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Consumer Segmentation Method Is Outdated

Consumer Segmentation Method Is Outdated
19 October 2023
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Consumer Segmentation Method Is Outdated

A majority of UK marketers, specifically 61%, believe that consumer segmentation, the practice of categorizing customers based on shared characteristics, is an outdated marketing method, with 63% deeming it entirely unsuitable for modern purposes, according to recent research from Treasure Data, an enterprise customer data platform. These findings are somewhat surprising considering that 96% of UK marketers still use segmentation in their organizations, despite growing doubts about its effectiveness.

The study, which surveyed 500 UK marketers, discovered that even though 86% of respondents update their customer segmentations at least every two years, more than half (56%) struggle to effectively target their audiences.

Many marketers attribute this new challenge to the evolving complexity of consumer behavior, with 66% expressing concerns that consumer behavior has become more intricate since the pandemic. With abundant access to information and choices, particularly online, consumer priorities, preferences, and purchasing habits can change rapidly. Nearly three-quarters (73%) of marketers now find it challenging to group consumers into one segment because they are in a constant state of flux.

As traditional customer segmentation methods face criticism, Treasure Data suggests that brands reconsider their approach and instead leverage first-party data to segment customers based on their current "situationship." In its report titled "Better Decisions: The era of consumer situationships," situationships are defined as momentary mindsets influenced by an individual's current mood, needs, priorities, and circumstances.

Treasure Data also surveyed 2,000 UK adults to understand the modern consumer mindset, discovering that consumers often shift between various mindsets or "situationships" based on their behavioral traits. Popular momentary mindsets include "Family Firsts," "Safe Shoppers," "Infrequent Buyers," "Purpose Shoppers," and "Seasonal Spikers."

The report underscores existing gaps in data management strategies among many brands, as 64% of UK marketers acknowledge data blind spots that hinder their ability to fully comprehend their customers. With 39% of marketers recognizing that consumers are increasingly opting out of sharing data with brands they don't trust to handle it properly, achieving effective segmentation is poised to become a greater challenge.

Andrew Stephenson, Director of Marketing EMEA and India at Treasure Data, emphasized the need for better first-party data to enable real-time, fluid, and evolving customer understanding. Stephenson noted the importance of eliminating data blind spots, enhancing data security measures, and gaining consumer trust to achieve the gold standard of targeting, which involves segmentation based on mindset and situational context.

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