful thinking and exotic ideas more than empirical data.

In recent years, we”ve heard less about the Hero and his friends. Arguably, segmentation has again become much more mechanical. We’re not dealing with people any more, we’re dealing with clicks on a website, algorithms, cookies and code. Now the best way into the market is to burrow through big data and to have the best psychometric understanding of the people you want to reach. Everything has changed once again.

You might say, in fact, that our understanding of segmentation is always in flux. You might also say that such changes undermine the marketers’ claims that segmentation is evidence based. How can the evidence have changed so much, after all? Certainly, influential theorists like Byron Sharp have condemned “the esoteric quackery concerned with segmentation, differentiation and how buyers perceive brands (e.g. brand personality)”. They say there is little evidence that different segments act differently. There”s also the problem that if you go looking for differences, you”re more likely to find them, not to mention the issue of practical utility. Do we really need one shampoo for blondes and another for gingers? Who actually benefits when the market is thus fragmented? And what happens if your home contains one blonde and one ginger? Buy both shampoos? Or a more generic single brand? Which also raises the question of where you draw the line with segmentation. Once you”ve identified different types of five-year-old girls, where do you go next? Where do you draw the line? And where do you admit that it”s absurd – and possibly even unpleasant?

By the same token, however, you could argue that there”s a certain robustness demonstrated by the fact that ideas about segmentation can adapt and change, while still maintaining some affinity with those timeless principles from the Ancient World. Let’s not forget that one of Aristotle’s key points was that the master of rhetoric has to respond to the dominant ideology and modify accordingly. An idea which is cynical – but also persuasive.

Speak Your Mind

*