Segmentation
Project Background
An audio equipment manufacturer was developing noise reduction headphones, and wanted to learn more about users of headphone and portable audio equipment. Of particular interest were consumer usage patterns; which type of audio equipment is used with various headphones (closed, open, and in-ear), and what are the reasons for choosing one type of headphone over another.
Client Objectives
The client requested a segmentation study in order to profile, and classify users by type of headphone used, for future target marketing purposes. Additionally, the client also wanted to understand the purchasing behavior of users in each segment, as well as the replacement cycle of headphones, and audio equipment.
The Challenge
The study itself was pretty straightforward; an online survey of roughly 20 minutes was administered to 1,015 consumers. However, the survey results left us with a good deal of response data to make sense of in a timely manner.
We had to identify like-minded respondents who think of themselves similarly, and have similar needs and wants relative to headphones and portable audio devices. Without a methodology to systematically examine the data, such a task is almost a Sysiphean Analysis.
Our Approach
There is no ideal methodology that works with every segmentation study, but Cluster Analysis is probably the most frequently used method of segmenting a market. The underlying definition of Cluster Analysis procedures mimics the goals of market segmentation.
It’s an iterative statistical procedure, which first identifies a random seed within the data set and looks for the next closest respondent in terms of all of their responses. Respondents are continually linked to one another and eventually form groups based on those who have the minimum variance in their answers to the questions at hand.
The Outcome
Cluster Analysis enabled us to build useable and marketable segments for headphones, by combining self-descriptors and attitudes, with the product needs expressed by respondents. This in turn enabled management to use the characteristics of each segment as a basis for making product and marketing related decisions.
The Upside
Understanding the distinct attitudinal factors of each segment also allowed the client to discover an untapped market for the product. While noise reduction headphones appeal to the frequent traveler segment for obvious reasons, we discovered that the client also had an audience with young urban kids influenced by brand.
Though this segment was in fact more price sensitive than others, our analysis revealed that these users are also more likely to receive headphones as a gift from family or friends.
