BY AARON GREGERSON
Meeting the demands of financial consumers has become increasingly difficult over the past two decades or so. Technology and the evolution of brand marketing has changed what consumers expect from the businesses they choose to do business with. For financial institutions, this has largely meant trying to keep up with the convenience, simplicity and user friendliness of brands such as Amazon, Apple, Samsung and others.
Consumers today also see what brands such as Bank of America, Wells Fargo and USAA have done to make managing finances easier. In turn, consumers expect degrees of those streamlined services from every financial institution. The rapid distribution of these expectations to consumers has largely been influenced by good brand management and a solid marketing strategy. The large bank brands have created expectation by tapping into the mindset of consumers.
Market Segmentation and the Buyer’s Journey
When the era of mass marketing ended, the advertising industry saw a definitive separation between marketing and advertising. Marketing became about the “how” to reach your target market by performing research, applying the research findings to an advertising campaign, and executing that campaign through market segmentation.
As market segmentation became more advanced in recognizing how consumers acted, four types of market segmentation were exposed.
- Geographic segmentation: Defining a market based on location, often where a consumer resides.
- Demographic segmentation: Defining a market based on proven traits of the consumer; such as age, gender, and income.
- Psychographic segmentation: Defining a market based on how the consumer thinks and interacts with the world around them. It is often measured by what media they choose to consume.
- Behavior segmentation: Defining a market based on how the consumer acts and behaves. This is often measured by tracking online activity.
The practice of market segmentation is defined as the process of dividing broad consumer groups into specific markets. These markets are based on one or more of the types of segmentation listed above, utilizing various metrics to achieve the desired outcome.
In large part, advanced market segmentation is responsible for driving consumer expectation. In the era of mass marketing, and even limited segmentation, everyone received the same message at the same time. Understanding that some consumers were at different stages of the buyer’s journey did not occur to marketers (advertisers) at the time. Advanced segmentation changed this.
Consumers are not only at various stages of a buying journey, but they are also wildly different when it comes to adoption of innovation. Advanced market segmentation takes all of this into account so that a brand understands who the target market is at each stage of the promotion life cycle.
The five stages of consumer adoption have been defined as:
- Innovators: These are your brand enthusiasts. These consumers will consistently raise their hand to beta test new products, services and systems.
- Early Adopters: These consumers are visionaries. They see how a new product can improve their life or, at the very least, be cool enough to try out.
- Early Majority: Largely, this group fits into the category of “Keeping up with the Joneses.” They see what the Early Adopters have and catch the trend wave while it’s still riding up.
- Late Majority: These consumers are more conservative than most and prefer that a new product, platform or system has been tried, tested and true before joining the trend.
- Laggards: Simply put, these consumers are skeptics. They were likely the last (or still have not) to sign up for online banking.
Meeting consumer expectation means first understanding which areas of your target audience fit into which stage of adoption. Then, cross-segment your adoption markets with identifying triggers for each stage of the buyer’s journey. For each consumer adoption stage, the triggers will vary.
Market Segmentation is Changing
People continue to evolve. Technology continues to become more advanced. The way people interact with technology (and, thus, other people) has changed. Before the iPhone came out 10 years ago, there were very few instances of people walking down the street and running into stationary objects. Technology has changed that!
To understand why market segmentation is changing means that we must first understand how our economies have changed.
Over time, advertisers and marketers have changed their tactics and abilities to reach people based on shifts in consumer behavior. Society’s “economy” also changes along with these eras and movements. The goal of every shift in economy is to better reach consumers where they are most ready to purchase or engage.
|Marketing/Advertising Era||Economy||Goal to Consumers|
|Mass Marketing||Goods Economy||Control costs|
|Basic Market Segmentation||Services Economy||Improve quality|
|Advanced Market Segmentation||Experience Economy||Render authenticity|
In short, market segmentation is changing because consumers are demanding that it changes. Today, we are living in what is known as: the expectation economy.
The Expectation Economy
Like it or not, your consumers have expectations of you. Expectations of your brand, expectations of service, expectations of technology offerings, and more. The list keeps growing! And the more they interact with other channels, brands, and buying experiences their expectations grow and evolve.
Evolution is the hallmark of the expectation economy. What is expected today is quickly replaced by a new expectation tomorrow. Today’s consumers are not interested in the status quo.
Think about a time that you were using an app or visiting a brand’s website on your smartphone.
Think about that experience from start to finish.
What piece of functionality do you, or did you, want that app or site to have that it did not? Was it a smoother mobile ordering process? Perhaps the site was not laid out to your liking. Maybe fewer steps to transact. More intelligence about you? More intuition on your position in the buyers’ journey?
That’s the expectation economy. You expected better of an experience you had. And it didn’t even need to be a bad experience.
The expectation economy is not limited to nor all about technology. Much of the expectation economy uses technology to feel more personal. Many of today’s consumer expectations stem from using technology, but it is not relegated to that role. With the amount of media and messages available, consumers are making up their minds about things like service interactions, physical locations and how brands interact with society. They are passing judgement on everything long before they may even interact with your brand.
What is the Expectation Economy About?
As explained in the book “Trend-Driven Innovation,” the expectation economy is based on the idea that consumers have ever-accelerating expectations that they apply to every purchase decision, experience and moment of attention.
There are three strands of consumer expectation:
- Rising Quality. This means that consumers expect the best. They see right through products and services that are rushed to market. Brands that deliver anything but their best will die a rapid death. The promise must match the outcome.
- Positive Impact. This means that your brand’s actions and how the brand interacts with society are subject to unavoidable awareness. In today’s world, brands are judged based on the impact they leave with the environment, social issues and health impacts, even the local economy. Consumers expect brands to take a stance so that they know whether or not they want to be a part of your story.
- Personal Expression. This means that today’s consumers are prioritizing self-improvement and personal expression through the products, services and brands they align with to meet their needs. Your brand must create a personalized, emotional experience for your consumers. Consumers expect not only to have and get more from your brand, but to be more to your brand. The personal and technological engagement are critical.
In the expectation economy, consumers find and interact with brands based on what matches their values and social mores. Brands must take positions in order to trigger emotional responses from their target audiences.
Meeting Expectations in the Expectation Economy
As consumers expect more from the brands that they do business with and subsequently become loyal to in various stages of life, your brand must learn to stay relevant. Staying relevant means your brand must find a way to meet the expectations of today’s consumers with relevant and timely communication.
The previous economy, the experience economy, was about rendering authenticity. The experience economy is about customizing interactions. This means you know “who” your audience is, “where” they are located and “what” they want/need, and you provide the “how” to engage and complete their need.
The evolution of market segmentation has become what is known as audience planning (or Audience Targeting). Audience planning is a process that provides the tools to customize interactions on a granular level. By becoming more granular within the existing target markets of your brand, you create more personal and customized communication that reflects the individual consumer.
To begin practicing audience planning, gain insight into the consumers you want to target with these stages of planning:
- Organizational segmentation: Begin with the market segments and personas you already have. Identify which segment(s) fit the target audience based on your objectives.
- Behavior triggers: What behaviors does your market exhibit when coming into contact with your brand, or similar brands? Your products? How long is the conversion cycle to a new sale? What triggers can be built around these behaviors to efficiently target your audience?
- Sequencing: Each behavior fits at a certain point in the buyer’s journey. Therefore, there is a sequence of events for each behavior that will need to be mapped in order to target and retarget the behaviors. Knowing this sequence shortens your potential buying cycle with your customer.
- Life stages: When performing the organizational segmentation step of this process, you will find that audience planning spans across multiple segments. Therefore, it is important to identify each of the life stages that you are dealing with, how they will need to be communicated with and how they will react to your message. The key is knowing that this step is far beyond age segmentation and incorporates where people are in their life, regardless of demographic position or profile.
- Value scoring: Establish a set of rules to understand how valuable your audience finds your brand, products, service and message. Utilize these rules in the execution phase in order to focus on your core audience at the right time with the right message.
Following these stages allows your brand to create hyper-targeted, customized messages. Your consumers will, in turn, respond to this positively. It shows that you are listening to who they are, where they come from and what their needs are.