Market Segmentation

Approaches

There are, broadly speaking, two approaches to segmentation: a priori (or prescriptive) and post hoc (or exploratory).

A priori (prescriptive)

Segments and segment membership criteria are determined upfront by the marketer or researcher. Data is usually collected through questions like:

  • "Which of these best describe you?"
  • "Which of these is most important to you?"

Pros

  • Simple to collect and use
  • Easy to understand
  • Low cost
  • Easy to replicate

Cons

  • Validity issues – assumes predefined segments are valid in terms of accurately discriminating on the basis of being similar within and different from each other
  • Can mask underlying factors which consumers may not be able to self-identify or articulate
  • Forced choice means segments may push people into a best-fit segment which may not be valid
  • Unable to “experiment” with data inputs for best solution
market segmentation approaches
market segmentation approaches

Post hoc (exploratory) – our recommended approach

Segments are determined on the basis of multivariate relationships observed in the data. This approach usually uses qualitatively-derived inputs that describe both attitudes and behaviour. It then experiments with various “inputs” and iterations to come up with the best solution to match the business and the brand.

This means the result is not just a demographic segmentation or geographic segmentation, and not just a psychographic segmentation or behavioral segmentation, but an all-encompassing solution where the segments are maximally different from each other, and the consumers within each group are maximally like each other.

Pros

  • Statistically valid and reliable method
  • Produces segments that are most similar within and different from each other
  • Can be reproduced using algorithms
  • Customised – investigates, tests, challenges
  • Potential for more targeted messages based on attitudes and behaviours

Cons

  • Higher cost (specialist statistical software required)
  • More data required (more data points have to be collected)
  • More complex to perform (requires specialist analyst)
  • Potentially more difficult to understand

We recommend post-hoc exploratory approaches as they are generally needs-based and therefore more useful to marketers, as they allow marketers to target specific segments with specific marketing solutions.

Learn more

Overview of market segmentation

Step-by-step guide to market segmentation

Let D&M Research create a unique market segmentation to suit your category and brand.

Contact us

For a detailed guide to the approaches and techniques used in market segmentation, download our printable Market Segmentation Guide.

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