‘What’s the best market segment targeting to do?’

Q: We were among the more than 120-130 attendees of your February 20th Executive Briefing on your 3rd quarter 2012 nationwide “Consumer Coping Behavior Survey.”

We work for a large multinational company that’s into a wide range of consumer products as well as consumer services. That is why we attended.  Your survey covered 159 product and service categories that included the categories where our company participates.

Can you please answer our question that we were unable to ask because your Q&A portion did not have enough time.  We learned from your presentation that we have two products in the “staple” category but a lot more in the “definitely-dispensable” category.  We also found that we have a sprinkling of products in the rest of your categories like the “near-staple,” the “nice-to-have-but-not-necessary-anymore,” and the “near-dispensable.”

You spoke of your survey data as sources of businesses growing.  What’s the business-growing opportunity in, for example, our “definitely dispensable” product?  And for our “staple” products?  Isn’t the market here already saturated.  So here, where’s business-growing?

A: For many who were unable to attend the executive briefing, we should start with some clarifications. First the categories. The “staple” product categories were those products and services that housewives, the survey’s designated respondents, considered they “cannot do without” and are “absolutely necessary” to them.  The “near-staple” is one that housewives still say are necessary but are no longer absolutely necessary.  The product or service that is in the “nice-to-have” category is one that housewives find not necessary anymore but consider nice to have nevertheless.  The “near-dispensable” is a product or service that housewives say they “can more or less do without.”  The “definitely-dispendable” is one that housewives find they “definitely can live and do without.”

We now proceed to your products in the contrasting categories of “staple” and “definitely-dispensable.”  For specific examples, let’s look at the coping survey data for NCR.  The data tell us that bath soap is a staple for NCR housewives while rubber shoes  is a definitely-dispensable category. You seem to be more concerned with business growing for a definitely-dispensable, so we start answering your questions for this category.

You need a framework or business model to guide you in uncovering the source for business-growing. Our 2010 book, Market Segmenting, Self-Segmenting and Desegmenting, offers one such framework.  Based on years of research, it found that “the ultimate source of growing a or any business is market segment.  Products are only a secondary source.”

The coping survey found that for any product category there are three market segments to source for business-growing.  These coping market segments are: (1) customer maintainer segment, (2) the lapsed customer segment, and (3) the non-user or non-buyer customer segment.

In NCR the housewife population sizes of these three coping segments for a definitely-dispensable category such as rubber shoes are:  4% in the maintainer segment, 17% in the lapsed segment, and 77% in the non-user/non-buyer segment.  Our market segmenting principle says: “The largest customer segment is the largest business-growing source.”   For rubber shoes, that’s at least 77% of total NCR housewife population.  We say “at least” because this figure does not consider “purchase frequency.”  For most of the non-housewife buyers, the average purchase frequency for rubber shoes is twice a year. That makes this non-buyer segment market size two times its segment population size if the purchase frequency also is true of housewives!

The practical question is this: “How do you convert or motivate a non-buyer to become a buyer?”  That’s a job for consumer motivation research.  It’s not what your questions are asking.  We can deal with this critical issue in another or maybe next Friday MRx column.

What about your product in the staple category?  Here’s the NCR coping segment data for bath soap:  88 percent in the maintainer segment, 0 percent in the lapsed segment, 0 percent in the non-user segment, and the rest of the percentages are distributed among the buy-even-more, the economizer, the reduce-buying, brought-back-into-the-budget segments.  So it’s obvious that the largest segment population size is the maintainer segment, 88 percent of NCR housewives.

Now, to interpret the 88 percent maintainers as market saturation is basically wrong.  Let’s refer to another market segmenting principle for the correct reading.  This principle says:  “You can grow a business by sourcing new occasions, new purposes for buying and/or more frequent purchasing from your existing and current buyer segment.”  For bath soap customers, for example, there are now hand soaps, facial soaps, and foot soap to enter and participate in.  There are cost advantages in participating in these new categories and segments.  Because it’s the same existing customers who will be buying your hand, facial and foot soaps, your campaign is saved from the typically heavy cost of new customer acquisition and new brand market intro.

From the foregoing, what’s significant to note is that sourcing business-growing from any category-coping-segment pair is most effectively and efficiently accomplished with the guidance of an appropriate business model and market segmenting principle.

Keep your questions coming.  Send them to us at [email protected] or [email protected]. God bless!