Stop segmenting consumers and start segmenting growth opportunities
In our experience, one of the biggest limitations in commercial strategy is not the lack of consumer insight but the way companies translate the insight into action.
At Globalpraxis, we work with organizations that know a great deal about their consumers.
They know who their consumers are, what they purchase, how often they make purchases, what they value, and how their needs differ by occasion.
In fact, most organizations have already performed sophisticated segmentations when they approach us.
And yet, when we look at where growth is really coming from, we often find a disconnect.
Consumer segmentation might be insightful, but commercial decisions are still being made around channels, customer types, historical sales, or broad demographic groups.
This is where we believe the opportunity is changing.
Because knowing who your consumers are is useful but knowing where the next pool of profitable growth lies is much more powerful.
Consumer segments do not make purchases in a vacuum
Consumers do not behave the same way all the time.
The same person may buy a premium product in a restaurant on Friday night, choose a value option in a supermarket on Saturday morning, and make an impulse purchase in a convenience store later that afternoon.
The same consumer, three completely different commercial opportunities.
This is why we are increasingly cautious about strategies that start and end with traditional consumer segmentation.
Segments help us understand people, but growth is often found at the intersection of several factors:
- The consumer
- The occasion
- The location
- The channel
- The need-state
- The portfolio available
- And the economics of serving demand
The combination of all factors gets us much closer to what we would call a growth opportunity, and it can be far more useful than a broad consumer label when deciding where to invest.
The “average consumer” – a potentially dangerous concept
We see this clearest in route-to-market and category work.
A company may identify a nationally attractive consumer segment and build a strategy around reaching more of those consumers.
This sounds logical, but those consumers are not distributed evenly across the market, nor do they behave consistently across occasions.
Their willingness to pay for the products they consider relevant may change. The channels they use and even the role of the category itself may change.
In the end, a national segment that looks extremely attractive on paper can translate into very different economics depending on where and how the demand appears.
This is where we think companies need to go a step further.
Instead of asking only: “Which consumers do we want to win over?”
We should also ask: “In which specific situations is winning them over most valuable?" Which is a much more commercial question.
We look for demand spaces, not just people
At Globalpraxis, we have found the focus on demand spaces to be an especially powerful approach to unlocking growth.
A demand space is not simply a group of consumers who look similar on the surface. It is rather a combination of who is making the purchase, what they need, when they need it, where it happens, and what they are willing to pay in that situation.
Once you scratch the surface, the picture of the market becomes much richer.
A mature category may still contain rapidly growing demand spaces, just as a declining channel may yet reveal highly attractive pockets of opportunity. And a relatively small consumer group can become commercially important if it over-indexes on the right occasions, while a large segment could turn out to be much less attractive once the economics of reaching and serving it are considered.
All this matters because growth does not come from segments, but from specific purchasing decisions.
The commercial implication is significant
If we look at growth through a demand-space lens, decisions begin to change.
The portfolio becomes more precise: Instead of asking which products to win nationally, we ask which products have the strongest role on a particular occasion or in a particular environment.
Pricing becomes more nuanced: Consumers do not have a single fixed willingness-to-pay, since the same consumer may value convenience, premiumization, or functionality very differently depending on the situation.
Route-to-market changes accordingly: Some outlets matter for their current sales and others because they give access to particularly attractive demand spaces.
And investment becomes more selective: Rather than spreading activity across a large segment, resources can be concentrated where the combination of demand and economics is strongest.
For us, this is where consumer insight becomes commercially useful.
Not when it results in yet another profile, but when the insight is harnessed to transform what the organization habitually does.
The way we think about innovation is altered in the process
Innovation presents a similar issue.
Companies often start by asking which consumer needs are underserved.
That is obviously important, but we believe there is another question worth asking:
Where is an attractive demand space that our current portfolio is not serving well enough?
This question leads to a very different innovation agenda for which the opportunity may not require a completely new product.
Instead, it may call for a different pack size, price point, format, or a new proposition for a specific occasion.
Or it may simply mean getting an already-existing product into the spaces where it is most likely to win.
Indeed, some of the best growth opportunities are not created in an R&D laboratory, but by seeing existing demand differently.
Data now allows much greater granularity
Historically, there was a practical reason why companies relied heavily on broad segments – they made complexity manageable.
You could not realistically build a different strategy for every combination of consumer, occasion, outlet, and product.
Today, that limitation is becoming much less relevant.
The combination of richer internal data, external sources, analytics, and AI allows us to identify patterns at a level of granularity that simply was not practical before.
We can now understand which demand spaces are growing, where they are concentrated, which customers provide the best access to them, which parts of the portfolio are capturing the opportunity, and where the gap between demand and execution lies.
This is particularly exciting because it connects our understanding of the consumer directly to commercial choices. And that connection has often been missing.
A simple question we like to ask
When we review a growth strategy, we often challenge teams with a simple question:
Can you pinpoint where the growth will come from next?
Not the consumer segment, category, or market, but: Where, specifically, will the additional transactions take place?
On which occasions?
Through which customers?
With which products?
At what price points?
And why would the consumer choose us?
If these questions are difficult to answer, the strategy may still be too broad.
At Globalpraxis, we believe the next step in segmentation is not to create overly-sophisticated descriptions of consumers, but to connect our understanding of the consumer with the spaces where business can truly create value.
Consumer segmentation tells us who matters and growth opportunity segmentation tells us where to act.
For commercial leaders, the second question is becoming increasingly important.
