Growing a staple product category business
QUESTION: Please stay with your series on consumer coping behavior survey even for just one more Friday. We’re fascinated with your idea that growing a business will come more from market segmentation than from products or new products.
But the example you chose last March 20th did not support this idea. This is the case of “pandesal.”
You said that your survey series showed how this product category went from a nice-to-have product in 2012 to a near-staple in 2013. And then, in 2014, consumers elevated it to a staple—a product they “cannot live without.”
If pandesal is now a product that consumers can’t live without, then the market for pandesal must already be saturated. How can you grow in a saturated market except through a new product, a new pandesal? Won’t you say that staple is an exception to your rule of business-growing from market segmentation?
ANSWER: I’m glad you brought down our discussion to a concrete level, in the specific case of pandesal.
Last Friday’s column was actually more about the coping survey’s trend data, although it also talked about the behavioral segment that’s behind the trends.
Let’s recall what I said about the coping segments responsible for pandesal’s shift in classification from a near-staple to a staple product category. The survey data for the Metro Manila housewives showed that, from 2012 to 2013, and then from 2013 to 2014, the “maintainer segment” significantly increased, i.e., those who had pandesal in their budget rose in number for two consecutive periods.
At the same time, those housewives who were dropping pandesal in their budget decreased just as steeply as those maintaining pandesal over the same 2 periods. It was at this point when I cited my market segmentation rule: “The ultimate source of growing your business are (behavioral) market segments. Products and new products are only secondary.”
Because I was concerned with the trend issue, I then asked: “How much exactly were those increases and decreases?” This is not what you are concerned about. Your question was about how to grow your business in a staple product category where you’re assuming that its market is already saturated, as far as pandesal is concerned.
Let me answer using the pertinent coping survey data. We look at the 2014 survey data on the pandesal coping market segments. There’s 87 percent of Metro Manila housewives who are maintainers, 13 percent lapsers and 0 percent non-users. Of the 87 percent maintainers, 84 percent are core maintainers, 1 percent returnees, and 2 percent big spenders or those who bought even more. The 84 percent core pandesal maintainers are housewives who just kept pandesal in their budget. This is probably what gave you the impression that it’s already a saturated market.
But that’s a static way of looking at what’s happening. Consumer coping behavior is dynamic. Even the core maintainers can change. They can decide to lapse. The number of total maintainers could also increase because there’s a 2 percent “big spender” housewives who decided to buy even more, and 1 percent “returnees” who came back after lapsing the previous period.
If you look at pandesal’s lapser segment, you’ll find that, of its total of 13 percent, 8 percent are not total lapsers, but only partial. They lapsed partially by economizing. When the economizers give up on this behavior, they come back to the maintainer segment as “returnees.” So look at the coping survey data as behavior change data.
As you can see, it’s not true that the market for a staple product category is saturated. Just because it’s populated almost fully by “maintainer” consumers does not mean it’s saturated. There’s going to be movements among its core maintainer consumers as well as from its subsegment of returnees and its other subsegment of big spenders.
At the same time, if you benchmark against what customer retention managers have done for business-growing of other staple products as bath soap, detergent and toothpaste, you will move away from keeping a static market vision.
In 2014, toothpaste, for example, was 98 percent maintainers, and yet that category continues to grow from one year to the next. That growth can’t come from new users because the survey data shows zero non-users. But those are housewife non-users. I’ve been told that the Close-up Lavapalooza campaign, for example, had in fact increased the frequency of toothpaste usage among the youth segment.
For the contrast, and to illustrate how the coping survey data can pleasantly surprise you, let’s take up a product category that’s opposite the staple. That’s a “definitely dispensable” product category. One such case is pork and beans (P&B).
The 2014 coping survey data showed that P&B Metro Manila consumers were 17 percent maintainers, 62 percent lapsers and 21 percent non-users. Here, you can immediately see that the burden of marketing work has shifted from the customer retention managers in charge of the maintainer segment to the customer reacquisition manager taking care of the lapser segment, and the new customer acquisition manager responsible for turning non-users into new users.
For the P&B customer reacquisition manager, the basic marketing task is to persuade 53 percent of the 62 percent lapsing housewives to bring back P&B into their budget, as well as convince the 9 percent economizers to return to their former usage level or usage frequency for P&B.
But the more challenging marketing job is with the new customer acquisition manager: How to turn the 21 percent P&B non-users into users. The key here is to find out what housewives are using in place of P&B. Then, uncover what are the housewives’ underserved needs on this P&B substitute before they get the P&B product developer to reformulate P&B so that it fills those underserved needs.
I hope you can see from the foregoing that there’s first a real need for you to revise, update and sharpen your understanding of behavioral segmenting. Then you need to connect this understanding with the correct analysis of the changing consumer coping behavior for business-growing.
Keep your questions coming. Send them to me at [email protected].
