Customer Segmentation Is A Game Of Tic-Tac-Toe

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Remember when you were a kid — or maybe more recently with your own kids — and played tic-tac-toe?

You started by drawing two vertical lines and two horizontal lines, which combined to create a nine-square grid. You then put your shape (X or O) in a box to claim it, alternating with your competitor to “own” the grid (and win the game) by securing three boxes in a row.

In some ways, that’s exactly what marketing is.


A credit union contacted us recently and asked us how they could better understand the consumer landscape in their footprint to help them win more lending business. I proposed that they play tic-tac-toe. We’d start by drawing a tic-tac-toe board, and go one step further and label the rows and columns:


On our board, the three rows correspond to the timing of consumers’ borrowing needs: Immediate, intermediate, and longer-term (not length of loan, but how immediate the need for a loan is). The columns correspond to consumers’ propensity to consider a credit union for their borrowing needs: Low propensity (or likelihood), moderate propensity, and high propensity.

Through consumer research, we would segment the consumer population using this tic-tac-toe board, and help the CMO organization understand:

  1. The market opportunity each segment represents by estimating the allocation of consumers to each segment.
  2. The demographics, channel behaviors, and financial services-related attitudes of consumers who belong to each segment.
  3. The marketing challenges each segment represents (e.g., what holds consumers back from considering a credit union).
  4. The marketing tactics required to capture the borrowing-related business from consumers in each segment.


Generalizing the board a bit, another firm might not capture “propensity to borrow from a credit union” but “propensity to consider XYZ.”

But much as a tic-tac-toe player must weigh the consequences of capturing a particular cell on the board, marketers must determine the costs, benefits, and competitive consequences of going after consumers in any particular segment.

If the majority of consumers are in the upper right hand bucket, you might want head down to the bar for an early beer. If the majority of consumers are in the lower left hand bucket, you might get sent down to the bar for an early beer.

If the majority of consumers are in the seven other buckets, you’ve got some marketing decisions to make.


The art is in determining how to allocate consumers to segments.

It’s not enough to just ask consumers “will you consider XYZ for your next purchase?” but to derive the likelihood by looking at past behavior. Same with product timing. A consumer may say that she or he has a longer-term need for a product, but good predictive modeling may indicate that certain behaviors, attitudes, and purchases indicate that the need may be more immediate than the consumer thinks or is willing to say.

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