Segmentation Part Three

Autumn 2021

In the last issue of Customer Insight we said that to be of any value, a segmentation exercise must pass 3 tests:

1) Understand

Does it improve your understanding of customers’ needs and preferences? s

2) Identify

Does it identify customers by segment?


Does it enable you to reach customers by segment with tailored messages?

Behavioural segmentation

Behavioral segmentation is the process of grouping customers according to their behaviour when interacting with a product or service.  Simple behavioural segments frequency and size of spend, and many customer loyalty schemes were developed on this basis. A very successful example was the Tesco Clubcard as it passed all 3 segmentation tests. It enabled Tesco to understand a lot more things about customers such as what they bought, how often, what products they bought with other products or on what occasions and what offers they were most responsive to. The Clubcard was perfect for passing the second test and customers could be reached individually with tailored communications. In the early years of Clubcard the regular mailshots with personalised offers were particularly successful. 

In more recent years more sophisticated behavioural segmentation approaches have focused on things like different product or service benefits or different levels of customer engagement.

Lego is an excellent example of the latter. They identified 6 ‘personas’ based on engagement levels as follows:

1) Lead Users

People LEGO actively engages with on product design

2) 1 to 1 Community

People whose names and addresses they know

3) Connected Community

People who have bought LEGO and been to a LEGO shop or park

4) Active Households

People who have bought LEGO in the last 12 months

5) Covered Households

People who have bought LEGO once

All Households

Those who have never bought LEGO.

The first three personas represented the most fertile ground for interaction because of their deeper involvement with the brand. Lego has extensive interaction with Lead Users including co-creating products with them. For Lead Users, the 1to1 Community and the Connected Community Lego has strengthened levels of engagement by developing online communities and social networks. By actively engaging these customers and giving them special attention, Lego encourages them to be the company’s most ardent advocates. The personas also enabled Lego to concentrate its efforts on the social media platforms most used by its most engaged customers. This has resulted in more coverage on the Internet, through the proliferation of LEGO pictures and customer-made viral videos, and social media feedback has also been used to generate ideas for new products.


American skincare brand Olay used benefit segmentation when creating its Skin Advisor. The artificial intelligence beauty tool collects data from customers by asking them five to seven quick questions about their skin. The advisor then reveals the true age of the customer’s skin and recommends products accordingly. By asking the customer questions based around their skincare routine, and their preferences, Olay can collate data that can influence its product development, allowing the brand to bring out products that are most sought after and most relevant to customers. For example, through its Skin Advisor app, Olay understood that many of its consumers wanted fragrance free products, an idea not even considered by Olay’s development team. Olay now has a very successful range of fragrance free moisturisers and creams. 

The Skin Advisor also revealed that many customers were seeking Retinol based products, and the lack of such products in its range was contributing to the brand losing custom. In response, Olay released Retinol 24 which has gone on to be one of the brand’s best-selling products and helped to significantly increase their sales.

Nigel Hill

TLF Research