Market research: Precious bundles of insight
Market segmentation can be crucial in establishing a brand identity and developing new products but marketers warn that customer divisions should be fluid to account for changes in behaviour.
For some exponents, market segmentation is a vital tool in deciding the very definition of a brand. FMCG companies are often obliged to segment their consumers before selling products to retailers, while for other types of business, it is more of a one-off.
“The point of customer segmentation is to define a brand proposition. It’s such an old cliché, but if a brand doesn’t stand for something, it’s not a brand. You can’t appeal to everybody, and you have to be clear about what you stand for and who your target is,” says Katherine Rose, marketing and communications director at Audley Retirement villages, upmarket complexes where residents buy homes from around £300,000 and upwards. It relied heavily on a segmentation process when developing a brand identity. She adds: “We wanted a market view, looking at a potential target market and understanding attitudes and behaviours that would allow us to segment them.”
While segmentation can be costly - Audley spent £50,000 on its project - it is worth the upfront expenditure. Jason Winstanley, senior insight and research manager at food manufacturer Moy Park says: “The cost of making a mistake in terms of NPD or mis-spending your advertising budget is going to be much more expensive. It’s an investment really to make sure you are taking decisions with as much information as you’ve got available before you commit money to advertising and product development.”
Audley’s project started with an ‘attitude battery’ developed from six qualitative focus groups, with panels of ABC1 adults aged 50-plus. Participants were asked about general attitudes to life, society, modernity and their views on retirement villages. A quantitative omnibus study followed, covering large numbers of issues in one interview among 2,000 adults aged 16-plus. That survey asked questions on topics such as when people start to think about retirement and how they might live when they are older.
The majority started to think about retirement around the age of 55, found the research. The company knew that to afford its homes, most customers had to own a house worth around £300,000. It then researched a further 500 people and found that 68 per cent fell into the AB socioeconomic group.
“We did a full-blown segmentation, a factor analysis that allows us to distil the 30 or so attitudinal questions into bundles of attitudes and then a cluster analysis that groups the respondents into segments. It’s very true and statistically robust,” says Rose.
Seven segments were identified. The most important were dubbed ‘positive downsizers’ because they were seen as the most likely to consider retirement village living. “These are people who are financially savvy, understand the benefits of downsizing and wish to do so to liberate themselves so they can enjoy whatever type of older life they want,” says Rose.
‘Full of lifes’, the next category, are slightly younger. “If you consider that Mick Jagger is nearly 70, these are the people who have grown up in that generation and behind it,” says Rose. Three-quarters of this group is aged under 70, but it is an important market. The average age of residents moving into Audley properties is 69.
The research also found that an active life was far more important to respondents than fears about insecurity in old age, and identified that the biggest barrier to visiting retirement villages was a misunderstanding about what they are - while common in the US and Australia, the British tend to confuse them with care homes.
Segmentation shaped the company’s brand proposition - the villages are presented in the same way as fashionable boutique hotels might be, to distance them from the ‘chintzy care home’.
Total costs for the research project were around £50,000. “But it gave us a brand positioning and confidence that we did not have to invest dramatically in the infrastructure of our offer. The brand positioning and the work around it generated double the visitors last year compared with the previous year and reduced the per visitor cost by 25 per cent. The first time we ran an ad with the new positioning in the Daily Telegraph we trebled our responses,” says Rose.
For other sectors, segmentation is more common. Moy Park, for example, uses it to help sell to retailers. “Understanding segmentation is necessary to engage with retailers, especially those with loyalty schemes,” says Winstanley. Put simply, if brands want to sell through supermarkets, they must speak the same language as the retailers.
A variety of data sources are available to help. However, the amount of data on offer can make segmentation a complicated and sometimes paradoxical task.
Focus groups, online research and social media feedback are all employed by Moy Park, which considers segmentation as an ongoing task rather than a one-off project. The retailers it supplies also use segmentation - but they do not all come up with the same segments. Information from retailer loyalty cards is a key data source used by the retailers. Brands need to communicate with each retailer individually in terms of the segmentation method used if they are to make their products fit in.
Those buying many economy items might be classified as ‘price conscious’, while those stocking up on ready meals could be labelled as ‘convenience cooks’. Finding out that they are under-represented in any one segment can help FMCG brands to steer their new product development (NPD) efforts in the right direction. It can also help them to target advertising: Moy Park has been sponsoring the Irish Golf Open to raise its brand’s profile in Ireland, for example.
However, placing shoppers in a box that is too tight can be misleading. “From Monday to Thursday they might be a convenience cook and at the weekend they might become more of a foodie,” says Winstanley.
Scandinavian lingerie brand Pierre Robert has also used a segmentation process to help with NPD and marketing decisions. The company has always sold its products through grocery stores, selling a popular range of tights since the 1950s. When it began looking to expand into new categories it carried out extensive research.
“We did a lot of segmentation of the market, we looked at the overall textile sector and also applied general knowledge from [parent company] Orkla. We applied that kind of innovation thinking, to different segments. We apply it now to the textile category in the grocery store,” says marketing manager Gunhild Enger. The company maintains a continuing programme of mixed quantitative and qualitative research to make sure that its consumer knowledge is up to date.
Pierre Robert appointed agency Webb deVlam to review its branding last year, to reflect its expanded product range - it now sells underwear ranging from long-sleeved woollen undershirts to lingerie and sports bras - and in recognition of the rapid development happening in the local grocery sector. Pierre Robert’s research has shown it is worth keeping the company up to speed with changing consumer demands.
Companies can find that a pared back, simplified consumer segmentation process works for them, especially when their own structures are complicated. Shepherd Neame is Britain’s oldest brewer, creating a range of beers that it sells through its own managed and tenanted pubs, and as a wholesaler. As well as traditional pubs it also has a growing chain of boutique hotels.
“The challenge is that we have a complex organisation in terms of communication. Where we break it down is by, in effect, occasion,” says sales and marketing director Graeme Craig. Venues in the portfolio are classified by whether they focus on food or drink, whether they offer outside space or if they have accommodation, and on what occasions a customer might enjoy them (see Mine’s a Pint, page 33).
The hotels, for example, segment customers into professional and leisure categories - and are marketed as venues for conferences, weddings, weekend breaks or other events as appropriate. The company has recently started to tone down the Shepherd Neame branding on its hotels to reflect the different occasions customers use them. It also plans to launch its own range of modern craft beers in July - and a segmentation will feed into this but the labels won’t be branded Shepherd Neame because of its traditional connotations. Craig says: “Branding will be contemporary. As Britain’s oldest brewer, it allows us to play in this sphere - but we won’t play as Britain’s oldest brewer.”
Mine’s a pint
Brewer Shepherd Neame segments beer drinkers in a flexible way, considering that people favour different beers at different times. The drinkers are classified by whether they favour mainstream, heritage or discovery/craft products, a strategy based on long experience of the drinks sector and customer feedback rather than specific research.
The brewery’s two mainstream brands - Master Brew and Spitfire - form the heart of the company, says sales and marketing director Graeme Craig. The former is a staple product in the brewery’s local Kent region, while the latter “is a broader brand that allows us to talk to customers the length and breadth of the country and internationally.” A new ad campaign, featuring TV comedians Armstrong and Miller as WW2 Spitfire pilots speaking in modern street dialect, has been launched to reflect the wide appeal of the beer.
The segmentation has driven product development too. Heritage consumers are targeted with messages that focus on the group’s history of making beer since 1698. Its new Classic bottled range features traditional beer recipes, such as a Double Stout originally brewed in 1868 and an India Pale Ale first made in 1870, in retro packaging that puts the brewery front of stage.
But in a modern twist on the classic theme, drinkers of heritage products have been identified as enthusiasts who will seek out new products. The only marketing undertaken for the range was to send samples to bloggers and journalists. Bloggers were impressed that the 315-year-old company was doing something different, Craig says: “That was fantastic because it was exactly what we were trying to achieve.”
The BIG challenges
Getting the right information
Research can identify markets and shape strategies, but it must be objective and rigorous research if it is to be relied on.
Being too prescriptive
Nobody likes being pigeonholed. Too rigid a classification can be counterproductive as a consumer may move between segments depending on the day of the week, how far they are from their pay day or other factors.
In busy product categories, both retailers and brands may be segmenting audiences in different ways. Invariably, it will be brands that adopt a different segmentation method for each retailer they deal with that do well.