Segmentation no longer fit for purpose, marketers claim

First they came for demographics, claiming it is no longer relevant, now it seems UK marketers are decrying consumer segmentation – linking customers based on shared traits – with three-fifths believing the tried and tested technique is now outdated, oversimplified, and no longer fit for purpose.

That is according to new research from enterprise customer data platform Treasure Data, which also points out few have found an alternative methods as almost all (96%) UK marketers still use segmentation.

The findings, derived from a survey of 500 UK marketers, reveals that while 86% of respondents update their customer segmentations at least every two years, well over half (56%) still struggle to target their audiences effectively.

And marketers think this new challenge is a result of consumers becoming trickier to understand, with two thirds (66%) concerned that consumer behaviour has become more complicated since the pandemic.

In fact, with easy access to more information and choice than ever before – especially online – priorities, preferences and purchasing habits now have potential to change at any given moment. Almost three quarters (73%) of marketers agree it is hard to group consumers into one segment because they are constantly evolving.

With this in mind, Treasure Data ‘s new report – “Better Decisions: The era of consumer situationships “- calls on brands to rethink their approach and instead aim to make use of first party data to “segment by situationship” in real-time.

“Situationships” are defined as a momentary mindset based on an individual’s current mood, needs, priorities and circumstances. The most popular of these momentary mindsets include “Family Firsts”, “Safe shoppers”, “Infrequent buyers”, “Purpose shoppers” and “Seasonal Spikers”, according to a separate Treasure Data study of 2,000 UK adults.

The report highlights prevailing gaps in the data management strategies within many brands, with two-thirds (64%) of UK marketers admitting data blind spots are preventing them from getting a full picture of their customers.

And with four in ten (39%) recognising that consumers will opt-out of sharing their data with brands they do not trust them to handle it properly, marketers look set to struggle with elevating their segmentation efforts.

Treasure Data director of marketing for EMEA and India Andrew Stephenson said: “This research validates what we knew to be true – that outdated models of segmentation which fix consumers into rigid and permanent groups simply don’t work. And marketers will face an urgent problem if they don’t take the need for better first party data seriously.

“If they are to have a real-time, fluid and evolving understanding of their customers, then brands must look to eliminate data blindspots, access and invest in data security measures to win consumers trust and from there, achieve the gold standard of targeting; segmentation by mindset and situation.”