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.”

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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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Psychtech ‘outsiders’ challenge research insiders to change

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

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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…]