David Allison is the founder of the marketing research agency Valuegraphics and the author of “Death of Demographics”..
The legendary Harvard marketing professor Ted Levitt once wrote that, “If you’re not thinking segments, you’re not thinking”. He added, “To think segments means to think beyond what’s obviously out there to see.”
Levitt felt that segmentation was crucial because it sparked insight into how customers differ from one another. Knowing what drives the behaviour of different groups of customers leads to better marketing decisions, he believed, since business success is only possible through market differentiation. “The search for meaningful distinction is a central part of the marketing effort”, he declared.
The trouble with segmentation, of course, is that it is hard to do. There is no “one size fits all” method of segmentation. There are many ways to segment, each method offering an answer to a different question. How similar are customers in their demographic profile? In their behaviour? In their interests and affinities? In their product preference and usage? In their lifestyle orientation? In their attitudes? It is like trying to solve a Rubik’s Cube, pivoting the different sides to come up with the solution.
Which is why most marketers do a lousy job of it. At best they default to the standard approach which is usually some mix of needs and usage segmentation – at worst they take the lazy way out and default to demographics. And even if they land on the right answer, marketers struggle to turn that insight into “meaningful distinction”. They make the mistake of using segmentation as merely a tactical tool, and then give up when they realize there is no way to target the segments through most marketing channels. Segmentation becomes just another check box in campaign development instead of what it is meant to be: a tool to drive strategy.
Beyond wrestling with the complexity of segmentation, marketers struggle with truly understanding what drives customer behaviour. We may know what people look like – their preferences – where they live – perhaps what they like to do in their spare time– but then why they do they behave so differently even when everything we know about them is the same? How often do we see people of identical age, income, lifestyle and ethnicity make diametrically opposite choices? That was the puzzle social psychology and behavioural science were supposed to answer. Yet even when behavioural tendencies and biases are revealed, they can be difficult to act upon. The insight becomes a “nice to know” instead of an “aha” moment – just another snippet of information in a persona profile.
What truly explains the decisions people make and the actions they take, according to Valuegraphics CEO David Allison, are their values: the modes of conduct they deem to be personally or socially preferable – the principles by which they live – the beliefs ingrained in them, usually from very early on in life, a function of the social and cultural forces around them. People act in accordance with those values, whether subliminally or not, even when it comes to their favourite brands. They are drawn to others who share their belief system. Values drive much of human behaviour, in fact, and can explain many of the choices that people make. And today, more than ever, people will choose brands based on the perception of shared values. Values become the tiebreaker.
If as marketers you understand what is important to customers, what motivates them, what is truly meaningful to them, you have a much better chance of relating to them, both as individuals and as part of a “target” audience. After all, a major goal of marketing these days is making meaningful connections with customers.
David makes the case for values-driven segmentation in his newest book “The Death of Demographics” in which he argues that marketers should talk to customers about what they think is important. His company has created a massive global database of values, the first of its kind, which marketers can use to determine the values of their customers.
I started by asking how he arrived at this conclusion after years of running a real estate marketing agency.
David Allison (DA):: Yeah, my company focused specifically on real estate, large-scale real estate development, so condos, resorts, office towers, and we did this all over the world. We were quite good at it. We were the largest game in town for a while there. And as with any business, though, you start in the same place. You start and say, “Okay, who’s our customer? Who’s the targeted audience? Who are we trying to do this for?” Then you get the business definition you can, write it all down. And we have two ways of doing that, demographics, male, female, rich, poor, young, old, Black, white, gay, straight, whatever, and then this whole other bunch of stuff that just falls into the category of psychographics, which is, what else do we know about them, past sales behavior, likes, preferences, wants, desires, needs, interests, etc., etc., etc.? And so then you get that all down on a piece of paper. And in the real estate game I used to talk about it as being, inevitably, it was an aging baby boomer target who was trying to downsize from their single family home in the suburbs and move into a stacked urban environment so they could take some of the money, and by over time, replace somewhere else. So we just called them all Bob and Sally. So Bob and Sally was our target audience, and based on what we knew, we had a little bit different kind of Bob and Sally for one tower versus another tower, but basically it was always Bob and Sally because they had the money. That’s who we were building condos for. So then you’d get that figured out and you’d go and spend a million bucks, and over the course of as small a period of time as possible you’d try and sell out all the units. And I’m talking a condo tower at this point.
And the neat thing about the real estate development industry from a marketing perspective is it has a beginning, a middle, and an end. So we define an audience, spend some money, talk to those folks, and then about three years later, you’re standing in a room with them, and you can look around and go, “Oh, hey.” What kept happening to me over and over again at these ribbon cutting ceremonies with the shrimp on a stick and the cheap glass of Prosecco that we pretended and called champagne was, I would just have this epiphany, this moment where I’d say, “Who are you people? Because you’re not the target audience we thought we were talking to.” Maybe 10% or 15% of the people in the room were. There was the Bobs and Sallys, but there was all these other people who had no resemblance whatsoever to the target audience. It’s, “Thank you for coming. You made us heroes, we sold out. Yay, you. I hope you enjoy your condo, but what the heck are you doing here? We didn’t target you. We didn’t buy into your channels. We didn’t think about you in our strategies. We didn’t put messages together for you, and yet, here you are.” So when I sold my company I said, “I’m gonna see if I can’t sort that out. It seems really inefficient. We’re spending X number of dollars and only 10% or 15% of it’s actually hitting the people. And accidentally, we seem to be hitting this other 80% to 85% of these folks, and we’ve got to solve this because that would be a really great thing to know.”
So that takes you really quickly into behavioral science because basically we’re trying to figure out, why did these people decide to be there? So how do humans decide things? So that’s what behavioral science is all about. And you start looking at psychology, sociology, psychiatry, even neurology. And I can go into a long-winded explanation on all of those, but the summary is they all fight like cats and dogs about how people make decisions. But they agree on one core central principle, and that’s that our core human values drive every decision we make thousands of times a day, all day long. So that was the eureka moment. Okay, cool, if we could just understand the values of a group of people before we spend a million dollars talking to them, then we’d know what we needed to be saying so that we could drive their decisions in the way we’d like them to go.
And then in retrospect, looking back on those rooms full of people, they weren’t dissimilar at all. On the outside they were. They weren’t the same demographics that I thought I was talking to, but since values drive all our decisions, they were all in the room because a set of values had attracted them there. We were accidentally using valuegraphics to talk to these groups of people. So I thought, “Okay, let’s see if we can’t figure out a way to do this with purpose instead of accidentally. If we could profile groups of people and understand their shared values, then we’d know how to talk to them and get them to do the things we’d like them to do.”
Stephen Shaw (SS):: So certainly emotion drives brand connection, brand connectivity, brand loyalty. In fact, they say that half of decision making is really emotionally driven, and that ties in with what you’re saying, that concept of values and emotions go hand in hand. The crux of the book is, as you’ve just explained, that values really explain what people do. So marketers have lived by Maslow’s hierarchy of needs forever, right? There was an early model for human motivation and marketers latched onto it, and that’s really guided their thinking. Your model, does that suggest that that displaces Maslow’s hierarchy of needs, or is there some overlap here between the two?