‘What about lapsed user segments for business growing?’

Q: We read your column last Friday about sourcing “far-out revenue growth” from non-user segments. We liked what you explained and learned from it.

But what about the coping segments of “lapsed users?”  We heard that you also identified these segments as “far-out revenue growth” sources.  May we request your column to please explain this.  We hope you can also define what is a lapsed user segment.

We’re like the readers whose request you answered last Friday.  We were also unable to attend your industry briefing of the highlights of your third quarter 2012 nationwide survey on consumer coping behavior.

A: We’ll start with the definition of a “lapsed user segment.”  The coping behavior survey identified 3 coping segments of housewives who differed in their budgeting behavior toward each of the survey’s 159 product and service categories.

There’s first the “maintainer user segments.”  Most housewives in this segment have maintained the product or service category in their budget during the survey period.  The survey data showed that this maintained budgeting behavior was true mostly of product and service categories that housewives classified as “staple.”  According to housewives a staple product is something they “cannot do or live without.”

The opposite of the staple is the “definitely dispensable” product.  In last Friday’s column, we saw that a housewife will classify a product or a service as definitely dispensable if she believes she and her family can “certainly do and live without” it.  As you read in last Friday’s column, the surveyed NCR housewives classified nearly half (or 46 percent  to be exact) of the survey’s 159 product categories as definitely dispensable.

The third coping user segment is what you’re asking about.  That’s the “lapsed user segment.”  Housewives in this segment have deleted or removed the product category from their budget.  The most often mentioned reasons (though not the only ones) for deletion are about disappointments.  You can glean this from such verbatims as the following: “Kasi di na siya kasing ganda nung dati” (It’s no longer as good as before).  “Nag-iba na yan.  Di na masarap” (It changed.  It’s no longer good tasting).  “Me binago sila na di naming gusto” (They changed something that we didn’t like).

From the perspective of the marketer, these housewives’ perceptions mean that the lapsed user segment can also be called as the “underserved segment.”  That’s different from the non-user segment which again from the side of the marketer can be referred to as the “unserved segment.”

It is the coping survey’s Mindanao data that clearly demonstrate the still neglected revenue-growing potential of the lapsed user (or underserved) segments.  For the comparison we wish to make, we retain the product category we analyzed in last Friday’s column, namely, canned fish, where there’s a relatively larger non-user segment than the lapsed user segment.

The opposite is the case with Mindanao housewives.  Here, those housewives partitioned themselves for this definitely dispensable canned fish category into 57 percent belonging to the lapser user segment, 34 percent in the non-user segment, and 9 percent in the maintainer user segment.  It’s the lapsers who were the larger population than the non-users.  The smallest coping segment was the maintainer user segment.

What’s marketing’s revenue-growing task in the larger lapsed user segment in Mindanao?  For the answer, we must first identify the needed or targeted housewife budgeting behavior for canned fish.   On the part of the lapsing housewives, the targeted behavior is to bring the deleted canned fish back to the budget.  On the part of the marketer, this equates to the objective of re-acquiring the lapsed consumers via a customer re-acquisition campaign.  The marketer’s responsibility sounds similar to what he needed to do in the non-user segment which is to acquire new consumers via a customer acquisition campaign.  It sounds similar but not really as you can see below.

Given the target customer behavior change, the next critical step is to uncover the driver or motivator of the target customer behavior.  For customer re-acquisition, this customer motivator is relatively easier to uncover as compared to unlocking the motivator for new customer acquisition.  Finding the key to persuading a former customer housewife of, say, canned fish to come back to serving canned fish to her family is clearly a less difficult job compared to finding the secret to getting a canned fish non-user to shift from not serving canned fish to start buying and serving it to the family.  Marketing history has shown that generally speaking, the more difficult is the uncovering of the driver for behavior change, the larger is the expected returns in revenue growth when the key motivator is unlocked and exploited.

The returns in terms of revenue gains are also proportionate to the difference in relative segment population sizes.  Continuing with the case of canned fish, let’s compare the population sizes of the lapsed user segment versus the non-user segment in Mindanao versus NCR.   Three paragraphs back, the Mindanao comparative percentages of segment population sizes are: 57 percent lapsed user housewives versus 34 percent non-users.  In NCR, these percentages are in the reversed order: 26 percent lapsed user housewives versus 61 percent non-users.  Where the non-users are relatively much larger than the lapsed users as is the case in NCR, we saw in last Friday’s column how much “far-out revenue growth” can come from the non-user segment.

Consider now the Mindanao data where the percent lapsed users is larger than the percent non-users but the relative difference is not as large as in NCR’s non-users versus lapsed users.  So there in Mindanao, we will not expect that much “far-out” revenue growth” from the lapsed user segment as we did with the non-user segment in NCR.  This is to correct your impression about the “far-out” revenue growth promise of the lapsed user segment.  But still this coping segment makes up a large but often neglected source of revenue growing.

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