Waving the rainbow flag in consumer segmentation

In this article we take a look at the history of consumer segmentation from the early 1920's to-date and the evolution of the LGBTQ community and its impact.

What is consumer segmentation?

Think of consumer segmentation as how you would arrange a house: you wouldn't put all household items in one area, but separate rooms based on their purpose. Consumer segmentation began in the 1920s as manufacturers were becoming able to produce product models at different quality points to meet the needs of various market segments.

This gave rise to market differentiation based on demographic, socioeconomic, and lifestyle factors.

Hypersegmentation, a shift to more narrow market segments, started in the 1980s. Marketing critics argue about the effectiveness of consumer segmentation. In competitive markets, they say it rarely exhibits major differences in the way brands are used.

Companies may opt to play it safe, developing products that attract the largest number of buyers.

Other brands get a market representative for research purposes and use those representatives as a benchmark for their target market.

There is a difference between assuming all girls like Barbie dolls and all boys like cars versus a detailed survey showing statistically the types of dolls and cars bought by different age groups.

Stereotyping is not market segmentation and the difference is: data.

You know, numbers don't lie.

Why is consumer segmentation important?

Digital marketing has given rise to the need for social consumer segmentation. Direct access to consumers offers valuable insights as to what their preferences are. The more we know about our consumers the more we think we can better identify their interests.

Competitors are offering similar products and services so how do you stand out?

Tailored marketing

Consumer segmentation enables companies to tailor their marketing strategies. Offering insights into existing groups, who to target, and how.

Types of consumer segmentation

• Social Consumer Segmentation

  Also referred to as demographic segmentation. Factors include age, gender, marital status, occupation, household income, etc.

• Geographic Segmentation

  Using location to determine consumers in suburban, inner-city, and remote areas.

• Behavioral Segmentation

  A form of market segmentation that focuses on consumer behaviors such as spending habits and online platform use, including active online hours.

• Psychographic Segmentation

  Aims to understand consumers based on their current beliefs and interests rather than previous habits.

• Social Media Segmentation

  Highlights the various social media platforms used and where consumers are most active.

Social consumer segmentation: LGBTQ+ enters chat

LGBTQ+ is an initialism for Lesbian, Gay, Bisexual, Transexual, Queer/ Questioning. The + is used to mean all other communities included, such as Intersex, Asexual, Ally, Pansexual, Demisexual, Gender Fluid, etc.

Labels are applied to some of the more popular social consumer segments.

A few examples include Double Income, No Kids [DINKS]; Young, Upwardly Mobile, Prosperous, Professional [YUPPY]; and Gay, Upwardly Mobile, Prosperous, Professional [GAPPY]

GAPPY is a blend of gay and YUPPY, who tend to be affluent, well-educated, free-spenders, and ambitious. This is the LGBTQ+ community to whom issues of diversity and inclusion are very important.

Is there inclusivity?

Gay consumers are traditionally not as considered when it comes to marketing and advertising.

However, according to marketingmag.com.au, knowingly or not, brands have been advertising to the gay community for nearly a century.

In the 1970s, marketers became aware of the economic potential in the gay community and exclusive gay advertisement campaigns began in the 1980s.

By 2004, it was estimated that 35% of the top 100 US companies made ads directly targeting gay consumers.

Major advertisement categories include travel, financial services, alcoholic beverages, automotive, entertainment, hair and skincare, luxury goods, pharmaceuticals, and fashion.

Inclusivity is notable in the travel industry. Due to fears of discrimination, the LGBTQ+ is inclined to visit countries where they feel safe. The more popular destinations being Europe and North America.

American Airlines launched an LGBTQ+-targeted vacation website and cbi.eu talks of entering the European market with tourism marketing tailored to attract travelers in this community.

The community is highly receptive to brands that make an effort to specifically engage them.

Rainbow or white? Joining the bandwagon vs remaining neutral

LGBTQ+ individuals are discriminated against by many cultural and religious groups.

Most brands decide to remain neutral in matters of politics, religion, and sexual orientation. This can be understandable as the growth of this market segmentation is still early days.

Generally, consumers are extremely loyal to brands they identify with or they feel speak to them. This is the same for the LGBTQ+.

The impact can be a double-edged sword. By including this market segment, brands stand to attract LGBTQ+ consumers, but it brings forth the risk of losing out on consumers who are opposed to promoting the lifestyle based on religious or cultural beliefs.

To take the highway or the road less traveled?

Surveys indicate the risk of alienating non-supporters of the LGBTQ+ is rapidly reducing.

According to PRRI, a nonprofit research organization, 69% of 40,000 Americans surveyed across all 50 states, support the protection and nondiscrimination of the LGBTQ+

The support is highest in the northeast [72%] and lowest in the south [65%] Further, the study shows, 76% of supporters were aged 18-29 years, and 59% were elderly 65+ years.

The LGBTQ+ makes up 4.5% of the US population according to Gallup and 6% of Europe. While a relatively small percentage of the population identifies as gay, a much larger percentage is open-minded and supportive.

Due to the growth in acceptance in the US, Europe, and around the world, brands need to reevaluate their marketing strategies or risk irrelevance to a significant share of consumers.

Brands must adapt to changing market segments and social trends, navigating the LGBTQ+ is something to consider.

How to go about it

• Be sensitive to social consumer preferences

  Research shows a good number of millennials and generation Z care deeply about gender equality and LGBTQ+ issues.

• Inclusivity begins at home

  Hire accordingly. You stand to gain from having an inner perspective while marketing to LGBTQ+.

  Brands like Google, Starbucks, Apple, and Coca-Cola have a reputation for being very supportive of the community.

• Use mainstream media

  Most advertisements are geared towards heterosexuals and the LGBTQ+ watch those same shows.

  Brands have become more inclusive of ethnicity and gender over the years, the same can be done with the community.

  LGBTQ+ messaging or “gay vague” is a more subtle way to speak directly with the community using mainstream media. For example, Heineken uses Neil Patrick Harris, a celebrity gay man in their commercials.

• Use LGBTQ+ specific media

  Directly target magazines, websites, groups, events, and other media channels geared to the LGBTQ+. This is a great way for them to resonate with your brand.

• Honesty is the best policy

  Remember when brands were shamed for “greenwashing”- inauthentic environmental claims?

  Be careful not to engage in “pinkwashing” which is inauthentic gender-neutral posturing done to be perceived as progressive and modern.

  Support pride celebrations and acknowledge your LGBTQ+ employees. Subaru was the first to extend employee benefits to same-sex partners.

• Understand diversity in the community

  The LGBTQ+ market segmentation can be effective when done intelligently.

Extensive consumer segment research is necessary to recognize the different races, cultural backgrounds, and gender entities.

Marketing strategies that work for gay males won't necessarily work for lesbians.

'Hint, hint' vs all-out pride

There is no universal approach. It's up to the brand based on preference or core values.

Here is a look at a few common methods companies have been using.

• Standardization – Setting the ‘standard' to have consistency. 50% of the ads in the gay press have no gay markers.
• Two ads are better than one- Creating two versions of the same ad and placing each in appropriate outlets.
• Put your money where your mouth is – Sponsoring gay events or charities. This way of marketing is notable with cigarette companies.

The community speaks: impact on LGBTQ+

A large number of the LGBTQ+ would like to see themselves depicted in advertisements.

They prefer direct depiction to hidden signals and codes. Each group within their community is biased to their gender.

The portrayal of the community so far has been generally unsatisfactory to them. Advertisements targeting them so far are seen as shallow or overly sexual.

Marketing efforts have been general. Targeting one group within the community and expecting similar reception by the rest.

To do or not to do

Risk is the main concern with the inclusion of this social consumer segment. Critics have argued it's like trying to nail a moving target.

Different consumer groups within the community also pose a challenge when devising marketing strategies. United as they are in fighting for their political, social, and economic rights, there are differences in their respective consumer behavior.

There is also possible negative reception by non-supporters from the larger heterosexual market segment.

The risk can pay off as the LGBTQ+ is seen to be very supportive of brands that take part in tailored marketing.

Surveys show nearly 70% of the LGBTQ+ respond positively to advertisements depicting their lifestyle. This has a “spillover” effect on heterosexuals who are accepting of homosexuals and the homosexual lifestyle.

Brands that wish to engage in tailored marketing should not look at this consumer segment as a whole. Think more [L]-[G]-[B]-[T]-[Q]-[I]-[A]-[A]-[+] and not LGBTQ+.

The subtle approach is also appreciated as it's been seen to appeal more to gay males.

If your brand is not genuinely pro-pride, it is better not to make it seem that you are. Members of the LGBTQ+ have been known to do extensive background research on brands to see if they really drink the water or just preach it.