Insights Article

Segmentation: telling you what demographics can’t
12th July 2017

Segmentation: telling you what demographics can’t

For many businesses, grouping customers for targeting purposes simply means demographics: gender, age and so on. This provides neither an accurate nor a useful snapshot of the customer-types in your market as most buying decisions derive from attitudes and behaviours and not from peoples’ age or gender.

To demonstrate this, let’s first take a look at the audience for four TV channels, split by gender and age alone. Our client has two channels and there are two key competitors:

We can see that using demographics does not define distinct channel audiences: each channel has pretty much the same bland audience profile. So how does any channel know which audience to target for share steal and growth?

A true segmentation provides a far more accurate and actionable snapshot of actual TV audiences. So we did a market segmentation for our client based on TV viewing data not demographics. This market segmentation revealed six segments. Let’s now look at same four channels, but this time using the segments:

Using segments from the market segmentation, we can clearly see distinct audiences to target for growth. There are two key insights from this chart:

  1. Our client’s channels A and B both rely on the same two segments Dual Screeners and Night Owls for a large % proportion of their audiences. In other words, our client’s two channels are competing with and cannibalising each other by targeting the same segments
  2. Bulk Indulgers account for a large proportion of competitor 1’s audience, and Weekenders for competitor 2, but these two segments hardly watch our client’s channels at all

So as a result of our market segmentation, our client changed their targeting strategy to reduce cannibalisation and target share growth from the competitors. Here’s how they used the segments to grow:

  • Channel A: keep targeting Night Owls but leave Dual Screeners to channel B and instead target Bulk Indulgers to take share from competitor 1
  • Channel B: keep targeting Dual Screeners but leave Night Owls to channel A and instead target Weekenders to take share from competitor 2

Simple. They grew share by +50% across channels A and B within under one year, as all growth avoided cannibalisation and was at the expense of competitors. Without the segments they would not have known how to do this; the market segmentation provided the hard evidence to accurately target a new audience.

This process works just the same in any market or category. Segmentation is equally important when positioning a new B2C brand or trying to grow B2B market share as only segmentation tells you your highest value, highest potential audience: who to target, how to communicate with them, and where to find them.

If you want to learn more about how segmentation is more powerful than demographics, get in touch with our team.

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