Segmentation Leads To Profitable Consumer Insights

For any set of consumers, there are many ways to segment them -- the right segmentation is one that predicts the behavior that the company cares about. An insurance carrier might segment consumers to understand who will check prices online but then purchase from an agent; a bank could segment consumers to understand who will adopt online bill presentment. These efforts help identify targetable groups -- guiding investments in direct mail campaigns, media buys, product development, and interaction design of the branch or Web site.

Segmentations can assign consumers to the appropriate segment using demographics, behaviors, attitudes, or a combination of data.

The simplest segmentations are often based entirely on demographics. When companies talk about "baby boomers" or "the mass affluent," they are thinking of demographic segments. Demographic segmentations are simple to understand and can be implemented easily because companies often can inexpensively obtain basic demographic information about their customers. But demographics are rarely the best predictors of key objectives: Neither your address, nor your race, nor your age says everything about your purchases, attitudes, or dreams.

There are primarily two ways to learn consumers' behaviors: Ask them or observe them. These data can be strong predictors of what consumers will do; for instance, having broadband and multiple PCs in the home is the key determinant of home network adoption. Companies often have extensive behavioral data about their customers: Banks and brokerages, for instance, know consumer transaction histories. But the downside of behavioral segmentations is that they become outdated as the implication of a behavior changes over time.

Learning consumers' attitudes requires custom survey work. And while it may be possible to build models to predict consumer attitudes for a larger database off a subset that has participated in a custom survey, such models don't always do a good job of predicting consumer attitudes. While some attitudes are well correlated with standard demographics, others are poorly estimated using the typically available variables. The advantage of attitudinal segmentations is their enduring predictive power -- most attitudes change less over time than specific behaviors.

¿Forrester's Approach To Segmentation
Forrester has created and applied numerous segmentations to understand consumer behavior:

• Consumer Technographics®. Consumer Technographics, our marquee syndicated segmentation, groups consumers on three dimensions: income, technology optimism, and primary motivation. We designed the Consumer Technographics segmentation to help predict a wide range of behaviors, from device ownership to online activities.

• Off-the-shelf vertical industry segmentations. We have created numerous other segmentations in our syndicated research for specific verticals. To look at investors, for instance, we segment consumers based on their wealth and on attitudinal statements about how self-directed they are when researching and making investment decisions.

• Custom segmentations. We have designed segmentations to understand firm-specific questions, such as: what types of customers use their Web site, how consumers will respond to marketing messages about a specific new product, or which service channels their customers prefer.

• Market research. We can provide insights on consumers from our existing Consumer Technographics data or through customized research.

• Online activity benchmarking. Compare your firm's online efforts with that of other banks and credit unions. We are also kicking off a multiclient research project on organizational models and staffing levels.

• Customer experience reviews. We can evaluate the usability of your Web sites, emails, and phone apps.

• Web assessments. We can compare the features on your site with those of competitors.

• Fraud avoidance. We can help develop strategies for protecting against phishing attacks.

Research Referenced In This Issue ABN AMRO Deal: A Milestone For Indian Vendors (37676) Demystifying Segmentation (37586) E*TRADE Acquires Harrisdirect — And A Rich Vein Of Cross-Sell Prospects (37539) How UK Consumers Use Banking Channels (37575) i-flex Deepens Oracle's Banking Vertical (37603) Men Are From CNET, Women Are From iVillage (36985) Postbank Shows Security Needn't Be High-Tech (37568) Search Marketing In Financial Services (37504) The Forrester Wave™ 2005 (36769) The Forrester Wave™: Accounts Payable EIPP, Q3 2005 (37129) The Forrester Wave™: Customer Data Integration, Q2 2005 (35963) The Forrester Wave™: Database Encryption Solutions, Q3 2005 (36486) The Forrester Wave™: Integration Suites, Q3 2005 (35795) The Truth About Teens And Advertising (37574) Where Do Canadian Financial Consumers Go Online? (37589) Why The Mass Affluent Matter (37118)

EMAIL: Email this issue to a colleague.

PRINT: View a printer-friendly version of this issue.

VIEW ARCHIVE: View past issues of First Look.

TECHNICAL SUPPORT: Call the Client Resource Center
1 866/FORRESTER (1 866/367-7378) or +1 617/613-5730.

EMAIL SUBSCRIPTIONS: If you'd like to subscribe or unsubscribe to First Look, please go to your Email Subscriptions page.