01 February 2016 13:45:09 IST

Associate Dean and Professor of Marketing, SPJIMR, Mumbai

Segmenting online consumers

With e-commerce now such a big part of retail, is it time to re-write the rules of consumer segmentation?

Traditional marketing tells us that consumers need to be segmented based on certain parameters — there is always the easy way of demographic segmentation, which is likely the cleanest, as groups of consumers become distinct from one another.

Then there is age distinction, such as children, young adults, young professionals, and so on; there is also gender segmentation, where marketers market their products or services differently according to the consumer’s gender— much has been written about the differences in shopping between men and women; consumers can even be segmented on the basis of income (for affordability), weight (for obesity-related products/services), and other such parameters.

Sectioning the purchasing population can also be based on attitudes, especially for those purchases that occur because of the sheer way in which consumers look at life. So getting a different haircut need not always be based on demography, but could depend on how consumers view themselves and their persona, and their outlook on life. It can be a chic style statement or a mundane standard look. Traditionally, marketers refer to this classification method as psychographic segmentation.

Changing behaviour

We all know of those consumers who are extremely particular about brand, fit, colour, and design, and will not just buy off the cuff, but rather spend time on trying on many outfits or pairs of footwear, before finding the ideal buy. Some others would rather own a greater variety of apparel and are not really particular about other parameters.

In India, we observe consumer behaviour changing every few kilometres. Just to drive home the point, let’s take the example of coffee. Consumers in the North are more comfortable with just a slightly bitter taste in their coffee and would prefer a not-too-strong variety, while consumers in the Southern part of the country want the strongly brewed version of the beverage.

Geography is important, as it brings along with it differences in the way people live and the choices they make. Marketers target these two groups (North India and South India) in different ways in terms of positioning, product (taste) and communication, among other marketing activities.

The online space

All this said, we now have a relatively new kid on the block — a new market-place called e-commerce (online stores). Consumers can buy from wherever they are in the world from a common platform and the goods will reach them wherever they are.

This place is the virtual world that links itself to the real world beautifully. So, if I want to buy a scarf or a TV set or a pair of shoes, I just need to browse, make my choice, pay and bang — in the next few days (or sometimes even hours), the product is with me.

With eBooks, it is even faster. Once they make a choice, consumers compare prices on offer by the various sites and purchase from the one offering the best price, and the book downloads on your device in a jiffy.

What can be the points of differentiation, then, for these online stores? Do the traditional principles of marketing segmentation still apply, if we assume the basic propensity to purchase online as a given?

Back to basics

It looks like they still do, considering the basic criteria for purchase would remain the same, be it gender, age, income, height or weight. But, then, should there be something beyond these?

One particular e-commerce site has, interestingly, sectioned its online store by activities. Let’s take a look at their segment that showcases everything you would buy before going on a vacation.

One would think their ‘vacation store’ would have a pile up of products and brands, but no. It has curious divisions, like things to buy depending on the kind of vacation you are going for — sightseeing, romantic, beach, hill station, adventure, family, party capitals, and luxury. Isn’t that amazing?

To segment by activity is wise, but may have practical implementation issues in brick and mortar stores — how else does one explain the absence of a vacation store offline?

Analytics of choice

It appears that the traditional method of segmentation will not go away. It may well be that online consumers’ purchasing behaviour will have to be superimposed on the time-tested ways of segmentation.

After all, a young mother would still buy a Funskool ‘Digger the Dog’ for her kid after an information search. The difference would be in her way of searching and how she makes the purchase.

So, should marketers move to segmenting based on the way people buy and not just on who they are? Here is a chance for consumers to behave very differently. Frankly, whether data analytics can capture the nuances of consumer choices online is still to be seen.