The 5th Way
Enabling Top Line Revenues Through
Integrated Customer Segmentation
A product of
2012
2012
Conference and For
October 25, 2012
Bucharest Romania
Conference and Forum,
October 25, 2012
By Paul Garrison
Bucharest Romania
-1-
Enabling Top Line Revenues Through Segmentation
About the author
Paul Garrison (paul@garrisongroup.
eu) is Chairman of the Garrison Group,
Professor of Marketing and the former
Dean of the Central European Business
School. He has had a long career as
a marketing practitioner starting with
Procter & Gamble in the US and later
arriving to Eastern Europe in the mid
90’s to direct Coca-Cola’s marketing
activities in 23 countries across the
region. Paul currently teaches at
Maastricht School of Management
in Romania, Skolkovo in Moscow and
Dartmouth’s Tuck School of Business in
the United States.
In October 2012, Paul Garrison will come to Bucharest to be one of the
guest speakers of Leaders in Marketing, a unique marketing conference and
forum. Book authors, international marketing practitioners and leading brand
consultants will be sharing best practices and actionable learning that can
be used immediately to generate top line revenues and ensure that your
marketing initiatives are meeting ROI objectives.
Join Leaders in Marketing for a unique opportunity to network and learn from
the very best in the business (www.leadersinmarketing.ro )
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-2Enabling Top Line Revenues Through Segmentation
Table of Contents
Catch Up Or Leap Ahead
Getting The Customer On The CEO’s Agenda
What Do We Want Customer Segmentation To Do?
Limitations Of Current Customer Segmentation Models
Looking For Love In All The Wrong Places
The Solution Was Hiding In Plain Sight
How It Works – The Case Of IKEA In Russia
Who Are The ‘Bell Cows’?
Summary
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Catch Up Or Leap Ahead
Integrated Customer Targeting is an evolutionary segmentation process
developed originally in Eastern Europe. It is an example of a new way of
marketing thinking in the East that goes beyond merely catching up to the
west, but rather to finding new opportunities to improve on best practices in
order to leap ahead.
The need for a deeper understanding about customers and their motivations
is fundamental to improving marketing’s effectiveness in both the West
and the East. However, marketers in the West are used to having multiple
customer research tools at their disposal – so many that they often find
it difficult to decide exactly what to do with so much data and how these
various sources can best be used together to drive the business forward.
Because businesses in the East are often operating on much tighter budgets,
managers there necessarily need to get that deeper customer understanding
cheaper and faster – and in doing so have broken through on a more
comprehensive method of integrating customer data that is more efficient as
well as more effective.
Marketing departments are also often smaller in the East than their
Western counterparts but they have also turned this size limitation into an
advantage through much greater daily interaction between marketing and
other departments such as sales, HR, and operations – areas of the business
that can all benefit from a deeper understanding of customer needs and
motivations.
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-4Enabling Top Line Revenues Through Segmentation
Getting The Customer On The CEO’s Agenda
Peter Brabeck, the Chairman of Nestlé, a company with significant operations
in the East and the West, stated in a speech to employees that he wanted
“marketing to be completely embedded in the business”.
Before the marketing people could get too excited about being at the
center of the Nestlé universe, Brabeck quickly added, “And business must
be completely embedded into marketing”. Brabeck was not contradicting
himself - he was simply pointing out the reality that good business and
good marketing are one and the same. In a successful business you must
integrate your business goals and objectives with the driver that makes it all
possible – increased customer value.
Financial objectives are certainly important, but there must be an
understanding that specific customer actions drive the overall financial results
of the business (see chart 1.a.). There needs to be a customer focus across
the entire organization. Of course, most successful executives would agree
wholeheartedly with that intention.
But if the focus is truly on the customer and we agree that our core strategies
are meant to drive specific customer actions that ultimately drive superior
financial performance and shareholder value, then how much do we really
know about our customers so that we can optimize the inter-connected
results?
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-5Enabling Top Line Revenues Through Segmentation
Chart 1.a. – Integrated Customer and Business Objectives
(retail example)
While we are all very busy developing a lot of strategies to drive improved
business results, the truth is that we often do not have enough data about
who our best customers are, or could be, and as such the chances that these
strategies will fully impact the customer are severely marginalized.
Most of us simply do not have the customer information we need to guide our
business growth strategies. We have bits and pieces such as some lifestyle
segmentation that we hope increases the efficiency of our media strategies,
and perhaps some current customer sales data that can help guide our
CRM (Customer Relationship Management) program, but do we really have
the relevant customer data we need to drive all of our ‘customer based’
strategies? The answer is probably not.
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What Do We Want Customer Segmentation To Do?
Most current segmentation models that drive customer targeting simply
run out of gas before they are able to reach the goal – in depth customer
understanding that can guide all of our go to market growth strategies.
Before we move into a more versatile form of segmentation - Integrated
Customer Targeting - we should first identify what it is exactly that we want to
use the customer segmentation for in the first place.
Like a lot of new marketing tools that require a lot of resources and a new
level of complexity in how you go to market, it is easy to get so lost in
the journey that you lose sight of the goal – remember how technology
applications overwhelmed the original repeat and cross-selling intent of CRM?
In chart 1.a., we listed several go-to market strategic areas where an
enhanced level of customer segmentation can significantly help target the
strategy with greater precision and thereby achieve much stronger results –
attract more visitors who convert to purchasing customers who buy a lot, for
more money, more often! The following are several examples on how a more
effective customer segmentation model can drive some key go to market
strategies:
Brand positioning
This is the most obvious place to put your segmentation to work. To develop
a more involving brand positioning strategy that connects at both the
functional and emotional level (see graph 2.a) you will need not only
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-7Enabling Top Line Revenues Through Segmentation
need category usage and attitude data that will help you identify the
functional drivers of purchase and consumption, but you will also need
broader lifestyle data to uncover the crucial emotional levers that you will
need if you are going to move beyond merely satisfied customers to brand
advocates – the highest level of customer brand involvement.
Chart 2.a. - Effective consumer research can establish the persuasion
hierarchy of the brand architecture
Preference (Emotional Experience)
Core benefits that drive exponential growth
- Provides significant points of
emotional leverage with customers
- Can propel to, and then maintain category
leadership
Differentiation (Functional Benefits)
Differentiate vs. competition
- Begins to positively differentiate your brand from the pack
- But lacks the appeal to drive significant growth
Cost of Entry (Required Features and Benefits)
Must meet ‘cost of entry’ requirements
- Must have to gain entry into the competitive set
- Won’t help your brand if it has it
- Will hurt your brand if it doesn’t
Source: Zyman Group
Brand archetype development
Utilizing archetype methodology (hero, innocent, sage, outlaw, etc.) in
creating stronger brand connections is a worthy pursuit but can easily lead
you out into the poppy fields. The problem is that archetypes are not
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-8Enabling Top Line Revenues Through Segmentation
effective as a segmentation devise in their own right because most customers
are drawn to a wide variety of archetypes.
However, better segmentation on the basis of both lifestyle and category
usage can help determine which customer segments are more, or less
likely to respond to a particular brand archetype. Understanding influencer
patterns among different segments can also shed considerable light on which
archetype message will travel with greater impact from segment to segment.
Localization strategies
This is basically an extension of the brand positioning strategies listed in the
first two strategic areas, but it deserves a separate point because this global/
local brand relevance debate remains a difficult balancing act with most
multi-national companies.
Global brands need consistency in how they go to market from one country
to the next, but they also must have some local relevance. To achieve this
crucial balance marketers are very much in need of insights both from the
category and the customer’s life in general.
Category data can help you connect the global product and usage imagery
elements to ensure your brand is consistently communicating and delivering
on the key features and benefits across multiple markets (see chart 2.b).
But for the brand to truly take hold in any market it must have some sort of
relevance to local customers, otherwise they simply won’t buy
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-9Enabling Top Line Revenues Through Segmentation
and will instead turn to another brand that offers more relevance and
meaning to their lives.
Chart 2.b. – Global/local optimization
G
L
O
B
A
L
L
O
C
A
L
Product Imagery
•
Feelings and attitudes directly related to the core brand experience functional features and benefits. (i.e. Disney is clean and wholesome
entertainment)
Usage Imagery
•
The feelings and emotions associated with actually buying and using
the brand (i.e. the sense of community – passive or active - while being in
Starbucks)
User Imagery
•
The connection with the type of people that use the brand (i.e. are
they like me, or what I aspire to be?)
Associative Imagery
•
The links between your brand and the image of the other brands,
activities and events you align yourself with (i.e. Coca-Cola and Lake Balaton in Hungary)
Source: Garrison Group
Communication strategies
To create a more engaging communication strategy that can deliver a stronger
brand message at the right time and place you need to know when your best customer prospects are more likely to want to engage with the category and your
brand (see graph 2.c).
Again, category driven data will tell you when, how and even partly why they purchase/consume, but it will not look at their lives in a broad enough
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Enabling Top Line Revenues Through Segmentation
context to tell you how they move through their days and nights, the media they
use, the networks they are increasingly connecting to, and most importantly, the
advice and powerful word of mouth recommendations they receive from social
and business networks.
Chart 2.c. - Target the right message to the right people at the
right time and place
Purchase
Pre-Purchase
‘Outside Selling
Environment’
Post-Purchase
‘Inside Selling
Environment’
‘Post-Purchase’
Homing
At work/school
News-letter
Packaging
from work
Promotion
Commuting
Costumer
Getting
Displays
ready
Out and
about
Entrance
Signage
CRM
Pricing
At home
Purchase Intent
Call-Center
Service
Loyalty Programs
Purchase Intent &
Purchase Behavior
Satisfaction &
Recommendation
Source: Garrison Group
Retailers need to create better in-store communication and store layouts that
enable customers to become more involved during a visit to drive both purchase
conversion and increase transaction size.
Chart 2.d shows how it could be possible to construct the physical layout of a bookstore to address different customer segment need states.
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Chart 2.d. - Orientation and attraction points that could guide
different types of customers in-store (bookstore example)
Source: Garrison Group
Manufactures also need to create more involving packaging designs and a range of
availability options that have greater application to how customers use the product. Both require insights from a deeper understanding that
reflects both the broader lives as well category usage for their existing and
potential customers.
Product development
The product development process for new goods and services must have the ability to anticipate new demand and reflect the role of the brand/products in providing a wider and/or deeper value to the customer
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Chart 2.e. illustrates some break-through product innovations that would have
been very difficult to conceive without a deeper understanding about customer’s
lives as well as a more thorough understanding of the nuances of the category, the
brand, and the business system as part of a more customer integrated ideation
process.
Chart 2.e. – Customer insight driven innovation
Ideation Area
Purpose
Break-Trough Example
What is the fundamental purpose/
benefit of this product or service?
What business are you really in?
Club Med discovers that they are really in the
escape and rejuvenation business –the ‘The
Antidote for Civilization’ and the practice of
no money required on-site.
What customer target is most likely
to buy this product or service? What
do they really care about in their
head, heart and gut relative to this
type of product or service?
Porsche’s loyal ‘sports car’ fanatics don’t buy
often enough. Porsche shifts target to prestige
oriented customers who are more likely to
buy every two years with Cayenne and the
more luxurious 911.
What can this product replace? What
other uses can it do that have not
been considered, or what category
can it potentially compete against?
A wider look at alternatives.
Vail Colorado adds simple metal brackets
on back of chair lifts to hold mountain bikes
and creates huge summer sport business with
under-utilized winter assets that can now attract repeat as well as new customers.
Different
Better
Special?
What can the product do that is
different better and special than
anybody has done before in that area
of business based on what we have
discovered in the earlier steps?
IKEA’s room design layout allows them to
motivate more sophisticated customers to
come to IKEA first for new ideas – from low
price furniture positioning to much a more
involving inspiration positioning.
Value
Chain
How can a customer value idea be
leveraged into the business system.
How can the sales, distribution and
production resources be leveraged for
maximum effectiveness and efficiency
McDonald’s leverages their real estate presence in Europe to launch McCafe concept to
dominate the neighborhood ‘third place’ coffee market prior to Starbucks entry into most
European countries
Core
Benefit?
For
Who?
Instead
of What?
Source: Garrison Group
The explosion of the SUV category 15 years ago wasn’t driven by insights from the
category usage of pre-existing outdoor enthusiasts; otherwise Jeep would have
continued to offer such predictable added value benefits such as free 5,000 lbs
wenches and CB radios.
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The importance of new suburban mom customers wanting to feel in control (they
sit higher) and safe (all-wheel drive) was a key lifestyle driver for potential new
customers that would never have been recognized unless someone at Jeep in the
early 90’s had the imagination to look broader than Jeep’s existing category for
new product and positioning ideas.
The same sort of dynamic is now happening with the rapid demise of SUV’s in favor
of hybrids also reflects a much deeper sociological issue than just rising gas prices.
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Limitations Of Current Customer Segmentation
Models
Customer segmentation is a hot topic in marketing globally and has been well covered over the years. Daniel Yankelovich introduced the idea of moving beyond simple demographic segmentation over 40 years ago and has argued that segmentation has more recently moved too far into “nebulousness” with an over-focus on
segmenting customers on the basis of their lifestyle rather than sticking closer
to category perceptions and attitudes that he and others argue are more closely
aligned with met and unmet product needs. He’s right.
On the other hand, the practitioners of lifestyle oriented segmentation would argue that if you segment customers only on the basis of category involvement such
as what yogurt marketer Danone has called; Late Night Snackers or Early Morning
Nurturers, where exactly would you find these customers in the real world?
It’s not like these customers go to the store as strictly a yogurt consumer, and they
certainly don’t engage in various forms of media with yogurt solely on their mind
and a cup in their hand. It is their life that we must understand better if we are
going to find them and convince them to buy more yogurt. This argument is also
right.
Below is an overview of some commonly used segmentation models with a brief
explanation of what they can do:
1. Category based segmentation
Most large marketing driven companies have usage and attitudinal data that relates primarily to their category and have segmented their customers accordingly
- such as what Coke has done for years with their Drinks and Drinkers studies.
As a result, these companies have some good insights into how customers specifically interact with their brands and with those of their competitors, as well as
some relevant current customer relationship data they can mine.
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These insights can be very helpful in developing new packaging options, competitive pricing strategies and seasonal promotional programs. The problem with this
category based segmentation is in attracting new customers to the category because this segmentation model doesn’t know enough about their customers overall lives and so it is difficult to create relevance where it doesn’t currently exist.
Also, in terms of emerging markets, it is typically the case that strong category usage data isn’t available because your brand, or many of your potential competitor’s
brands, may not be present in the market, or have been for a very short period of
time.
2. Lifestyle based segmentation
The companies that have gone wholeheartedly into VALS research (Value and
Lifestyle) have become frustrated because although they have excellent lifestyle
behavior and attitudinal data that has proven useful in creating more customer
involving advertising materials, it falls short on providing actionable insights that
could help those marketers develop better products and services because it is lacking the insights on how these VAL segments specifically interact with the brand or
category.
3. Price/quality based segmentation
This is the last of the major segmentation methods offered by the likes of BCG
(Boston Consulting Group) and McKinsey that seeks to differentiate between six
or seven different customer groups driven purely by price on one end to premium
quality on the other (see chart 2.f).
Share of Grocery Spending
Pure
Price
12%
%
Value
Seeker
11%
Price
Focused
Value
Uninvolved
Demanding
Loyalist
13%
14%
Brand Switchers
15%
ConvenientQ
uality
16%
Pure
Premium
19%
Brand
Loyalist
Chart 2.f. – Price/quality continuum
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This price/quality segmentation is especially popular these days among FMCG (Fast
Moving Consumer Goods) marketers because it tends to confirm their world view
that today’s customers are looking only at two intersecting factors - quality and
price.
Their stay awake at night fear is that retailers recognize the same version of reality and are rapidly grabbing more market share by introducing retailer brands with
increasingly higher quality levels that moves their appeal from what has been
primarily lower income groups necessarily gravitating towards price as the key differentiator, to higher end customers who are driven on the basis of quality – more
for more and worth it. It is these higher end consumers that are starting to suspect that brand value is less about quality and more about an ‘advertising facade’
which they are less inclined to buy in to – literally as well as figuratively.
4. Demographic based segmentation
With the most experienced of marketers divided into one of the three camps listed
above, less sophisticated marketers are avoiding any form of psychographics and
instead find themselves sticking with fact based demographic factors such as age,
sex and income.
Although banks, retailers and white goods manufactures who predominately use
this most basic form of segmentation find it convenient and easy to access from
existing customer data, they are increasingly coming to the realization that it lacks
the customer insights needed to create better products or better communication
strategies.
Chart 3.a provides a summary of the various segmentation models with an indication of where they can and cannot help the business develop better go to market
strategies.
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Chart 3.a – Linking customer strategies with existing customer segmentation methods
Most Commonly Used Customer Segmentation Models
Key Go-to-Market
Growth Strategies
Lifestyle Based
Segmentation
Brand/Category
Usage and
Attitudes Based
Segmentation
Price/Value
Based
Segmentation
Demographic
Based
Segmentation
Brand Positioning
Yes
Yes
No
No
Communication Strategies
Yes
No
Corp. Social Responsibility
Yes
Partl
y
Yes
Partl
y
No
New Product Development
Yes
Yes
Cust. Relationship Mgmt
Yes
Yes
Partl
y
Yes
Localization Strategy
Yes
Yes
No
Partl
y
Yes
Yes
Yes
Partl
y
Partl
y
Partl
y
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Supply Chain Management
Availability Strategies
Packaging and Pricing
No
Integrated Customer Targeting, as its name implies, doesn’t attempt to favor one
form or the other of current segmentation models in terms of what is most important, but rather seeks to develop much stronger growth strategies by integrating multiple forms of customer data (demographics, lifestyle, category usage and
price sensitivity) into a single tool that enables you to go to market with products
that are more meaningful within customers lives, deliverable relative to existing
brand and category usage and expectations, and defendable because your brand
has added value that can better resist purely price driven competition.
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Looking For Love In All The Wrong Places
The seeds for this Integrated Customer Targeting method was inspired from an unlikely source – MTV’s Room Raiders TV program, a modern adaptation of the classic Dating Game show that was aired in various forms around the world in the 60’s
and 70’s. The original show was basically a focus group on dating.
A young woman would ask three men sitting behind a panel a series of category
questions. The three bachelor respondents would typically answer in a way that
most marketers are all too familiar with on why their focus groups so often go
wrong.
The young bachelor on the Dating Game show would usually answer the given
question such as ‘do you believe in kissing on the first date’ or ‘their favorite first
date places’ based on one of three primary intentions, rather than on what he really believes:
•
•
•
What he thinks the girl wants to believe about him
What he thinks the audience wants to believe about him
What he wants the two guys sitting next to him to believe about him
When the girl finally picks bachelor number two, you groan and say she got it all
wrong. From your perspective (as the audience you enjoyed a broader context
than she can from the other side of the view blocking panel) you were able to see
and read facial expressions, could see what he was dressed like, how he interacted
with his peers, and so forth – all of which led you to believe that you had better
insights on who was the better date choice for the girl beyond the stated answers.
MTV’s Room Raiders went deeper and revealed much better insights about the
three bachelors than you or the girl was ever able to do within the old Dating Game
format. In Room Raiders, the girl visits each prospective date’s home while they
are away before she ever gets around to asking them questions in person – which
in effect become more validation questions based on what she has already discovered in their kitchen, bathroom, bedroom and closets.
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Because there is now an even larger perspective on the lives of the three date
candidates, we found that we almost always agreed with her final decision as being the right choice for her. She could see what clothes they really wore based on
wear and tear, what was in their cupboards, refrigerators, or medicine cabinets.
She could discover their favorite sites on the internet, what magazines or books
they read, and even see the mail they received.
The MTV’s Room Raiders illustrated in a very fundamental way that we need a
more integrated (category and lifestyle) model of segmentation and customer understanding.
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The Solution Was Hiding In Plain Sight
There is typically a broad single source data base available in almost any market
in the world that large research companies have developed over the years to efficiently research hundreds of categories and then sell this essentially category and
brand data on a piecemeal basis to individual brands and their agencies. One of
the most known of these researches is TGI – a data base that has primarily been
used by a wide range of brands from soft drinks,
automobile manufacturers, mobile phone operators, and retailers to better
understand how their customers and their competitors customers interact with
media.
To answer the media question TGI goes into incredible detail on not only what
media customers interact with, but also how they move about in their daily lives so
that media planners can identify new media opportunities. However, because the
data covers so many individual categories, it becomes possible to look at the sum
of the parts TGI data as a composite picture to determine who people are based on
a wider selection of brand, product, media and leisure choices.
All of the lifestyle choices that this data represents within a single source data
base offer much deeper insights than how the data base has typically been used
on a micro category level, rather than on the macro lifestyle level that the composite data can now reflect. TGI and several other single source data bases like them
go well beyond room raiding because they cover a lot more about what people do
than what happens only within their home. It tracks where they go on vacation,
how often they go out per week and where.
And these data bases are much larger than what most companies could afford on
their own – 36,000 respondents for TGI in Russia, for example. Because it is conducted quarterly in most markets, you can even dig into the data with the right
tools to determine who is the first to buy a new product in a category – the valuable early adopters.
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We all know that the key factor in movie marketing is to reach those people that
watch movies the opening weekend because they are the influencers who make it
their job to tell the rest of us which movies to watch. But how does this differ for
an action movie, a romance, or a family movie. That’s why
lifestyle segments (i.e. Actualizer Parents) layered on top of category
segmentation (i.e. First Weekend Movie Goers) is so crucial to answer the
important influencer question. Marketers need to know who these people are specifically and what else are they buying and using so that we can better
understand their lives from a much more holistic standpoint (see graph 3.a).
3.a – Integrated Customer Targeting Inputs Process
Customer attitudes
about their lives
High Value Target
Selection and
Insights Mining
Customer usage and
attitudes about a
category
(Phones, Beer, Cars etc)
Life Driven
More Personally
Involving Brand
Connections
Product Driven
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How It Works – The Case Of IKEA In Russia
We developed a methodology to utilize these large single source data bases, combine them with other existing category data available within most companies to
create a new segmentation process that we call Integrated Customer Targeting.
Not an incredibly innovative name, but it gets the job done. The first step in the
Integrated Customer Targeting process is to create a mathematical model that
enables us take the entire TGI data base and filter it through a personality mapping model.
We prefer the Adler’s personality dimensions as a base model (see chart 3.b) because it is popular tool that enjoys wide use in research circles and also increases
the cross correlation capabilities with other researches that are important later on
in the process as we layer on additional primary research studies from the
client company or elsewhere. What happens in the initial filtering process is that
the thousands of respondents begin to cluster on the basis of similar purchasing
behavior and attitudinal statements included in the TGI survey that reflect shared
values, attitudes and behavior.
In each market there are a multitude of brands that are highly indicative of lifestyle values and attitudes. Choices in automobiles, mobile phone, cigarettes and
alcoholic beverages are the most obvious lifestyle indicators, but in the case of
Hungary we found one particularly revealing brand/lifestyle indicator within 100%
juice brands. HohesC and Granini are two high end juice brands that reflect very
different values. Granini, as the name and beautiful designer package would tell
you, is all about style.
In contrast, HohesC, as the name and very scientific looking package would tell
you, is much more about substance. It is basically the same product – 100%
orange juice, but the type of mom who puts HohesC on the table is very different
than the mom who puts Granini on the table. Within the data base there are literally hundreds of brand choices that indicate a very distinct lifestyle story.
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- 23 Enabling Top Line Revenues Through Segmentation
3.b. - Personality dimensions serve as the bases of the
Integrated Customer Targeting ‘life’ segmentation
Source: Alfred Adler
As a second step we dig into the new clusters to better understand the core characteristics of each cluster. IKEA in Russia has used lifestage demographic criteria
because understanding this factor is so important in separating
fundamental home living circumstances. The three lifestages they use in the segmentation we developed for Russia are early (18+ pre-kids), parents, and seniors.
Graph 3.c. is an example of parents’ life stage segmentation for
Russia.
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3.c. – Parents lifestage segments
Source: Garrison Group and IKEA Russia
From the demographic aspects of the database we know that Fulfillers,
Balancers and Guiders are among the highest income segments. However, the
way they live their lives is remarkably different, and, consequently, how and why
they shop at IKEA is also strikingly different (see graph 3.d). And that is what IKEA
must know if they intend to increase the percentage who visit, visit frequency, purchase conversion rates on each visit, and of course, potential transaction size – the
four most important business success drivers for IKEA.
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Chart 3.d. – IKEA customer penetration for Parents life stage
Source: Garrison Group, IKEA Russia, TGI (data for Moscow, St. Petersburg and Kazan)
From the demographic aspects of the database we know that Fulfillers,
Balancers and Guiders are among the highest income segments. However, the
way they live their lives is remarkably different, and, consequently, how and why
they shop at IKEA is also strikingly different (see graph 3.d). And that is what IKEA
must know if they intend to increase the percentage who visit, visit frequency, purchase conversion rates on each visit, and of course, potential transaction size – the
four most important business success drivers for IKEA.
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Balancers is a segment name that represents a widely recognized lifestyle in the
West. They exist in Russia, as well as throughout Eastern Europe, but what and how
they balance is somewhat different. The insight for these people in Eastern Europe
that is much more pre-dominant than in the West is that the Russian Balancers are
incredibly guilt driven due to the fact that they desperately want to provide a better
life for their families than their own parents could offer them in previous times, yet
they also want to be a tight family unit like it was in the old days when they were
children before the political changes.
Add to that an enormous amount of opportunities available in Russia today that
offer one lifestyle advantage but take from the other and you begin to understand
the guilt picture. Because they don’t feel that they spend enough time at work or
at home and feel badly about it in both places that they tend to over-compensate
in bursts of spontaneity that reflects their ‘home living’ category usage. Like other
Russian parent segments, Balancers spend a lot on their children, but they are more
likely to edge towards spoiling their children with race car themed bedroom sets
and big home entertainment centers equipped with the latest gadgets.
Guiders are another high value segment in IKEA’s parent’s lifestage segmentation
and again, relative to demographics such as income and educational level, they
are similar to Fulfillers and Balancers. The difference is that they do not feel guilty
about their time spent at work because they have a well-focused plan. They may
live in the suburbs or in the center - the deciding factor is typically the quality of
local schools. Their children may have computers and other gadgets, but the focus
is less on spoiling than on preparation. The category hot button for them are living
rooms that are connected to the kitchen so that they can cook and interact with the
family at the same time. Unlike cocoon driven Fulfillers, bedrooms are much less
important for Guiders and they like them to be in close proximity to the children’s
room, all of which are centered on the family room/kitchen.
The Fulfillers, as graph 3.c. showed, are one of the most self-focused of the segments. Fulfillers would tell you that the 16 hour days and extensive business traveling and other engagements are for the sake of their families and the better life they
are determined that such hard work and success will provide for them. But the reality is that they are doing it because they have a consuming obsession of living up
to their own expectations and the expectations of others around them. It is about
themselves.
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- 27 Enabling Top Line Revenues Through Segmentation
They were expected to be the most successful out of the university and they have
been wholly focused for quite some time on proving that assessment correct. Or
perhaps they were even underestimated in school (the Russian equivalent of Bill
Gates), but the point is that they are still obsessed with fulfilling expectations –
hence the name we gave them. They shop at IKEA at a rate of about half the lifestage average but their focus, more than any other segment, is on bedrooms.
They spend disproportionately on big comfortable beds and the reason has much
to do with their lifestyle. They are ‘on’ all the time and the only treasured
moments they get is to retreat into the secure cocoon of their warm and soothing
bedroom. We also know that in the living room and kitchen areas they are more
concerned about style rather than substance, but it is in bedrooms that IKEA is
able to really capture them emotionally.
The early lifestage segments (see graph 3.e) are even more distinct than with the
parent lifestage not only in how they live their lives, but also in how and why they
shop at IKEA (see graph 3.f).
Chart 3.e. – Early lifestage segments
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- 28 Enabling Top Line Revenues Through Segmentation
3.f. – IKEA customer penetration for Early lifestage
Source: Garrison Group, IKEA Russia, TGI (data for Moscow, St. Petersburg and Kazan)
The two highest value segments (potential to shop at IKEA) could not be any more
different from a lifestyle standpoint, but demographically they are very similar as
both are well educated and financially relatively well-off compared to their peers.
They also shop a lot at IKEA, but it is here that the difference is most striking and
it is directly related to who they are as people from a more holistic standpoint.
Chardonnay Girls are basically the Sex in the City TV show characters – Russian
style. Like their New York counter parts they have a problem finding ‘Mister Right’
because they typically go for single Russian Peacocks or married Fulfillers. Style is
more important than substance which is reflected in their dating choice as well as
much of their social and fashion choices. However, they yearn for small studio living settings with lots of mirrors (confidence builders) and matching accessories are
major hot buttons for them.
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- 29 Enabling Top Line Revenues Through Segmentation
The internal IKEA merchandising group that puts together those living areas on the upper
floor are well aware of this because they have been fully briefed on the particulars including
segment ‘day in the life – and day in the store’ training videos that IKEA has produced for
the Russian market so that when a Chardonnay Girl walks by one of the settings targeting
her, she immediately feels ‘this is me’.
Pull out sofas are also important for visiting family and friend from the countryside (a lot of
Chardonnay Girls are small city girls attracted to the fuzz and buzz of Moscow) and for those
‘girls only’ nights spent commiserating over the latest boyfriend break up.
Progressive Intellectuals is a group that IKEA was surprised to find they attracted in such
numbers – the highest percentage of IKEA shoppers in the entire lifestage, neck and neck
with the Chardonnay Girls. Unlike their western counterparts that we would call Alternatives, the nearest Russian equivalent called Progressive Intellectuals are less green and typically work for multi-nationals or local big companies just as the Chardonnay Girls do. But
their lifestyle and resulting purchasing patterns differ dramatically.
Progressive Intellectuals are much too eclectic to find comfort in sofas, tables, chairs and
curtains that all match. Where Chardonnay Girls are likely to place a mirror, a Progressive
Intellectuals will add another bookshelf (their source of intellectual confidence). So why
then do they go to IKEA at a rate of almost two times the lifestage average? It is to visit and
shop in IKEA’s famous Market Hall on the ground floor. IKEA’s Market Hall is a wonderful
assortment of nick knacks, fabrics and accessories that allows the Progressive Intellectuals’
uniquely personal style to flourish and be fully realized.
Time spent in the store is also dramatically different as we have learned by combining the
traditional category and brand usage and attitude studies IKEA uses with the broader segmentation the TGI data provides. Chardonnay Girls tend to spend between 2.5 to 3 hours in
an IKEA visit that happens about once per month.
Progressive Intellectuals only visit about every six weeks and stay only about one hour in
the store. Furthermore, Chardonnay Girls are more likely to fall into to the sweet temptation
of all the ad-on sales placed around the room-settings (even before arriving to the Market
Hall), whereas Progressive Intellectuals do more conscious and planned purchases and are
less likely will be driven by impulse.
The ability to combine the data from IKEA’s usage and attitude studies within the broader
Integrated Customer Targeting process is possible by finding the attitudinal statement that
overlap between the two data bases and then using these as ‘data doorways’ to either bring
in broader information into the IKEA customized research findings
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- 30 Enabling Top Line Revenues Through Segmentation
Who Are The ‘Bell Cows’?
The final benefit this Integrated Customer Targeting process offers to marketers is the ability to determine which segments are more likely to influence other segments and why. As
individuals living in a society we all recognize that we routinely look to certain people we
know to help us with information and knowledge that we believe they process, that for
some reason or another, we lack. By digging into purchasing patterns of a very broad and
very deep data base in Integrated Customer Targeting we can identify certain characteristics that help us determine who these influencers are. What is important to marketers who
have specific products and services to sell, is the ability to understand who the influencers
are relative to specific categories.
Chart 4.a. – Fashion category influencers
Source: Garrison Group
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- 31 Enabling Top Line Revenues Through Segmentation
We know from the Russian segmentation that Chardonnay Girls are influential establishing
fashion trends (see graph 4.a), but depending on the style, Progressive Intellectuals can also
be quite influential, but to different segments.
Chardonnay Girls and Progressive Intellectuals are both trend setters in fashion – but
through very different styles. In contrast the role hierarchy of influence changes
significantly when we look at the travel and tourism category (see graph 4.b).
Chart 4.b. – Tourism and travel influencers
Source: Garrison Group
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- 32 Enabling Top Line Revenues Through Segmentation
Wellness hotels are a rapidly growing category in Eastern Europe and Russia, but almost all
are positioned with benefits and packaging that target Fulfillers.
The reason for this was interesting to discover in our research when we learned that most
wellness hotel owners are themselves Fulfillers and consequently are caught in the
self-limiting trap of thinking they themselves are typical of their customers.
Consequently, they are in effect marketing to themselves. They have the Fulfiller segment
well understood but it is a significantly smaller market than they could enjoy if they had a
better understanding of who could be their best potential customers and their much
different needs.
Bolt On Capability
As stated earlier, the key to the impact of this Integrated Customer Targeting process is that
it does not attempt to rank one particular model of previous segmentations over another,
but seeks to combine the unique benefits of each so that a fuller picture of your brand, your
competitors and your customers emerge.
While it is certainly a leap ahead methodology, it is more evolutionary rather than
revolutionary in application. This should be comforting to most marketers because it does
not require throwing out everything they have expensively done previously, but builds on to
where they are by adding a new and broader data base combined with a new form of
segmentation modeling.
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- 33 Enabling Top Line Revenues Through Segmentation
Summary
Get on the CEO’s agenda by better clarifying why deeper customer understanding needs to
be there and how it can be best utilized to drive better shareholder value.
Before you start down the complicated and often expensive path of customer segmentation, it is fundamental in importance that the company first assess what it is that they need
the segmentation for (brand positioning, communication strategies, distribution activities,
etc.) and how these strategies will drive specific customer actions and the impact of these
actions on the overall financial results of the business.
Customer understanding and how that links to core business growth strategies is “too important to leave solely to the marketing guys”. It must be integrated into every aspect of
the business that impacts the customer value proposition of the company and therefore
deserves to be high on the agenda of the CEO.
It isn’t enough to know how customers interact with your brand. It’s important, but it’s
not enough. It is also important to know how customers view your brands relative to your
competitors as well as within the category drivers of satisfaction. But unless you can understand how factors such as brand attitudes and category usage are reflected in the broader
lives of customers, you will find it very difficult to emotionally connect with those
customers.
And when you have the ability to truly connect emotionally as well as functionally with your
customers, as IKEA has been able to do in Russia, and elsewhere where they have employed
the Integrated Customer Targeting model, you will find it enables a greatly enhanced ability
to target your best customer prospects with the right products communicated at the right
time and place to optimize your marketing impact and efficiencies. It is no accident that
this model was developed in Eastern Europe where once again, ‘necessity is the mother of
invention’.
It is well accepted that the customer is changing at an unprecedented rate in these markets and that this rapid change is reflected in both their brand usage as well as within their
evolving lifestyles.
And because marketing budgets are often more restricted in Eastern Europe, it was imperative that we not only find a method to access better customer knowledge more cost
efficiently, but also that the marketing strategies and tactics that result from this new segmentation allows us to ensure that limited marketing budgets are truly targeting the right
people at the right time.
The goal of the Integrated Customer Targeting approach is to perform the seemingly
impossible result of increasing marketing’s impact while simultaneously decreasing its cost
in absolute terms
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