Blueocean takes a very comprehensive and structured approach when it comes to identifying, defining, and profiling segments within a product category. While most companies focus their approaches to segmentation on lifestyle/psychographic variables and needs, Blueocean’s approach is multidimensional and integrating. Fundamentally we believe that purchase decisions within a category are based on a multidimensional gestalt that is the sum total of normative beliefs, attitudes, behaviors and needs. We have provided a more detailed description of our overall approach below.
Segmentation Basis Dimensions
Blueocean believes that in any given product category, there are five key dimensions that mitigate consumer purchase decisions:
- Personal identity
- Habits and Practices
- Emotional Connection with Category
- Product/Services Needs within Category
- Purchase Decision Drivers
This dimension is related to how consumers see themselves in terms of who they are as individuals, their lifestyles, and how they relate to the world around them. The core thought process here is based on “I will buy things that are consistent with and reinforce who I am as a person.” In order to capture a holistic view of personal identity, Blueocean has developed a battery of attributes designed to assess consumer beliefs about who they are based on lifestyle factors including beliefs about leisure, role of work, role of family, personal health, finance and spending, environmental concerns, fashion, charity, and social interaction.
In addition, to assess personality dimensions, we utilize the “Big Five” model to assess personality dimensions. The Big Five model is a comprehensive, empirical, data-driven research finding. These five broad factors were discovered and defined by several independent sets of researchers. These researchers began by studying known personality traits and then factor-analyzing hundreds of measures of these traits (in self-report and questionnaire data, peer ratings, and objective measures from experimental settings) in order to find the underlying factors of personality. The Big Five metrics we use include:
- Openness to experience – (inventive/curious vs. consistent/cautious)
- Conscientiousness – (efficient/organized vs. easy-going/careless)
- Extraversion – (outgoing/energetic vs. solitary/reserved)
- Agreeableness – (friendly/compassionate vs. cold/unkind)
- Neuroticism – (sensitive/nervous vs. secure/confident)
Habits and Practices
These are the actual behaviors related to the category and address questions around how consumers behave within the specific category, how much time they spend on activities related to the category, what types of activities they engage in, etc. The items we use in this section include assessments of time spent on various activities such as work and personal email, instant messaging, discussion group participation, gaming, online research, digital entertainment and music, online shopping, online banking/investing, working on documents, spreadsheets and presentations, etc.
Emotional Connection with Category
This dimension is related to how consumers relate to the category, which in this case translates to understanding how consumers relate to technology and technology products. Our battery of category attitude measurement tool, customized to the technology space includes early versus late adopter, technology opinion leader versus follower, role of technology in life (anxiety, confidence, liking, and usefulness), and the importance of various emotional attributes (global brand, heritage, youthful and exciting, etc).
Different categories have a different mix of brands. Consumer decisions on what product to purchase depend on the category itself, the number and types of brands in that category, and their general perceptions regarding the incremental value that a specific brand brings to the products in that category. The list of attributes in this section includes items related to the number of brands, importance of brands, similarity or differentiation among brands, etc. Additionally, we include attributes related to information seeking behavior associated with purchases in this category, as well as perceptions regarding discounting and promotions.
Finally, to address specific business questions related to the “PC+” category of a large technology company, we included attributes that directly gave perceptions about the “halo effect” of PC brands versus tablet brands versus smartphone brands.
Product/Service Needs within Category
These are the core product-related needs – the extent to which a consumer is likely to purchase a specific product depends on the extent to which they feel the product meets their specific needs. Blueocean typically develops a custom set of attributes for specific categories. Because of our significant and long-term experience working in the technology space, we have identified a comprehensive list of product/service related needs that consumers in this category typically have related to design, style, colors, weight, performance, multimedia performance, advanced features, reliability, security, battery life, screen size, need for touch screen, customer service and support, warranty terms, etc
Putting it all together…
Because consumers can be segmented on each of the above five dimensions that mitigate the purchase process, Blueocean then develops an optimal set of segments separately based on each of the five dimensions detailed above (Segmentation Basis Dimensions – SBD), and then integrates the results to develop a final set of segments. The process by which this final set of segments is developed is a combination of art and science.
First, the segmentation results for each of the five SBDs are examined to determine which of the solutions offers the best set of segments in terms of size and differentiation across segments and homogeneity within segments. Each set of dimensions is rank-ordered on the basis of the segment yield, differentiation across, and homogeneity within segments (Segment Yield Efficacy Rank – SYER). The dimension that yields the strongest solution (SYER=1) then forms the foundational frame-work against which the next two dimensions (SYER=2 and SYER=3), are combined in a “matrix” to yield a more detailed set of “cascading” segments. This approach ensures that we are using the three strongest dimensions (in terms of Segment Yield Efficacy) to determine the final segment solution.
The final set of optimal segments are then “profiled” using the segments from the remaining two segmentation basis dimensions. Additionally, each segment is further profiled using demographic variables, product/brand ownership variables, key influencers, and media habits (TV/Radio Programming, Newspapers/magazines, and Internet Sites). Finally, Blueocean is able to develop perceptual maps for each segment that show the relationship between brand perceptions and key product/service needs and emotional connection attributes, to help identify “white space” opportunities for product development and marketing communication strategy.
One of the key elements of the approach we have outlined above is the iterative process which is used to arrive at the final segmentation solution. It is important for our client to understand that they will necessarily need to be an important and engaged partner in the iterative process. For a segmentation study to be ultimately successful and resilient within an organization, it is important for key stakeholders to have a say in the final segment solution. Thus, at each stage of the process, Blueocean will share our findings and provide recommendations; client will have the opportunity to review our findings and recommendations at each stage and provide feedback based on stakeholder outlook, expertise, and understanding of client’s long-term goals and strategies. This collaborative process will finally yield a set of key, actionable segments that can then be effectively targeted by our client to drive share growth.
What are the benefits of our approach?
We believe our approach has several key characteristics that make it a superior approach to market segmentation. Our rationale is outlined below:
1. Consumer Centric: While most market segmentation approaches are based on a priori attitudinal and needs oriented analysis, our approach puts the consumer at the center of the stage. We start with the consumer as an individual, with an identity, as a member of an underlying group, similar with birds of the same feather, but different from others. We start with consumer lifestyles, personalities and their category related behaviors which typically constitute the root causes behind purchases decisions within a category. We are then able to determine how they differ based on their category specific needs, allowing us to uncover unmet needs for product development. Understanding their attitudes towards the category and brands in the category provides a significant opportunity to develop targeted marketing communications.
2. Multiple Basis Dimensions for Segmentation: We develop the best segmentation options from each basis dimension, and combination of basis dimensions, and evaluate them against key business criteria, to determine the final segments. The key benefit here is that we identify the best solution without any pre-conceived notions.
3. Multiple Analytic Techniques: Commonly used analytical techniques have advantages and disadvantages. Depending on the final set of questions, the length of the questionnaire, the interim results, we use a variety of statistically sound approaches that help to maximize the value of the results.
4. Combination of Art, Science, and Business Savvy: While many segmentation approaches are based purely on the mathematical results, our approach places a great deal of emphasis on actionability, accessibility, simplicity, and consistency.
5. It’s About You: We don’t dictate the ultimate solution. We understand that segmentation is an immersive outcome. We provide the potential solutions and share our perspective on the pros and cons of each with you, but the ultimate solution is based on your feedback. We work with you and your stakeholder to determine the business criteria against which each solution will be judged. This makes it easier to “sell” the final solution internally, and for key stakeholders to “internalize” the results.