This past month has been a busy one for my family, which means we’ve been eating meals on the go more often than usual. Between work travel, a family road trip, clients visiting my city, afterschool activities, and just an overscheduled social life, we’ve probably eaten out more than a dozen times this month, many of which were at QSRs. While that is a bit out of the ordinary for us, it isn’t completely unheard of for my busy family of 5. What’s interesting is when I look back at what was driving each of my trips to a QSR this month, they actually differed quite a bit.

Even though I’m the same person at each QSR visit over the last month, I was purchasing for different reasons and had very different needs each time:

• • • Family, something for everyone, quick
    • Healthy, on-the-go/portable, caffeine boost
    • Relaxed environment/seating, filling, vegetarian options

It’s well known in the market research industry that consumer segmentation is a powerful tool for marketing, product, service and experience development, and brand leadership – it gives you the guidance for who, when, where, and how to reach your target customers. In our previous segmentation blog posts we outlined Catapult’s core elements for a successful segmentation, when you might consider a refresh, and the role qual plays in segmentation. But another important consideration is the type of segmentation you employ because when it comes to segmentation, one size does not fit all.

Traditional person-based segmentation works well for many brands and categories, but it can fall short when you’re dealing with higher frequency categories such as QSR, food and beverage, CPG, and travel. In those higher frequency categories, we often find that the occasion drives the needs and motivations behind each purchase more so than the person. This can make for a messy and non-actionable person-based segmentation solution. In these cases, we like to explore segmenting by occasion or interaction with the category rather than by the person – an occasion-based segmentation solution.

We often have clients in high-frequency categories struggling to implement a person-based segmentation solution and one of their biggest questions is “how can we make our segmentation more actionable?”. To answer this question, let’s explore the differences between and benefits of person-based and occasion-based segmentation.

Person-Based Segmentation

Person-based segmentation is a traditional approach to segmentation that many brands employ. It blends different dimensions of consumers (attitudes, behaviors, demographics, perceptions) to create distinct, identifiable, and statistically differentiated groups or segments of people. This type of segmentation is well-known by marketers and product developers. When done well, it is a very useful tool for creating marketing strategies, communications plans, and new products. It’s often easy to understand because each person gets assigned to one segment and typically stays in that segment. Profiles and personas are created and the brand team can really visualize and understand who the segments are — you get to know them.

The Case for Occasion-Based Segmentation

However, needs, motivations, and behaviors vary for each interaction or purchase in higher frequency categories, presenting a challenge for person-based segmentation solutions. In high-frequency categories (like my QSR experiences this month) it can be very difficult, if not impossible, to segment a person with such varying needs into stable person-based segments. 

On top of that, it can be extremely challenging to uncover how to meet a customer’s exact needs at the right moment with this type of solution since they are situationally dependent.  This is where occasion-based segmentation comes in. This approach is also designed to create distinct, identifiable, and statistically differentiated segments, but the difference this time is that instead of representing a person, the segments represent the occasion for interaction with your category or brand. And, unlike person-based segmentation where one person is assigned to and stays in one segment, in occasion-based segmentation one person will likely belong to multiple segments, or occasions. 

Those are just 3 examples of potential QSR occasions that a single person could experience.  Just by reading those initial descriptions you can already see the different needs for product development, messaging, and even packaging start to emerge for each occasion segment.

But let’s think about how that would play out in a person-based segmentation solution where a person needs to be assigned to one single segment. Is my segment one that prioritizes healthy food or not? Am I in a rush or looking to relax? Do I prioritize beverages with food or not? The answer to all those questions is ‘both’ which makes for a pretty messy person-based segment with unclear needs and motivations, and can leave marketers, product developers, and brand teams scratching their heads. In this case, occasion-based segmentation can provide a more actionable solution that a brand can develop strategies around.

Benefits of Occasion-Based Segmentation

Since occasion-based segmentations are often done on the category level, not just for a particular brand, it can help highlight your brand’s strengths and weaknesses across occasions and identify white space where occasions exist that no brand out there is really fulfilling. The data collected for an occasion-based segmentation is also incredibly rich. You’re able to learn an incredible amount about what the consumers in your category are doing, what motivates them, what their needs are, and where they are going to try to have those needs met.

If your focus in on alcohol beverages, restaurants, travel, QSR, food and beverage, personal care, CPG, or another higher frequency category, then occasion-based segmentation may be the right fit for you. But occasion-based segmentation isn’t for everyone. If a category is lower frequency, like purchasing a vehicle, or when the need doesn’t vary much from one purchasing occasion to the next, like buying toilet bowl cleaner or dog food, then person-based segmentation is going to give you a much more actionable solution.

One other important thing to consider before taking the plunge into occasion-based segmentation is the transition your organization will have to make if they’ve already adopted and have been trying to make a person-based segmentation work. It’s a mind shift to move from thinking about your segments as individual people to recognizing that people exist across a variety of occasion segments, but it’s a worthwhile effort.

The clients I’ve worked with to shift to an occasion-based segmentation for their high frequency category have leveraged their new occasion segments to develop new successful product lines, create tailored marketing and messaging campaigns, and develop customer acquisition strategies to grow their market share. They also report feeling like they now truly understand their customers, which is the golden ticket many marketers are looking for. 

JILL MILLER

CO-FOUNDER
CATAPULT INSIGHTS

Jill: Thanks for chatting with me about segmentation today. How long have you been doing segmentation analysis?

Tom: Longer than I’d like to admit – my first exposure was over 20 years ago! As an applied statistician, I’ve been fortunate to have encountered a LOT of analytic techniques across a wide variety of industries over the years. Segmentation is among the things I’ve enjoyed most because it can fundamentally change a business. I’ve had the privilege of being involved in segmentations for clients in a variety of industries including automotive, fashion, CPG, food & beverage, and durable goods, to name a few. 

Jill: What do you love most about segmentation? Which part is your favorite?

Tom: I love the interplay among the business/industry, consumer/customer, and research/analytics experts. You can’t do segmentation well without a high degree of collaboration, and that’s what really floats my boat. You become a team that is greater than the sum of its parts, and when you have the right people on the team, it can result in something really special. 

My favorite part of the process is identifying the essence of each segment and helping to come up with a catchy name for each. You thought I was going to say the math!

Jill: I really did! Frankly, I find naming to be one of the most challenging parts of a segmentation. 

Tom: It may seem counterintuitive that a math nerd likes the challenge of coming up with catchy name. However, names matter because they make it easier to “hold onto” an idea and they elicit a pre-conscious emotional judgment. The right name can make a difference in helping others to understand and embrace a segment (or any idea, really). I love the challenge of taking something as complex as a segment and giving it a pithy and concise label. It is not unlike the statistical process where we represent a complex thing like a data set with a simple thing like a bar graph. 

Jill: What was your most successful segmentation and why do you think it was such as success?

Tom: I advised on a segmentation in the automotive space several years back. What I really loved about this particular project was the collaborative nature of it. We had a couple of statisticians, a crackerjack project manager, several category experts, multiple analysts, you name it. I liked how many different people were involved.

On a sports team, there is a role for every player, and if anyone is missing, your chances of success are diminished. Each player brings something vital to the endeavor, and each person on the automotive segmentation team was fully present and engaged. They brought deep knowledge for their area of expertise, and we were able to work as a team, fitting together like pieces of a puzzle. 

Jill: What was the most challenging segmentation you’ve ever been a part of and what did you take away from that experience?

Tom: It was many years ago, but I remember it well. It was in a category I don’t know particularly well, and it did not go well because it was a less collaborative process. The client had a very full plate and very little experience with segmentation, so we were missing a critical component of our team – a category expert. They lobbed the requirements over the wall to us to see what we could do with limited input from their team. The role of category expert was impossible to fill by a team of researchers and statisticians who were novices in the category. Ugh. 

Jill: That sounds rough. What did you do?

Tom: Well, it ended up being an incomplete piece of research. We found a few useful nuggets but ended up leaving a fair bit of it on the table.  While it was a painful process, I learned a lot from it. 

Jill: What was your biggest learning or takeaway from this project?

Tom: Start with the end in mind! Always start a segmentation project with a clear understanding of what success will look like at the end, how it will be used, and how it will impact the client’s business. Getting that information up front and setting expectations about client involvement from day one makes a world of difference. I’m super militant about it now (perhaps irritatingly so) and have not repeated that mistake.

Jill: Speaking of mistakes, what’s the biggest mistake you see researchers make when creating a segmentation?

Tom: The biggest sin, for research in general and segmentation specifically, is clinging to a preconceived notion despite evidence to the contrary. As a statistician, I put more stock in what the data say than in any individual opinion. Personal bias is natural and isn’t always a bad thing – when driven by experience, it can actually lead to some useful questions/answers, but it can be tricky to avoid having the tail wag the dog. I encourage my clients to listen to the data and let it guide us rather than trying to steer the analysis in a particular direction. When you do the latter, you run the risk of simply confirming a bias rathing than uncovering some new truth. That’s a colossal waste of resources and potentially dangerous for the business.  

Jill: Do you have a favorite statistical technique, methodology, or analysis for segmentation?

Tom: No, I do not. Generally speaking, I am method agnostic. In my opinion, a good statistical model is one that works. I typically recommend that segmentation data be analyzed using multiple techniques, and then make a determination as to what makes sense mathematically, holds up to accepted diagnostic measures, and resonates with the client content experts. It’s not at all uncommon to recommend a solution that isn’t the best from a strict statistical standpoint but makes the most sense to the client in the context of their category and business.

Jill: If you could give one piece of advice to a researcher on the client side who is starting off with their first segmentation, what would it be?

Tom: Always keep these three rhyming words in mind: 

Elevate the level of visibility of the project. Make sure that stakeholders are involved at the beginning, middle, and end. You need involvement and buy-in from everyone throughout the process, otherwise it may look like a “black box” solution, and adoption by the organization can become a challenge.

Collaborate. Assemble the right team and ensure that everyone is playing their role. The team, at the very least, should include the subject matter or category experts (often the client team), one or more statisticians, a project manager, and an analyst or two. Then work together and toward the same goal. 

Communicate. Segmentation is not a set-it-and-forget-it kind of thing. There should be ongoing communication throughout the process with the core research team and stakeholders. You need to be sharing things like ‘this is what we are doing, what we’ve learned, and what’s next. We’re on version 16 of the questionnaire. We’ve explored 12 segment solutions.’, etc. Expect to “live with” your team part-time during the project. There aren’t that many unilateral decisions to be made in a segmentation – you will enjoy the best outcome by sharing the decisions, the knowledge, and the success.

While every conversation I have with Tom is informative, productive, thought-provoking, and fun, this one got me thinking — perhaps I should rephrase that final segmentation best practice from “get yourself a stellar statistician” to “get yourself a Tom.”  Drop us a line if you want to learn more about our approach to segmentation or how we can help you understand your customers in an actionable and meaningful way. 

Jill Miller

CO-FOUNDER
CATAPULT INSIGHTS