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Further Reading | Mindset Segmentation

Further Reading | Mindset Segmentation

Segmentation is a process of grouping people based on things they have in common. Marketing segmentation, the most common form, classifies people based on their likelihood to purchase a company’s products. Mindset segmentation, an emergent practice, groups people based on their values and expectations. And, it is a tremendous predictor of how communications can create trust.


The popularity of mindset

Take a look around your local bookstore and notice how often you see the word “mindset” used in book titles and subtitles. The word appears often and in several sections of the store. In the business section lie titles such as The Toyota Mindset: The Ten Commandments of Taiichi Ohno; in self-help: How to Change Your Mindset + Live Your Most Fabulous Life; and in parenting: Mindset for Moms: From Mundane to Marvelous Thinking in Just 30 Days.

This new societal craving to get more out of life and ourselves is unquestionably influenced by Carol Dweck’s 2006 breakthrough: Mindset, The New Psychology of Success. Dweck’s obsession with understanding failure led her to observe the way children react to hard problems. Those observations eventually led to Dweck’s discovery of  the “growth mindset” and the insights she uses to teach this mindset to others.

Another researcher, though less prominent, has also studied the consumer mindset for decades.  Howard Moskowitz describes himself as a market researcher and a psychophysicist. If his name sounds familiar, just picture Malcolm Gladwell on the stage at TED talking about chunky-style spaghetti sauce and Moskowitz’s discovery of horizontal segmentation.  It’s a popular, dramatic Gladwell speech describing Prego’s marketing research in the 1980s that uncovered a wide disparity in consumer preferences for spaghetti sauce.  After analyzing the results, Moskowitz concluded that people didn’t want just one type of sauce, they wanted many varieties, including extra-chunky.

In his speech, Gladwell describes Moskowitz as a great inventor, one who we should thank for providing the many different kinds of olive oil, mustard, vinegar, and yes, spaghetti sauce that fill the shelves at our local supermarket. The next time you find yourself standing in the snack isle, staring at hundreds of varieties of crackers, and praying that you get home with the right one; think of Howard Moskowitz.


What is mindset segmentation?
Simply said, mindsets offer another way to understand people. Unlike marketing segmentation, mindsets provide a method of typing people on a personal, human, and emotional level. Each researcher and business applies mindset segmentation a little bit differently, but they all start with a desire to know how people think and are likely to behave in emotion-inducing situations.

In her research, Dweck isolated characteristics that enabled people to overcome adversity. As a result, she found that people fell into one of two categories: those with a growth mindset, who were more likely to rebound from failure, and those with a fixed mindset, who saw themselves as limited and unable to grow from disappointments.

Moskowitz, on the other hand, applied mindset segmentation to the emotionally driven world of life insurance. To support the relationship selling approach used in life insurance, Moskowitz and his team endeavored to understand the mindset of customers on a personal level and a product level. Their research utilized mindset segmentation as a means of measuring and categorizing the emotional experience of purchasing life insurance.

Following are excerpts from the research paper Moskowitz and his team published on this work titled: Relationship marketing, mind-set segmentation, optimized messaging for life insurance, and typing customers into segments.

Although lifestyle and marketing research has succeeded in solving the marketing segmentation dilemma, the problem of linking segments with specific customers in the population still lingers. By knowing to which segment a specific customer belongs, marketers could shape a strong concept or selling message for that person. . . . Furthermore, it is not clear that there exists a link between the information about a customer purchasable from databases and the mindset of that individual in terms of that to which he reacts at an emotional level.

Perhaps because of Moskowitz’s experience pioneering horizontal segmentation, he and his team decided to branch out again. This time, their goal was to make their research more actionable at the individual level, enabling insurance agents to evaluate prospective customers on the spot and determine the prospects’ corresponding mindset. It’s difficult to imagine a more valuable tool for sales people. Moskowitz explains:

This study extends the literature of segmentation and relationship selling by presenting a straightforward approach to type prospective customers in terms of mind-sets, allowing the sales effort to be more individualized and focused on what stimulates the emotional triggers of the prospect.

In the research paper’s conclusions, it’s evident to the reader that Moskowitz and his team are aware that they discovered something significant.

At the end of mindset segmentations, we identified groups in the study with similar mind-sets. These groups transcend conventional methods of classification.

Importantly for the study of mindset segmentation, is the realization that the new groups Moskowitz and his team established, “transcend conventional methods of classification.” In other words, no marketing segmentation analysis, or web analytics report, or web user personas can replicate the type of information uncovered through mindset segmentation.


Mindsets and investments
Moskowitz and his team published their research in March of 2009. If you’re an investor of any sort, that particular month is forever etched in your mind. Interestingly, it’s also when our team of writers at a financial services company began a mindset segmentation project in order to improve our communications.

Investments, like insurance, are intangible and emotional products. Also like insurance, a person’s emotional relationship to these products changes over their lifetime. When people are young and healthy, a retirement plan and a life insurance policy seem almost unnecessary. As the decades mount, those feelings can change drastically.

Unlike insurance, investments have a second and less predictable emotional trigger: the market. And back in 2009, the market had driven investors’ emotions into a vortex of fear. Day in and day out during the crisis, our writing team crafted messages for customers, trying to educate them about the market and provide a sense of direction. But, to do that effectively, we needed to understand the emotional side of our audience.

Business writing is a highly functional endeavor. Writers work in service to the organization, finding a phrase for every business goal and giving voice to every idea. Writers are the recipients of business strategy; they are not the creators of it. Marketers and business heads inform writers of what they want to say, and writers turn their thoughts into meaningful messages.

However, in the midst of prolonged mayhem in our nation’s financial system, the things we’d been trained to do were not working. In the spring of 2009, a sense of honesty led us all into a conference room to tackle a new project, in addition to our regular workload. We hoped this new project would allow us to rise to the occasion and find a way to reach people more personally. Communication is a company’s relationship-sustaining mechanism with its stakeholders, and our team of writers felt a responsibility to reach these emotionally fraught customers.

Although we had a bounty of marketing segmentation at our disposal, those data points didn’t bring people to life for us, as Moskowitz explained above. It was clear to all of the writers that if we really wanted to understand the human side of customers, we needed more information.

Up on an empty whiteboard, we wrote down the types of information we needed to know about people in order to communicate with them in a meaningful way.  Common customer attributes used by marketers, such as age and income level, provided little value to us. We were trying to develop rapport with people we’d never met while explaining changes in the market or changes to our company’s service model. With an eraser, we wiped away those common attributes and replaced them with qualities that told us about a person’s motivations for investing with us, their personal and cultural values, and their expectations from a company such as ours.

It turns out that each of these attributes: desires, values, and expectations, is a tremendous predictor of trust. Knowing the types of changes to our company’s service model that would fail to meet a customer’s expectations (thus breaking their trust), or the types of messages that were aligned with a customer’s values (to enhance their trust), enabled us to improve the quality of our communications.

With the help of colleagues in several areas of the organization, we eventually established a new set of customer personas that enabled us to understand people as people: three-dimensional, imperfect, and irrational.

Our results and the personas we created based on those results established new customer segments thattranscended conventional methods of classification. These new personas cut across business lines, which are and should be irrelevant to customers. Mindset personas gave us the ability to have a plausible, fictional conversation with customers so that we might hear their point of view and understand how they want to be treated. The personas were a tremendous discovery, and they were the product the writers’ commitment to connect with people in an authentic and meaningful way.


Putting these ideas to work

As I mentioned above, these concepts are explored in depth in my book, including process details, and tools that empower internal teams to segment customers and internal audiences based on mindset attributes. The book also explains the process for developing these unique personas and provides examples from fields as diverse as education and business.


Emotional decision-making

Business marketing and sales activities that respond to customers’ emotional needs are not new. In fact, after Daniel Kahneman won the Nobel Prize in 2002 for his discoveries in the field of behavioral economics, emotions were drastically elevated in the business world. While Kahneman’s prize-winning work dates back to the 1970s, the Nobel, with its unmatched power to bestow credibility, finally tipped the scale for rational-minded business leaders.

Additional works such as Emotional Intelligence by Daniel Goleman, Built to Love, The Science of Product Emotionby Peter Boatwright and Jonathon Cagan, along with research from Richard Thaler, Dan Ariely, among others have broadened the field of study on emotional decision-making. However, it was the Nobel alone that put emotions on the map for business leaders. And it follows that acceptance of mindset segmentation hinges on an explicit recognition of behavioral economics.