How Companies like L'Oréal and Nike Find Success Through Customer Segmentation

L'Oréal Chief Marketing Officer Marie Gulin-Merle attributed her company’s “digital transformation” to a focus on storytelling and personalized digital experiences, but also to the power of customer segmentation. A L'Oréal study of search analytics revealed a relatively small but ardent group that represented significant growth potential. In this case, it was “contour-me-quick” consumers, who want to learn contouring skills, but think it's too hard or time-consuming to do. L'Oréal made a series of how-to-contour YouTube videos targeted at this segment, and the videos racked up more than 9 million views.

L’Oreal’s success illustrates the importance of one of our most important tools at Campos - Customer Segmentation. It’s been a hot topic lately. While the concept has been one that we have put to use for clients for many years, it has emerged as a powerful trend recently in the form of entrepreneurs and startups turning entire categories on their heads by targeting highly specific groups of people. These segments can be large (plus-size women) or small (dairy farmers), but they traditionally have been un- or under-served in the world of mass markets. Our report on segmentation gives plenty of examples of companies that are seizing the opportunity to fill these gaps in need, and explores how more established brands are taking note and breaking their own markets into sub-segments. L'Oréal, the world’s largest cosmetics company, is just one example.

This raises the question: How does one even go about identifying customer segments?

Companies with rich customer data can use statistical analysis to identify sub-segments that share a core set of attributes. Alternatively, organizations can match customer addresses to pre-determined lifestyle segments using a syndicated data append service. Marketers without existing data, or limited or spotty data (you are not alone), can also identify segments using a mix of customer, syndicated, and survey data. With these tools, along with expert analysts and strategists, small but mighty growth segments can be revealed (alongside those you need to maintain, and those that can receive less investment).

Building out personas for each segment is typically the most fun part. The analytics transform customers into people. Armed with each segment’s demographics, shopping behaviors, attitude and opinion statements, media consumption habits, recreational activities, and more, marketers can exploit the personas to construct targeted communications plans.