Segmentation & Targeting

Market segmentation consulting is the work of dividing a market into groups that behave differently, sizing each of them in revenue, and then deciding which ones a company will organize itself to win. The dividing is the easier half. The deciding is where most programs stop, which is why so many segmentations end as a deck rather than a change in where the money goes. Vivaldi has built segmentations from demand situations rather than demographics since 1999, for companies including Western Union, Vodafone and McGraw-Hill.

• Since 1999demand, segmentation and targeting strategy
• 200+published case studies
• 10 officeson four continents
• 5xWirtschaftsWoche Best of Consulting, Strategy and Innovation
• The Interaction Fieldwritten by our founder

Most segmentation describes who customers are

A conventional segmentation sorts people by attributes: age, income, region, firmographics, attitudes, sometimes a personality label. The output is a set of named groups with photographs and quotes. It is usually accurate, and it is usually inert, because nothing in it tells a company what to build, what to say or where to spend.

People do not buy according to who they are. They buy according to what they are trying to get done, and the same person moves between several of those situations in a single week. A demographic segment splits the market by the buyer. A demand space splits it by the occasion, the job and the context in which a choice actually gets made.

That difference is the whole argument of this page, and it is the reason a segmentation can be methodologically clean and commercially useless at the same time.

When companies bring us in

Segmentation and targeting work is usually bought by a CMO, a chief strategy officer or a head of insight. The trigger is almost never the planning calendar. It is one of these.

• Growth has flattened while category share has held. That combination usually means the category was mapped correctly and the demand moved outside the lines it was mapped with.
• The existing segmentation is four years old and nobody uses it. It sits in a deck, the media plan runs on something else, and the sales team has never heard the segment names.
• Marketing and finance cannot agree on where to spend. Segments without revenue numbers lose every argument they enter, so the budget defaults to last year plus or minus a few points.
• A new product needs a target and the company has only a demographic. Product teams can build for a situation. They cannot build for an age band.
• Competitors are reaching the same conclusions. Everyone working from the same purchased demographic map identifies the same attractive segment and then competes on execution inside it.

Why demographic segmentation does not change where the money goes

The objection is not that demographic or attitudinal work is wrong. It is that it answers a question nobody has to act on. Four specific failures show up again and again in the segmentations we are asked to replace.

• Demographic segments are stable and unhelpful. They rarely move, which makes them comfortable to plan against, and they explain very little of what people actually choose.
• Attitudinal clusters do not survive a media plan. If a segment cannot be found, reached or served differently, it is a description rather than a target.
• The segmentation and the P&L do not connect. A segment that cannot be sized in revenue terms cannot be prioritized, and anything that cannot be prioritized gets funded last.
• Nothing in it is exclusive. A map built from data every competitor can buy produces conclusions every competitor can reach.

Demand spaces sit closer to the mechanism of choice, which makes them harder to copy and more useful to build against. It is also why the penetration debate in marketing does not settle the question, and why the move from salience to category entry points left something behind.

What our market segmentation consulting services include

Five bodies of work. Most engagements use all five, and a company that already has a credible segmentation often needs only the last two.

1. Demand-space segmentation research

We start from the situations in which people make a choice, then describe who turns up in each one.

• The activity, occasion and job that organizes the choice, described in the customer’s own language rather than in category language
• Qualitative work to find the real distinctions, followed by a quantitative study to validate and size them
• Demographics and firmographics kept as descriptors of a space rather than as the base variables that define it
• A view of which spaces are contested, which are underserved, and where demand is moving

2. Demand-situation definition

A demand space is only usable if it is defined tightly enough that two people in different functions would assign the same customer to the same space.

• The boundary conditions of each space: what counts as being in it, and what the adjacent space is
• The competitive set per space, which is frequently not the competitive set the company tracks, because substitution happens by situation rather than by category
• The entry points into each space and the language customers use when they are in it

3. Segment economics

Every space carries a number or the segmentation will not survive its first budget meeting.

• Current revenue, addressable demand and growth rate per space, built so finance can interrogate the method
• Cost to serve and cost to acquire by space, since the largest space is rarely the most profitable one to pursue
• The company’s current share of each space, which is usually the finding that changes the conversation, because share of category and share of a demand space are not the same measure

4. Targeting and where to play

A segmentation that narrows nothing has not done its job. Targeting is the decision, and it is the step that gets negotiated away when it is not written down.

5. Activation and assignment

Segmentation dies when nobody can act on it, which is almost always a data problem rather than a strategy problem.

• Rules that assign a real customer or prospect to a space using data the business already holds, not data a survey would have to generate
• Proposition, pricing and channel implications stated per space, so product and marketing have something concrete to build against
• A refresh cadence with a named owner, because demand situations move faster than demographics do

How a segmentation and targeting engagement works

1. Frame. Name the decisions the segmentation has to improve: the media allocation, the product roadmap, the sales coverage model. A segmentation built without that list will be judged on elegance instead of consequence.
2. Discover. Qualitative work with customers and non-customers to find the situations that organize choice, alongside a review of the transaction, CRM and panel data the company already holds.
3. Size and choose. A quantitative study to validate the spaces and attach revenue to each, then the targeting decision itself, stress-tested with finance and written with its exclusions.
4. Embed. Assignment rules into the systems that need them, implications per space for product, pricing and channel, and a refresh cadence with an owner.

Segmentation and targeting results

Western Union: three high-value traveler segments across three markets

Western Union wanted to expand its financial services offering for international travelers, a valuable and underserved segment relative to its core remittance business, and the open question was which traveler segments were genuinely attractive and what products would answer their needs. Vivaldi conducted segmentation research that identified three distinct high-value traveler segments across the US, UK and German markets, each profiled with specific behavioral, attitudinal and product preference data. Western Union launched new financial products across the US, UK and Germany informed directly by the segmentation framework, and the three-segment model gave the company both near-term launch targets and a longer-term framework for evolving its traveler product portfolio. Read the full story: How Vivaldi identified three high-value traveler segments for Western Union.

Vodafone: seven consumer segments and eight growth platforms for the connected home

Vodafone needed to define its strategic position in the connected home market, where network connectivity was becoming a commodity and the real value sat in the smart home services and experiences built on top of the infrastructure. Through Project Jetson, Vivaldi identified seven consumer segments and eight distinct growth platforms, combining consumer research, technology trend analysis and strategic scenario planning into an innovation roadmap. Vodafone emerged with seven consumer segments defining who to serve and eight growth platforms defining where to play, which is exactly the pairing this page argues for, and the roadmap gave actionable direction for product development and partnership strategy. Read the full story: How Vivaldi helped Vodafone define 7 consumer segments and 8 growth platforms.

McGraw-Hill: a segmentation of the education ecosystem, then six instructor personas

McGraw-Hill's user base spans educators, administrators and students across multiple institutional contexts, and had never been systematically segmented in a way that could guide product development, messaging and go-to-market priorities. Without that framework the company defaulted to generalist strategies that failed to serve any audience particularly well. Vivaldi built a segmentation of the education ecosystem integrating demographic, behavioral and attitudinal variables to reveal distinct user personas across the key audience types, producing clear where-to-play and how-to-win recommendations: How Vivaldi built McGraw-Hill's customer segmentation framework.

The company returned later to re-evaluate its instructor segmentation after post-COVID changes in higher education. That three-phase engagement ran qualitative research, quantitative segmentation and opportunity prioritization, and produced six distinct instructor personas along with the digital platforms and learning experiences that would drive the highest growth and adoption in each. The six personas let McGraw-Hill prioritize digital platform investment with confidence and build more targeted marketing and sales strategies per persona: How Vivaldi segmented McGraw-Hill's learners to drive product innovation.

Segmentation and targeting by industry

Three sectors where our published segmentation work sits. The method is the same in each: build from the situation, size it, then choose.

Why companies choose Vivaldi for segmentation and targeting

Three reasons, and they are related.

The first is the unit of analysis. Vivaldi built the Demand Landscape and the Interaction Field around the argument that demand forms around situations rather than around people, so demand-space segmentation is not a technique we adopted. It is the thing the firm has been arguing for since 1999.

The second is that the segmentation arrives attached to a decision. We are a strategy firm rather than a research supplier, so the deliverable is a targeting choice with exclusions and an investment implication, not a report that hands the decision back to the client.

The third is that the work connects forward. A segmentation is an input to a route to market, an acquisition model and a brand position, and those are all engagements we run, which means the segment definitions survive contact with the next piece of work instead of being quietly rebuilt in it.

How to evaluate a market segmentation consultancy

Worth asking of everyone on your shortlist, including us.

• Ask what the segmentation is built on. If the base variables are demographic or attitudinal, you will get a description of your customers rather than of their choices.
• Ask how each segment is sized. A segment without a revenue number cannot be prioritized. Ask to see the sizing method before the work starts, not in the final readout.
• Ask how a real customer gets assigned to a segment. If that requires a survey the business does not run, the segmentation will never reach the CRM, the media plan or the sales team.
• Ask what the firm will tell you not to do. A segmentation that recommends serving every segment better has avoided the decision it exists to force.
• Ask what happens in year two. Who refreshes it, on what trigger, and at what cost. A segmentation nobody owns stops being true long before anyone admits it.

Segmentation consultancy vs market research agency vs in-house analytics?

Related work

Segmentation is the input to the decisions that follow it. Three connected pieces:

• Go-to-market (GTM) strategy once the target spaces are chosen and the question becomes how to reach them.
• Customer acquisition where the segmentation should be changing what you pay for a customer, since preference inside a space lowers the cost of winning one.
• Demand landscape mapping if the question is the shape of demand across a whole market rather than the segmentation of one brand’s customer base.

This work sits inside our brand acceleration group, part of the Marketing Strategy and Acceleration practice at Vivaldi, the strategy firm behind the Demand Landscape and the Interaction Field.

Market segmentation consulting in the US and worldwide

Our segmentation work runs out of ten offices on four continents, with the US team in New York. Most of these engagements are multi-market from the start, and that matters more for segmentation than for almost any other kind of strategy work, because demand situations are not evenly distributed. A space that drives most of the category in the US can be marginal in Germany while an adjacent one carries the volume there. A single global segmentation that averages those differences away is worse than no segmentation at all, so we build the spaces to be comparable across markets and let their weights differ.