The Segmentation Challenge

Perhaps the most critical challenge in marketing is to identify your most likely buyers or participants and understand how to reach them and what messaging will resonate with them. There are a wide variety of segmentation approaches to tackle this challenge. Over the years, we’ve created custom segments (via survey methods) for clients and we’ve utilized off-the-shelf psycho-demographic or “lifestyle” systems in support of direct marketing initiatives.

We’ve also developed targeting models, based on analyses of past program participants. These kinds of models assume that the most likely future buyer/participant will look like past buyers. This is an assumption that, while usually true, can be wrong. For example, a utility’s HVAC rebate program could be built on the backs of one or two enthusiastic contractors in a limited geographic territory. Current participant profiles may not match likely future participants at all.

In addition, we’ve seen these kinds of models built strictly on geography, consumption and age/type of home. While better than nothing, these limited data models don’t include critical information. For example, just because a household is a heavy user in an older home doesn’t mean they’re likely to do anything about it. They might not care or have the available funds to take on improvements. Customers also do things for very different reasons. If you don’t know more about them, you have to utilize a one-size-fits-all approach to communications – which is why so much energy efficiency marketing messaging is simply about saving money.

The challenge is particularly compounded for our clients in the utility industry who are often tasked to support multiple (very different) initiatives: new homes programs, green power or community solar programs, EV initiatives, traditional DSM/rebate programs, and customer service/communication choice initiatives, etc. Can one segmentation system support all?

An Effective Solution

Shelton Group has developed a proprietary consumer energy segmentation system based on data from the Energy Pulse™ study, which has been published each year since 2005. This online survey of over 2000 American consumers, asks a battery of self-reported behavioral, attitudinal and demographic questions to understand habits, propensities, attitudes and the various spheres of influence related to energy consumption and product selection. The resulting consumer energy segmentation system addresses both the “Who” (as in who’s the best target) and the “Why” (why they will or will not engage/why they are or are not satisfied) that is critical for energy-related marketing and customer communications.

Over the past ten years, we’ve consistently found four stable segments that have barely shifted in their market size and composition. Each segment has a distinct demographic and attitudinal profile. True Believers are pro-environment and undertake the highest number of energy conserving behaviors. Working Class Realists are struggling to make ends meet and are difficult to engage in energy conservation initiatives. Cautious Conservatives care about “the ROI” of any undertaking, yet are surprisingly good targets for solar due to their desire for “control”. Concerned Parents are busy and convenience and comfort drive their decisions.

In our ten years of Energy Pulse studies, we’ve built a warehouse of segment responses to questions about communication preferences, social influence, personality characteristics, media consumption, technology usage, home technology product interest, energy efficient product purchase propensities and rebate participation, interest in load control and time of use billing, and attitudes regarding solar and other renewable energies. We’ve also tested hundreds of messages both in surveys and in segment-specific focus groups to learn what resonates with each and how to connect with their underlying drivers.

Segmentation Appending

Shelton Group has created a predictive algorithm that allows us to append our energy segments to our client’s customer records using third-party data from a provider like Acxiom. The right segmentation system can help you market in a much more cost-efficient manner. Response rates increase when communications are targeted to the most likely prospects and are written/designed to specifically connect with their underlying drivers. Shelton Group has a proven approach to help you do that. Shoot an email to lhead@sheltongrp if you’re interested in learning more.