Market Segmentation & Brand Positioning: A Research Guide

Posted on Mar 24, 2025 in Marketing

Using Market Research to Segment Markets

Why Use Market Segmentation?

Market segmentation is more commercially effective than mass marketing because:

• Buyers are more inclined to select products and services tailored to their needs.
• Companies can better ‘cut through’ the noise if their message resonates with a specific segment.
• Companies can selectively target specific parts of the market.
• Choosing with whom to do business (or not) is a fundamental principle of segmentation.
• Segmentation drives innovation.

Types of Segmentation

Geo-demographic Segmentation

Based on location, this captures observable or measurable characteristics about individuals or purchasing units that may have implications for how an offer might be perceived. These variables (age, gender, etc.) can be taken individually or combined to form composite descriptions of a target audience. Within consumer marketing, demographics are commonly used as a basis for defining life stage groups that correspond with specific requirements. Voting intentions are often linked with age and social class, so a political party campaigning will closely analyze the demographic composition of a specific electoral area.

Behavioral Segmentation

A buyer’s habits and observable behaviors can be strong predictors of their underlying needs. The analysis of one’s behavior is especially powerful because it can reveal insights that research respondents cannot recall or express through conventional surveys. Many supermarkets use loyalty cards to track and analyze customer behavior.

Attitudinal and Needs-Based Segmentation

Needs-based market segmentation is challenging because the requirements or beliefs of an individual constantly change, even from one day to the next. The brand that is best able to appeal to the deeper-seated feelings, motivations, and concerns of the market is the one that will frequently win out. A significant drawback of this approach is that respondents may give similar answers to many of the statements, limiting the scope for creating distinct segments.

Business Segmentation

Many B2B organizations use similar principles to segment their markets. Instead of demographics, the B2B organization typically segments based on ‘firmographic’ characteristics such as the size of the company judged by the number of employees, revenues, sales, or profit margins.

Five Tenets (Principles) of Successful Segmentation

• Segment Distinctiveness: Each segment should have a clear and distinct ‘personality’.
• Segment Recognition: If it is difficult to slot an existing or potential customer into one of the segments, then other, more easily recognizable segments should be developed instead.
• Segment Durability: Segments must be valid for the long term, or at least as long as is required by the company’s marketing strategy, because segmentation frameworks can take years to bed in.
• Segment Size: There should not be too many segments. It is an expensive exercise to define and implement a marketing plan for more than six or seven distinct groups.

Using Market Research to Improve Brand Positioning

Researching New Visual Identities

The evaluation of competing designs within a survey is typically set up in one of several ways:

• Monadic Testing: Each respondent is asked for their opinions on just one randomly chosen design option during the survey, providing a large, comparable sample for each design tested. Opinion can be measured as in real life, where we use one product at a time.
• Sequential Monadic Testing: Back-to-back (consecutive) monadic tests for each respondent, i.e., each design is tested individually in turn to keep costs down since several designs are evaluated per respondent.
• Paired-Comparison Test: Research set-up in which two potential designs are tested side by side among the entire sample. The winner is the one that gets the most favorable feedback. This simulates choosing one product from two options.
• Proto-Monadic Testing: Combines a monadic (one at a time) test with a paired comparison later in the interview as a safety net in case one approach does not suggest a clear winner.

Definitions

• Sequential Monadic Research Design: Sequential monadic designs are often used to reduce costs. In this design, each respondent evaluates two products. The sequential monadic design works reasonably well in most instances.
• Paired-Comparison Test: Paired-comparison designs appeal to our common sense.

Criteria that might be measured as part of a logo/visual identity testing exercise include: overall favorability and likeability; the extent to which the visual identity aligns with desired brand values; whether the logo is associated with the brand and category; how the logo is perceived in context, e.g., on product packaging, at the point of sale, and on a corporate website.

The Funnel

• Awareness: Respondents are first asked about spontaneous awareness, which involves naming, top of mind, etc. For self-completion surveys (such as online surveys), these responses are entered as free text and are then coded for analysis. Spontaneous awareness is seen to be a very good judge.
• Familiarity: This stage seeks to measure the ‘quality’ of one’s awareness of a brand, from only having heard the name through to being ‘very familiar’.
• Consideration: Is the brand among those that the market would seriously consider buying? For many purchases, only a maximum of 3 or 4 brands enter into the decision maker’s consideration set, so being within that number is vitally important.
• Usage: Although a brand could just measure their sales figures, usage is a very important long-term metric to independently track. Understanding the dynamics of competitor brands that are being used and the relative market share that these command are two outputs that internal data alone will not answer.
• Advocacy: To understand how well a brand is delivering against its promises. This can be done either with recourse to a satisfaction question or the buyer’s likelihood to recommend a brand to others.

Other Topics Covered as Part of Brand Tracking Studies

• Advertising Awareness: As the respondent is not aware of the sponsor of the study, tracking changes in these measures is a good indicator of the effectiveness and reach of advertising.
• Channel of Purchase: When combined with information about the brands used, this gives important intelligence about the channel strategies of competitors.
• Behavior During the Purchase Decision: For those making a recent purchase, respondents may be asked to report on some of the actions they followed in the build-up to the acquisition.
• Switching Patterns: Regularly tracking this can be an early warning of impending defection to competitors.
• Audience Profiling: Brand tracking is often strongly linked to an organization’s segmentation.

Research Design of Brand Tracking Studies

• Frequency: The first consideration is how frequently the survey should run. This tends to range from monthly to every two years. Scheduling of brand tracking research should be based upon when promotional activities are anticipated to fall.
• Consistency: The next critical issue is that of methodological consistency. The questions asked from one wave (or iteration) of brand research to the next must either be the same or very similar.
• Blindness: In many cases, a brand tracking survey should be ‘blind’. In other words, the sponsor of the study should not be disclosed to respondents. It should be hidden until the end of the survey.
• Sample: For brand monitoring projects, the sample size must be sufficient to statistically detect any changes from one wave to the next. If the margin of error for a tracking sample is larger than the expected change in the measures that are to be tracked, then more interviews may be required.