As companies develop their branding strategies, they are required to answer a fundamental question: who are their customers?
Without being able to identify who your brand is talking to, it is very hard to develop a marketing mix which will provide value to your target market.
Segmentation is the process whereby companies realise that they cannot be everything to everyone. In order to be successful and to rise above the noise, firms need to segment the market and focus on the most relevant and profitable market segments. Segmentation is a very challenging process, as it requires companies to process a high volume of heterogeneous information pertaining to both internal and external firm factors.
Companies rely on a variety of criteria to create custom types and categories of users which need to be:
On another level, once, the segments have been identified, firms are required to understand what are the behavioural patterns which are associated with a particular customer type. To answer this second question we will look into an innovative marketing theory called ‘Jobs to Be Done‘.
In this post we are going to analyse:
The first and most immediate approach we can pursue in segmenting a firm’s audience starts with creating groups of users which are defined by descriptive criteria such as:
Alternatively, segmentation can decide not to focus specifically on the individual as a person, as much as an individual as a consumer. In this case, we need to understand elements which are more behavioural. In other words, we need to clarify not who he\she is, as much as what makes his purchase. This typology of segmentation is much harder to carry out, as we need to understand behavioural patterns and relationships of causality.
Behavioural segments instead relate to:
Understanding behaviour is an essential component to deliver an effective branding experience. This approach is also encouraged by Jobs to Be Done Theory and will be discussed in the next section of this post.
Finally, the last category of segmentation criteria is called psychographic segmentation. This segmentation relates to how a purchase decision is a reflection of an inner concept of self. According to how a customer reacts to change and innovation we can create the following categories:
An additional psychographic segmentation can respond to a customer’s ability to spend, according to the following characteristics:
Because of the increasing relevance of consumer behaviour, a new strand in marketing research was developed to focus on the relationship of causality that pushes the consumer to buy products and services. This approach is called “Jobs to Be Done”, and will be discussed in the following section of this post.
Jobs to be done theory is a marketing approach that allows firms to identify causal elements that are strictly connected with a purchase decision. This approach was designed to allow companies not to focus exclusively on descriptive elements but to dive deeper into the motivations that push consumers to buy.
According to this approach, brands need to be able to position themselves in the mind of consumers, so that they may be recalled to perform a specific job, which requires the users to purchase a product or service they want to get done.
Certain brands, like IKEA, are very effectively positioned in the market, not because of the particular features and qualities of their products, but because they are the perceived as the perfect means to satisfy certain jobs customers need to get done – like furnishing a students’ apartment.
According to this theory, some of the descriptive elements which are derived from traditional segmentation approaches, lead only to creating ‘personas’ or consumer types that would be the ideal customers of our company. This approach may be useful to clarify in what direction we want our brand to go, but it cannot really unearth the motivations that push him\her to buy, or in other words what is the Job to Be Done.
Jobs to Be Done is a fringe theory, but it is gaining momentum, as it forces firms to understand what customers are really buying, which may not necessarily be what companies think they are selling them. If you’d like to look more into this theory, in this post we talk in more depth about it: Why Jobs to Be Done Matters for Your Business.
To some extent, as we identify who are our customers and why they buy our products, we need to understand what kind of relationship to build with them.
In the past, the relationship with customers was much more hierarchical, meaning that customers could decide whether to buy or not to buy our products, but could not partake in the value creation process.
In recent years, thanks to the development of digital technologies, the relationship between firms and customers has now completely changed, making the customer an active participant of the process of both creation and validation of a fashion product. This can be done through a crowdsourcing strategy, a marketing strategy design to create and make us of the community rallied around a brand to inform and develop design and marketing strategies for a product, or a product line. We address this topic in more detail in this article: Use the Crowd to Push Your Business.
Online digital platforms have in fact allowed organisations to involve in a very profound way their audience by creating new dynamic partnerships with their community and creating completely new marketing and communication strategies based on new dimensions of ownership, as shown by the share-economy platforms. One of the most famous examples of how a company can leverage its community is provided by Threadless.com which innovated the apparel design business from its foundations.
Firms are finding in this re-structured relationship with their target market the means to develop new business models, which thrive on the involvement of customers in a variety of processes such as garment design, creation, purchase and post-purchase experience.
Now that we’ve mastered both segmentation criteria and consumer buying behaviour, let’s address an additional challenge: understanding purchase behaviour in luxury. This is an essential goal for any company wishing to develop a competitive advantage either in their domestic market or internationally.
The general principles driving a customer to purchase luxury goods are either hetero-referred or self-referred. In case of the former, a customer is persuaded to buy luxury goods because he\she wants to feel a sense of belonging to a group, in case of the latter, the benefit of the purchase is either recreational or hedonistic.
Nonetheless, identifying patterns in luxury purchase behaviour leads to additional 6 segmentation criteria. Let’s look at each to understand what motives apply to luxury good consumers.
How to manage such a wide variety of customer segments? As we’ll see in the conclusions paragraph, companies need to equip themselves with new technological infrastructures to capture their consumer value and retain it.
As discussed in this article, understanding who are your customers is important, but understanding why they buy your products is even more important.
In this sense, companies are now forced to delve much deeper into their target market to inform their management and marketing strategies. Only by segmenting their customer base, firms are able to gain a stronger understanding of what products they need to develop, and how they need to market them.
However, in order to build customer segments, we need data and in order to collect data, we need to create an IT infrastructure capable of assisting a firm in managing the relationships which are created with their customers.
In order to pursue a highly-targeted marketing strategy, a company needs to adopt new tools. This is why Customer Relationship Management (CRM) software has become an increasingly relevant tool to allow companies to ignite, support, convert and retain customers.
As fashion brands invest a high volume of resources to acquire customers, CRM software allows companies to manage customer relationships and maintain customer loyalty over time.
Once the marketing segmentation has been completed, firms are able to pick the most relevant customer segments and the particular need they want to address. This is at the ground of their branding positioning strategy, which will be discussed in our next instalment: Branding Decisions in the Fashion Industry.
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