As an educator, marketing practitioner and leader of the Marketing Accountability Council, I’m noticing significant gaps in how I used to approach and teach market segmentation and the realities of our changing environment. What used to be a straightforward method of categorizing consumers based on demographics feels outdated.
Today’s world is incredibly complex and divided, making it essential to look deeper into people’s multifaceted identities, changing values and the fast pace at which their behaviors evolve.
The limitations of demographic factors
Once a reliable indicator of consumer preferences and behaviors, age seems almost arbitrary due to diverse life experiences within generational cohorts. A 35-year-old digital nomad and a 35-year-old suburban parent may have vastly different values, purchasing habits and brand affinities despite sharing the same age bracket.
While still relevant, income levels no longer paint a complete picture of a consumer’s purchasing power or priorities, as factors like debt, gig economy participation and varying definitions of success come into play.
Gender, too, has become more complex. The traditional binary approach to gender is being challenged by growing awareness and acceptance of gender fluidity and non-binary identities. Brands that still rely on outdated gender stereotypes risk alienating a large part of their potential market and facing backlash from socially conscious consumers.
Geographical segmentation is also losing its effectiveness. As remote work grows and ecommerce breaks down global barriers, a consumer’s location has less impact on their brand preferences or buying habits.
This is why marketers must think beyond local markets and consider how to appeal to geographically dispersed but ideologically aligned consumer groups.
Dig deeper: 3 steps to an authentic brand: Identity, intention and implementation
From the segmentation, targeting and positioning (STP) model to a multifaceted consumer understanding
In this new landscape, psychographic factors and shared values are emerging as more reliable indicators of consumer behavior. One of my students told me she was willing to wait months for a product that aligns with her values of sustainability. This illustrates a broader trend toward conscious consumerism.
Increasingly, consumers are making purchasing decisions based not just on product features or price but on how well a brand’s values align with their own. This demands a more nuanced approach to segmentation that considers consumers’ stances on sustainability, social justice, political ideologies and other value-driven factors. This polarization of social and political views has created new challenges and opportunities for marketers.
In June 2024, Tractor Supply, a rural lifestyle retailer, faced significant backlash from conservative activists over its DEI policies, including LGBTQIA+ events and diversity-focused hiring practices. This backlash led to a swift retreat from these initiatives, with Tractor Supply announcing plans to eliminate DEI roles and goals. This scenario has played out repeatedly across corporate America, with companies like Ford, Harley Davidson and Target facing similar scrutiny and often responding by scaling back their DEI efforts.
In this climate, companies aren’t judged solely by the quality of their products anymore. Consumers expect brands to align with their personal values and political beliefs. It’s a tightrope between embracing robust DEI initiatives and avoiding backlash from opposing viewpoints. How do you navigate this landscape?
Dig deeper: The war on DEI is hitting marketing and hurting business
Moving beyond demographics and reacting
Companies that retreat from their values at the first sign of backlash reveal a deeper issue: a lack of conviction. If a company claims to stand for diversity, sustainability or social justice but quickly backtracks in response to controversy, what do they really believe in?
Such reactive behavior alienates the customers who initially aligned with those values, erodes trust and weakens the brand’s authenticity. To build genuine, lasting relationships, brands must remain steadfast in their beliefs, even when they’re uncomfortable or controversial.
This brings us to the Dunning-Kruger effect, a cognitive bias that explains how those with limited knowledge often overestimate their understanding. At the same time, those with deeper expertise tend to recognize the complexity of a situation.
For example, many marketers believe they understand their audience based on surface-level demographic data or trending consumer insights. However, the Dunning-Kruger effect tells us that this confidence is often misplaced. Those who dig deeper into consumer behavior and psychographics realize that audience understanding is far more intricate than it initially appears.
Consumers make buying decisions based on their values, political beliefs and views on sustainability and social justice. Segmentation strategies must include more than just demographics and surface-level insights. Marketers stuck in the early stages of the Dunning-Kruger effect might believe they’ve mastered their segmentation models. Yet, in reality, they’re missing the nuances of who their consumers genuinely are and what they stand for.
For brands, this means moving beyond traditional segmentation methods. It’s about staying curious, challenging your assumptions and aligning your business with the values that matter to your audience. Instead of just reacting to social and political trends or the latest consumer fad, invest in understanding your consumers deeply and act with conviction. Your segmentation strategy should reflect who your customers and who you are as a company.
Enter clustering
Clustering takes segmentation further by grouping consumers based on deeper, data-driven insights (e.g., behaviors, values and needs) rather than surface-level characteristics. With the right data, clustering can reveal segments and their characteristics scientifically and precisely.
This approach allows you to tailor your messaging more effectively. For instance, if you discover a segment of eco-conscious consumers, you know they will likely pay more for products that align with their values. On the flip side, if you find a cluster of cost-conscious families, affordability and convenience will be the keys to winning them over. But remember: It’s not just about spotting a new cluster; it’s about making sure your brand can genuinely deliver on the promise.
In a world where values are at the heart of purchasing decisions, clustering helps you stay authentic and actionable with your customers. There are no empty promises or quick fixes. Just a strategy built on real insight and alignment with what your audience truly cares about.
Clustering isn’t just for data scientists anymore. With tools like Google Colab, DOMO and Tableau, you can quickly dive into data analysis without needing a degree in statistics. No more excuses for sticking to outdated methods. You can now work more efficiently on your own or with data scientists and statisticians from your company or services like Upwork to use clustering.
Google Colab provides a cloud-based platform for running data analysis without expensive software or extensive technical knowledge. Special thanks to my friend Dan Renkas, who helps businesses improve their results through better data management, for demonstrating the power of this technology to me.
Bottom line: Segmentation is a powerful tool, but it only works if you genuinely meet the needs and values of each group. Align your messaging with your company’s real strengths and values, not just the perceived desires of a cluster. Otherwise, that “alignment” is just a facade — and your customers will see right through it.
The evolution of corporate strategy
Corporate America’s DEI dilemma reflects broader societal challenges around identity, equality and representation. How companies navigate these debates will determine their success and shape the future of workplace culture and social progress. The path forward requires wisdom, empathy and a commitment to engaging in difficult conversations — both within boardrooms and with the communities they serve.
By returning to fundamental human truths and focusing on universal desires such as belonging, fairness and respect, companies can create DEI initiatives that resonate across diverse audiences. Clustering enables brands to break down the complexity of modern consumer identities and craft strategies that speak directly to those truths. In doing so, businesses weather the current storm and emerge as leaders in building a more inclusive and equitable society.
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