Get the Segmentation Basis Right and Consumers Will Divulge

THE PROBLEM
Segmentation is arguably one of the most important tools in the marketer’s toolkit. One key to developing a useful and valuable segmentation scheme is to have reliable information about consumers, which raises the question: How can a firm get consumers to divulge information that can be used for segmenting? An answer to this question may lie in understanding which segmentation bases consumer like and do not like, because these preferences may influence whether consumers are willing to divulge information about themselves to marketers.

To examine this issue, Banerji and Carlson conducted a series of surveys in which the respondents were presented with several common bases for constructing segmentation schemes (e.g. demographic information, past purchases, web search history). For each segmentation basis, respondents indicated the extent to which they would want to be segmented, the extent to which that basis accurately described them, and their willingness to share information. The responses consistently revealed two patterns. First, some segmentation bases were preferred by most respondents and some segmentation bases were disliked by most respondents. Second, respondents’ preferences predicted their willingness to share information and the perceived accuracy of the basis.

FINDINGS

The data from one of the surveys illustrate these patterns. Banerji and Carlson presented 722 people with a list of nine different segmentation bases. Figure 1 (see next page) depicts respondents’ least preferred (left panel) and most preferred (right panel) segmentation bases. It is evident from the chart that some bases were generally favored (e.g. past purchases and product preferences), others were clearly unpopular (e.g. connections and web surfing history), and some bases were split. For instance, demographic information was the most preferred basis for a large subset (30%) of respondents, but it was also the least preferred
way to be segmented for a considerable subset (15%).

The second important finding that emerged consistently was that respondents’ preferences mattered for their willingness to share information and their perceptions of accuracy. Figure 2 shows respondents’ ratings for the segmentation basis they most preferred (gray bars) and the segmentation basis they least preferred (blue bars). Clearly, respondents were far more willing to share information about their most preferred segmentation basis than their least preferred basis. Similarly, respondents perceived their most preferred segmentation basis as much more accurate than their least preferred basis. Thus, consumers who prefer to be segmented a certain way believe that segmentation basis to be more accurate and are more willing to share the associated information. When they are segmented on a less preferred basis, they believe the basis is less accurate and they are less willing to share the corresponding data.

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IMPLICATIONS & CONCLUSIONS

In every survey conducted by Banerji and Carlson, a large majority of the respondents said they ‘agreed’ or ‘strongly agreed’ that they had been segmented by marketers. It is not surprising then that consumer concerns about personal data being used for marketing efforts are growing. Our data reveal that despite this growing concern, consumers have clear preferences about how they want to be segmented, and that these preferences have important consequences for their willingness to share the information required to segment them. As such, marketers should consider consumer preferences not only with respect to their products, but also regarding how they wish to be segmented, so that they can capture the information needed to build a segmentation scheme with the greatest profit potential.

Kurt Carlson

Director of the Georgetown Institute for Consumer Research and Professor of Marketing, McDonough School of Business

Professor Carlson teaches courses on marketing research, consumer behavior, and marketing management. He is also the director of the Georgetown McDonough Behavioral Research Lab. He received his bachelor’s and master’s degrees from the University of Wisconsin and his Ph.D. in marketing from Cornell University. Prior to joining Georgetown, Carlson was on the faculty of the Fuqua School of Business at Duke University from 2001 to 2009.

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