The face of America continues to change.
Ethnic minorities are growing, with the fastest being “mixed” races. The US is aging, with people living longer and more actively. Our youth increasingly influence not only our wallets but also our values. And unprecedented calamities like COVID have transformed many of our behaviors in minor to major ways – how we manage our work, health, communities, technology, shopping, and more.
The US consumer landscape has become a mosaic of diverse segments with diverse expectations and needs. A one-size-fits-all approach won’t work.
Yet reaching and resonating with diverse consumer segments is more difficult than ever. Marketers are grappling with a reality where traditional tactics falter, and consumers' expectations of personalization are high, and consequences when not met.
Data underscores the extensive change:
Consumers are comfortable being multi-dimensional, but many businesses see them in just one way: as walking wallets.
69% of consumers accept paradoxical behaviors as both human and acceptable. (Accenture)
Personalized experiences tailored to individual needs is no longer a luxury
71% of consumers expect it and 76% are frustrated when they don't get it. (McKinsey)
Even with basic demographics like age and income, responses to inflation vary; younger generations tend to both scrimp and splurge more than their elders. (McKinsey)
As a result, Accenture research finds:
a staggering 88% of executives feel outpaced by the speed at which their customers evolve
Our clients questions demonstrate their challenges:
"We see certain product models appeal differently to males and females as well as across ethnic groups, but don’t know why or what to do” - Consumer Electronics leader
“Which marketing and sales tactics should we use to best influence first-time buyers versus repeat buyers?” – CPG Marketing leader
"How should we approach segmentation based on who the consumer really is, rather than at a macro level, and tailor our strategies for individual retailers?” - CPG Sales leader
What’s the Underlying Root Problem to tackle?
From my personal experience leading insights at large organizations, I know the frustration of hearing “we must target Gen Z!” or “let’s focus on women,” both segments too broad to be effective. Such demographic-focused strategies fall short by not accounting for the modern consumer’s complex preferences and behaviors.
69% Consumers feel multi-dimensional behavior as both human and acceptable. (Accenture, Jul’22)
We need to shift our perspective — to see our consumers not just as segments or statistics but as individuals with rich, multifaceted lives.
It's through this lens that we discover how our offerings don't just fit into their lives but can enrich them in unexpectedly holistic ways.
5 Limitations of Common Targeting Approaches:
Overgeneralization of Consumer Groups: By casting too wide a net, brands miss the subtleties within consumer segments. For instance, a beverage company might broadly target all millennials as health-conscious, overlooking those who prioritize taste.
Relying Solely on Demographic Data: This limits understanding and excludes potential buyers who fall outside these demographic lines but share the same behaviors and preferences. A tech company focusing solely on millennials might miss the older, yet equally tech-savvy consumers.
Underutilization of Psychographic Data: By not accounting for lifestyles and attitudes, we skim the surface, missing deeper consumer insights. A health food brand might miss those on the cusp of a health journey, focusing only on the overtly health-conscious
Ignoring Cultural Nuances and Cross-Channel Behavior: Marketers must adapt to local tastes and understand varying channel behaviors. A retailer may not realize they need local flavor adaptation across regions, and certain consumers' preference for in-store purchases, after beginning their journey online.
Neglecting Evolving Trends: Brands sometimes cling to outdated segmentation models and miss out on emerging segments. A car manufacturer may stick with family-oriented marketing, not realizing the growing segment interested in sustainable and electric vehicles.
Marketers must evolve – some analogies:
The Personal Trainer: A trainer customizes workouts for clients’ specific health goals; similarly, marketers should customize campaigns for the specific desires and needs of consumer segments.
The Chef: Just as a master chef tailors a dish to suit a diner's palate, marketers must tailor strategies to satisfy the nuanced tastes of different consumer segments.
The Gardener: Like a gardener who understands that different plants need varying amounts of sunlight and water, marketers need to recognize the different "nurturing" each consumer segment requires.
Fundamental Targeting approaches:
There are 3 levels of depth in understanding consumers and how we can engage them:
1 Demographic Targeting
What it Is: Targets based on age, gender, income, and geography.
Strengths: Easy to measure and widely applicable.
Limitations: Surface-level; doesn't capture individual preferences or behaviors.
Best For: Mass marketing where personalization is not crucial.
2 Psychographic Targeting
What it Is: Targets based on interests, activities, opinions, and lifestyle.
Strengths: Goes beyond basic facts to understand consumer likes and dislikes.
Limitations: Subject to change; may not predict long-term behavior.
Best For: Campaigns aiming for short-term engagement or immediate action.
3 Psychological Targeting
What it Is: Targets based on enduring psychological traits such as personality and values.
Strengths: Highly predictive; taps into core motivations.
Limitations: Requires rigorous data collection; ethical considerations.
Best For: Long-term marketing strategies aimed at deep customer loyalty
Here's a side by side comparison:
Psychological targeting offers a more nuanced understanding of customer behavior than simple demographic targeting. It allows marketers to understand the motivations, interests, and personalities of customers, enabling more effective, personalized messaging.
(More on this: Harvard Business Review's report: "What Psychological Targeting Can Do, Apr 2023")
9 ways to develop a deeper understanding of your Consumers:
There are many ways to do research or get data to gain a fundamental to very detailed understanding of your Consumers. Here are a few that cover a spectrum of basic (and free) to sophisticated (and expensive)
General:
1 Publicly Available Research:
How to: Start with existing studies from sources like PEW Research to understand broader market trends and consumer sentiments.
Example: Pew's reports on technology adoption could inform tech companies of demographic shifts in device usage.
Expert Agencies: PEW Research Center, Statista, eMarketer, and many more.
Primary Research:
2 Online Surveys and Questionnaires:
How to: Use online surveys to quickly gather data on consumer preferences and behaviors. Basic understanding by key demographics – gender, age, generation, income, ethnicity etc.
Example: A beverage company surveys online community members about flavor preferences and understands differences across generations.
3 Qualitative 1-1 Interviews or Focus Groups:
How to: Conduct in-depth interviews or organize focus groups to delve into consumer motivations, feelings, and attitudes that are not easily captured through quantitative methods.
Example: A cosmetics company conducts focus groups to explore emotional reactions to a new product line.
4 Consumer Segmentation Analytics:
How to: conduct in-depth usage and attitude survey, then do iterative analytic modeling to cluster consumers based on various behavioral and psychographic traits. Develop 5 to 8 meaningful segments, and identify the 1 to 2 to target that will help you achieve your goals.
Example: A TV brand developed a segmentation based on type of content watched, who watched with, and home décor style and identified top 2 targets
5 Consumer Experience Journey Mapping:
How to: Map out the entire path different consumer segments take from their first interaction with a brand to post-purchase, using both qualitative and quantitative data to identify key touchpoints and opportunities for engagement.
Example: A home appliance brand maps the customer journey for its priority target consumers from online research to in-store visits, to after-sales service, identifying gaps in customer satisfaction and opportunities to enhance the experience.
Remember: Consumer journeys are not linear - Different target consumers will result in many potential paths and touch-points to review:
Learn more on Khatanalytics' approach to CEJ here
Secondary Research / Analytics
6 Syndicated Panel Data Analyses:
How to: Analyze secondary data from consumer panels to develop foundational demographic profiles for brands. Do deep buyer analyses like heavy-medium-light or new-lost-retained, as well as custom cuts for more nuanced learning.
Example: A Snacking company found penetration losses during COVID were driven by “Light” buyers, who had different demographic profile and buying behavior than heavy buyers, requiring different approaches to re-engage.
7 Social Media Sentiment Analysis:
How to: Analyze social media data with social listening tools to gain real-time insights into consumer behavior, preferences, sentiment and emerging trends. Monitor engagement and sentiment to refine targeting strategies.
Example: Monitoring hashtags related to fitness to target potential customers for a new sportswear line.
8 Retailer Loyalty Card Data Analytics:
How to: Analyze data from loyalty programs to understand purchase history, frequency, and preferences, which can inform personalized marketing and product development.
Example: A grocery chain uses loyalty card data to identify and target segments interested in organic products.
Data like Walmart’s Luminate, Kroger’s 84.51°
9 Predictive Analytics and Machine Learning:
How to: Utilize machine learning algorithms to analyze vast datasets and predict future consumer behaviors, preferences, and trends based on historical data.
Example: A streaming service uses predictive analytics to anticipate the types of shows that would appeal to different audience segments, based on viewing habits and content preferences.
The game changing benefits of employing strategic segmentations:
By serving consumers insightfully, you can transform your impact.
A few ways how:
Enhanced Customer Relevance: By employing targeted segmentation, you'll deliver messages that resonate deeply, increasing relevance and connection with diverse consumer segments , resulting in personalized marketing that resonates and converts.
Increased Marketing Efficiency: With refined targeting strategies, your marketing efforts become more efficient, yielding higher ROI as you engage the right consumers with the right message in the right channel at the right time.
Elevated Brand Loyalty: Through understanding and integrating the nuances of the consumer experience journey, you'll foster stronger loyalty as customers feel understood and valued by your brand.
Improved Product Development: insights will identify needs and gaps for you to innovate and develop products that meet the evolving needs of your consumer segments, keeping you ahead of competitors.
Strategic Competitive Edge: Leveraging advanced segmentation analytics positions your brand at the forefront of consumer insights, granting you a competitive edge in crafting compelling value propositions for diverse markets.
Summary:
To truly connect and win consumers, we must know them intimately — as individuals with rich lives, aspirations, and needs. It’s through this deep understanding that we can cater to them more effectively, nurturing a strong brand affinity and loyalty that naturally culminates in increased sales.
Even if you apply just some of the insights, you will put yourself way ahead of competition.
What Sets Khatanalytics' Apart
Always focused on helping you achieve your goals, we blend qualitative and quantitative research to understand consumers' journeys intimately, developing actionable segmentations and journey maps for comprehensive strategy development for each of your cross-functional teams.
You benefit from our:
20+ years of insights leadership, developing deep consumer understanding and helping our teams strategically apply it to grow the business at top-tier companies like Samsung and Unilever.
Customized, goal-driven research with a robust toolkit for actionable strategies.
Proprietary CEJ framework, developed to engineer your consumers' loyalty.
"The aim of marketing is to know and understand the customer so well, the product or service fits him and sells itself.” - Peter Drucker
Research referenced: