Customer and audience segmentations are powerful internal tools for helping your teams to design product, marketing and experiences around your target groups. They are an effective strategy for helping orient a business around the customer, and ensuring this customer-led approach is something that all your teams can get behind. A few colourful segments are easier for everyone to digest than vast reports of customer data. But, as with anything, it is not without its challenges. The main one being: the balance between accuracy and usability.
The most accurate segmentation would be far too overcomplicated for the business to find usable. It would reflect the complex reality of humans and their refusal to sit neatly in defined segment boxes as much as we want them to. The most usable segmentation would be far too oversimplified to generate enough value for customers. The business could get behind them easily but customers might feel that something is missing in the experience of your brand.
In this article we explain why needs-based segmentations are gaining popularity in a digital age, how they achieve this balance and overcome some of the challenges faced by other forms of segmentation.
Different types of segmentations
Here are the main types of segmentations we’ve seen over the years and the common struggles that organisations face when implementing them:
- Demographic segmentations (e.g. young women) are useful due to their simplicity, but have limitations because they don’t actually define how people behave or what they want
- Attitudinal segmentations (e.g. enthusiasts) are closer to defining customers based on mindset, but are too abstract and can be difficult to implement strategies around
- Behavioural segmentations (e.g. spenders vs. savers) are easier to identify and target but can be harder to speak to or communicate with in a meaningful way
At this point we need to scrutinise the thinking behind these approaches from the perspective of your business. All segmentations should be tailored to your business and the reality of customer buying behaviour in your market. It should never be applied off-the-shelf.
If you’re a tech brand for example:
- Demographics can play a role in how people interact with tech, but not as much as it used to, and probably less than we stereotypically believe. Age and gender might not matter but something like industry in B2B SaaS could be a good measure
- Attitudes also play a role, but they can also change quite quickly especially in tech, might require updating the segmentation again in a short amount of time
- Behaviours, such as whether someone is an early adopter, can be helpful for identification or targeting but might not be as helpful for product, messaging or experience - would there be a drastic difference in the way you speak to early adopters vs. lower engagement segments?
Needs-based segmentation using JTBD
Needs-based segmentation takes a step back from the above methods and asks: what is the main reason a customer buys your product?
The main reason a customer buys your product is because it serves a Job to Be Done.
A Job to Be Done is a need a customer has to make progress:
- Sending money to family abroad
- Building up a deposit for a house
- Finding something to wear to a wedding
- Buying a gift for a friend
In each of the above examples, the customer is preoccupied with finding a solution to their need. They are on a mission to solve this and are looking for solutions that speak to this need.
It is true that this might be reflected in their demographics, attitudes and behaviours.
- Demographics - you’re more likely to be a certain age when building a house deposit.
- Attitudes - you might be more of a fashionista to be seeking a new outfit.
- Behaviours - you might be looking to spend more on a gift than someone else.
But ultimately, the main objective for this customer is their Job to Be Done. Now you know what this group of customers cares about you can better target them with relevant ads, understand their mindset in the buying moment and gear your products, marketing and experiences towards creating brilliant end-to-end journeys that solves their exact need.
It is also possible to cross a needs-based segmentation with key demographic data. Let’s say you are targeting different types of business: e-commerce, retail and consultancy are very different business models. So you can look at needs within each of these groups. This will give you a rich picture of your customers, without being too overwhelming to use for your teams.
Why needs-based segmentation is valuable
- It is grounded in customer motivations
A segmentation that is built on the foundation of customer motivations and needs is more predictive about a customers’ buying behaviour than demographics, behaviours or attitudes.
- It reflects buying behaviour in a digital world
In a digital world, customers have online search at their fingertips. They are using multiple channels for discovery and there are ample opportunities for them to be snatched away to a competitor solution whilst they are looking to buy your product. This amplifies the need for brands to speak to customers’ JTBD - connecting better with customers in a buying moment can be key to conversion and effectiveness.
- It can help you spot growth opportunities
A needs-based JTBD approach can help you unlock the hidden opportunities within the market. By segmenting the market in this way you can better understand the underserved needs or Jobs of your customers and you can better tap into new growth avenues. Especially ones that are being missed by the current competitive landscape.
- It can help you build personalised end-to-end journeys for customers
If you understand the Job that a customer is trying to get done, you can speak directly to this need, personalise marketing and comms, build bespoke landing pages and campaigns and customise support. It will help your business compete with challengers who are building entire brands around a specific JTBD. E.g. Pleo for expense management, Square for restaurants that are getting off the ground.
- It is easy to explain and adopted well by teams
A needs-based approach can bring a level of clarity that can often get lost in many statistical frameworks. We are orienting around the customer need, which means the other details about what a customer does on the weekend are nice-to-know but peripheral to the fundamental point. This helps to lose some of the noise which distracts from the essence of what really matters. It provides a framework for teams and builds creative confidence without weighing them down.
Learn more
If you’d like to learn more about needs-based segmentation schedule a call with us to learn more.
Untold Insights helps brands adopt a customer-led strategy to launch, grow and scale winning digital products. We offer strategic customer advisory JTBD identification, segmentation, competitive mapping and buyer’s journey analysis.
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