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Trends in consumer products marketing analysis can be as fickle as fashion. Analyses like economic value added (EVA) and gross margin return on investment (GMROI) have all had their time in the spotlight as ways of evaluating performance of consumer goods. For the past five years, segmentation, the practice of defining and refining targets for specific marketing activities emerged as the new “it” analysis, but often fell short of delivering the desired results at retail. Many consumer products companies used segmentation as a strategic analysis to identify new areas of opportunity, primarily focused on consumers and in some cases shoppers. As these companies found out, in today’s complex retail environment, consumer and shopper segmentation isn’t enough. Leading-edge companies are using segmentation as one essential step in the process to drive results at retail. For results, segmentation execution, not just segmentation, is the new black.
At the beginning of the segmentation process, most companies ask the question, “who is our consumer target?” Best-in-class companies are going one step further and asking, "who are consumer and shopper targets and just as importantly how will targeting this consumer/shopper lead to better results?" Segmentation can group shoppers, retailers, consumers or products using multiple data sources such as research, syndicated point of sale data, shopper data or social media data. Leading manufacturers use segmentation to understand who is buying products, in what venues, for what occasions, how often and where. But knowing this information is not enough. To make the segmentation pay off, execution is essential to define how to activate the segmentation at retail or to identify on which retailers to focus the attention. This “end-to-end” model, which takes segmentation from development to implementation is depicted below and highlights the customer focused steps as a critical juncture:
Most manufacturers spend the majority of their time in development. It is important, but development will more quickly hit pay dirt if the retailer's targets are identified with a focus on execution from the start. If done well, the “what” in development will be brought to life through the “so what” of a strong category strategy that will have tangible platforms and customer-specific action plans in the “now what” to implement the programs at retail. This is more than promotion. It can be product placement in store, reframing the nature of a category or going to market in a completely different way than historically executed. Case studies illuminate the power of segmentation execution.
Case Study 1
A major consumer products manufacturer suggested introducing a new snack item into the produce department of the supermarket. Historically the product was sold in the refrigerated section in center store. In order to achieve distribution in the produce section, the manufacturer conducted a segmentation analysis to learn the types of consumers who were most interested in purchasing these snacks, potential new users and offering snacking occasions solutions in alternative locations. As important as the segmentation was the launch execution. The sales organization was armed with a simple selling story that explained the value of the move for shoppers and profit for the retailers.
Case Study 2
A major refrigerated and frozen food manufacturer needed to reposition its category for greater shopper relevance in supermarkets. Analysis was conducted to recast its categories, along with more than 40 grocery categories. Providing this analysis along with nutritional trend information allowed the manufacturer to successfully partner with key retailers, including Kroger and Safeway, to execute department and store-level changes to reflect the new learning. This repositioning provided the manufacturer “a seat at the table” and an invitation to c-suite conversations on broader retailer efforts.
In both examples, the critical denominator is the focus on execution and the results that happen as a result of the segmentation execution orientation.
Segmentation can also be used to guide manufacturer execution across retailers. The goal is to understand how to best penetrate a specific channel, group of retailers or individual retailer based on identified opportunities for a given business strategy as showcased in the following case study.
Case Study 3
A spirits company was determined to grow its business in national accounts. It had primarily been focused on developing its independent liquor retailer business which was unable to leverage the scale of major promotions and shopper marketing programs. A detailed segmentation was conducted on national account retailers and they were grouped into strategic segments based on expertise. By understanding the criteria of engagement for these retailers, tailored programs were created to meet the retailer’s specific needs. This combination of segmentation and go-to-market strategy led to a holistic growth plan that identified a five-year downside if the company didn’t take action, and how the company could achieve its goal of 25 - 30 percent growth if it did.
To make segmentation count, the focus must be on execution once the initial analysis is complete. Three key action steps take segmentation from helpful development to execution-driven results:
- At the beginning of the process, take inventory of available and/or needed resources for the segmentation analysis, packaging of the program and most importantly, executing the plan at retail.
- Understand the use of the segmentation up front, so that necessary implementation plans can be put into place to take advantage of the analysis. The implementation plan takes the important work of segmentation and puts it into practical use.
- Implement a closed-loop reporting plan at regular intervals to continuously monitor in-market results and refine the segmentation over time.
Segmentation analysis provides important insight. Leveraging segmentation to drive performance at retail is rapidly being recognized by manufacturers and retailers as a game-changing way to drive results making segmentation execution the new black.