Does segmentation result in exclusion?

I’ve been thinking about the topic of segmentation recently. Segmentation is when group of people are identified specifically for a particular purpose because of some desirable attribute they may have. So, for example, Coca-Cola may target their marketing at young people with disposable incomes. They are the likely group to purchase their product, and because they are a homogeneous group, it is also more cost-effective to focus on this particular segment.

The problem with segmentation is that it implicitly excludes the set of people who dot not form this homogeneous group. Marketing to people outside this group may be more expensive and result in lower returns, but they may still be viable consumers for the product or service that’s being marketed. Another aspect that needs to be considered is that by explicitly marketing to a particular segment, marketeers run the risk of alienating their core segment. It’s the sharp line between the haves and the have-nots that ends up generating feelings on animosity and loss of goodwill.

This is one area where user-generated content (UGC) helps to address the gap. Content producers will tend to produce material that their peers can relate to and understand. This tends to blur the division between people who are marketed at and those who aren’t and over the long-term tends to smoothen out any discrepancies in the marketer’s initiatives. Once you start looking at the long-tail benefits of UGC you can see how the sharp boundary starts becoming blurred so the effects of any promotions the initiatives the organisation is pursuing gets spread across the social graph it’s respondents make part of.

Effects of “negative-segmentation” (I coined that term to signify specifically excluding a particular segment) also need to be carefully managed. I came across an instance where PayPerPost (the organisation that provides a marketplace for bloggers and advertisers to meet for mutual benefit) was running a competition called WorldWide Wednesday. This was aimed at international members and specifically excluded members based in the U.S. (which I would guess would be it’s largest segment). It was carefully engineered however, in that the prizes PayPerPost offered for this promotion were significantly lower that their main competition held the day before. This produces the effect of attracting international members, without causes too much loss-of-goodwill with their local segment.

Segmentation is a great tool for marketers, regardless of which industry you’re in. However, the moral of this post is that segmentation needs to be applied carefully. Always keep in mind the effect on people you are excluding on a particular promotion and ensure you don’t upset your main segment.