Identifying Shopper Segments

Retailers and CPG manufacturers continue to refine the ways in which they gather consumer data and identify shopper segments -- and it's getting easier."Most CPG companies are wide awake to the fact that there is no such thing as an average shopper," says Matt Nitzberg, executive vice president, manufacturer practice at dunnhumby, Cincinnati. He says segmentation work has become very sophisticated over the last five years, "partly because data and insights are much more sophisticated and easier to work with, and in part because retailer partners are now developing, advocating and going to market with their own segmentation."Household panels, ethnography, behavioral studies and mission trip data all help break down segments, and, with more open lines of communication, brands and retailers are better prepared to overlay segmentation work to target the right shopper.At the same time, it's important to periodically update segments based on new research and the ever-evolving shopper. Lois Seidl, vice president of client services at Meyers Research Center, New York, says companies that haven't updated research in the past few years will have segments that skew too much toward free-and-easy spending, as opposed to the current, tougher economic realities.Refining SegmentsHenkel Consumer Goods, Scottsdale, Ariz., annually updates its three-segment breakdown: Shoptimizers, who clip coupons and look for the best deals; Mainstreeters, typical mainstream shoppers; and Carefrees, who are the most impulsive. They detected a slight uptick in Shoptimizers and a slight downturn in Carefrees as the economy bottomed out in 2009."We re-evaluate each household every year," says Mack Hoopes, manager of shopper insights at Henkel. "People's behavior does change, although not dramatically. The extent of that change is very dependent on categories, channels and specific retailers."Henkel primarily uses household panels from SymphonyIRI and tracks historical purchases of people in grocery stores, club stores and the value channel. Shopper behavior across those channels is probably going to be indicative of what they do across other channels, Hoopes says.ConAgra Foods, Omaha, updates its segments "periodically" but seldom sees much change. The company generally takes a new look at segments when there's a change in shopper marketing strategies with a particular brand, says Danica Konetski, senior director of shopper insights. She says they use "any number of methods," including ethnography studies, panel data and home and in-store surveys."We identify our targets behaviorally, and we understand them demographically and attitudinally," she says. "We want to make sure we understand who the 'maintenance' target is, and who the 'growth' target is." She adds, "Brands each have their own idea of who to target. For example, Healthy Choice and Banquet would require two very different targets."Research can be attitudinal, demographic or based on either "claimed behavior" or "actual behavior," says Nitzberg of dunnhumby. "We work with clients that use behavioral data as the core basis for segmentation -- the notion that you are what you buy," he says. "With behavior-based data, you can measure, 'Did my message not only reach the people I intended it to reach, but did it result in the behavior I intended?"Arc Worldwide, Chicago, encourages clients to break down customer segmentation based on trip types, says Susan Pitt, account planner. "How they shop, when they shop, why they shop is helpful to the creative team to develop a specific solution," she says. "Focus and specificity are what help us do the best creative."In the graphic on the previous page, Arc, the marketing services arm of Leo Burnett, illustrates that before a brand marketer can identify a segment through manufacturer/retailer merged segmentation, he needs to understand the performance of his category in that retailer and what that retailer wants to capitalize on based on the performance of his category in those stores.Hyde Tools, Southbridge, Mass., works with the Home Improvement Research Institute and other specialized data vendors to research its customer segments. The company generally focuses on three: contractors, "weekend warriors," and the occasional hand-tool user, says Karen Wilson, chief marketing officer.Some retailers can match the three-segment breakdown with a "good, better, best" selection of tools, Wilson says, while others, due to their smaller size, can only focus adequately on one or two. Hyde responds accordingly with the right product mix and in-store marketing materials.How Many is Enough?CPGs typically use between four and eight segments, and they need to strike a balance between company-wide and brand-specific breakdowns, Nitzberg says. "They may be failing to leverage their total portfolio by having different definitions and different languages across 10 or 15 or 20 categories," he says. "The positive spin on those silos is ownership. You don't want to lose nuance."Brands are working to become focused on one or two segments, Meyers' Seidl says. "They definitely do change their messaging depending on the segment they're trying to reach," she says. "It makes it easier to be credible to the retailer."Lily Lev-Glick, principal at Shopper Sense, Closter, N.J., typically sees three to five segments and recommends that companies update their research about once every three years. "Not annually," she says. "The needle doesn't move that quickly."Lev-Glick also recommends that companies formulate segmentation taxonomy that individual brands can tailor somewhat. "It lets us stay in line with other marketing strategies and tactics that occur further upstream, that really need to carry through," she says. "That way, they don't have their own segmentation schemes different from the overall category."To come up with its three segment names, Henkel ran an internal contest. "We told them what the behaviors were like," Hoopes says. "[Colleagues] came up with some of the names. We think the names say a lot."Lev-Glick says the names of segments that result from research help to keep the breakdown clear in everyone's mind. "To give it a silly name is just a way to make it manageable, so you can give the segment a personality, and put it into a context that the marketer can understand, with one label, who they're dealing with," she says. "When they come together, they capture the character of the shopper."Sharing DataDana Stotts, account director at Arc Worldwide, says generating shopper data accomplishes nothing without a clear plan and open communication. "It's not just getting data, but getting the right data," Stotts says. "We may get spreadsheets upon spreadsheets of sales data, but it may not get us what we need. Ideally, it's about sitting at the table with the retailer and our clients and actually hearing their feedback: 'This is where my category is going.'"Retailers are more likely to go public with their segmentation than brands, simply because they have more brand partners than the other way around, Seidl says. "They want their suppliers to think in these terms," she says, "so they need to communicate with them."Henkel publicizes its top-line study results to share knowledge and establish its place as a "leader or a change agent," Hoopes says, although probably 90% of its work is for retailers' eyes only. ConAgra chooses to keep its segmentation private except when partnering with retailers, Konetski says. "If we're doing specific shopper marketing at an account, it often becomes necessary to understand the overlap," she says. "That makes good sense as we partner with the retailers. That would be the instance where that information becomes helpful. Otherwise, nobody's that interested."The company uses a customized version of SymphonyIRI's Shopper Insights Advantage tool (known internally as S3) to try to overlay brands' segmentation with those of retailers to find commonalities, which can make it easier to sell in programs, Konetski says. "You're more sophisticated in your understanding," she says. "Your ability to be flexible is good, and helpful." (See sidebar for more on this tool.)CPGs and retailers continue to hone their ability to focus execution jointly, based on tactic, geography and media vehicle, Nitzberg says. "Segmentation drives strategy, and strategy drives choices," he says. "The brands that stand out as best-in-class know how to link their learnings about shoppers and overlap that with the segments of shoppers most important to the retailer."Next StepsHenkel hasn't become sophisticated enough to design specific campaigns for different regions, types of stores, or with different materials based on its segmentation research, Hoopes says. "That's a natural inclination," he says. "We aren't to that point yet.""Everyone is trying to crack that code," Lev-Glick adds. "We don't necessarily have the ability to have multiple packages that speak to each segment. We can swap out signage and point-of-sale." However, she says it depends on strategy. "The largest segments don't necessarily mean the most opportunity. There's a fine line between communicating to every segment and leaving some out so you only communicate to one."

Identifying Shopper Segments

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