‘Will business growing model for hotels work for FMCG?’

Q: Your business-growing model for a provincial hotel makes a lot of sense to us. It was simple but practical. However, it was for a service.

We’re into the manufacturing and selling of an FMCG (Fast Moving Consumer Good). Our product is a hard liquor drink, brandy to be specific. Like the group that asked you in last Friday’s column, we also noted that in this series of yours on business-growing, each time a new industry is in question, the business-growing model you prescribe is different.

So please tell us. Will the business-growing model for the hotel you formulated last week work also for an FMCG, for our brandy? Or do we need a different model?

A: We’d like to start where we ended in our column last Friday. We said that if Sogo Hotel wanted to grow its business, it should “think of its hotel business as participating and prospectively participating in different market segments around its neighborhood and trade areas.” So if you’d like to test if the business-growing model we proposed for Sogo Hotel will also work for your brandy, ask yourself the question implied in the preceding Marketing Rx: “Can I readily find different and several hard liquor drinking market segments for my brandy product and brand?”

If you can readily find those market segments, then this business-growing model for Sogo Hotel will work for the business-growing needs of your brandy product and brand. However, if you find the task difficult and you feel like you’re forcing the process, then this is the wrong business-growing model for your brand and you’re better off searching for a more appropriate model. Allow us to remind you and say that those differing business-growing models we’ve recommended are all market segmenting models. They are all found in the Senior MRx-er’s “Segmenting” book.

We now take on that test for finding different and several hard liquor drinking market segments for your brandy product and brand. Think of those segments according to where buyers buy and/or drink brandy.

There’s first the liquor shelves of the supermarkets. This retail source defines a supermarket brandy buying market segment. If you want an estimate of this segment, say, monthly segment market size per supermarket, the “Segmenting” book’s formula for this instructs you to get first this segment’s monthly brandy buying population size, then multiply this by its average monthly brandy buying frequency times the average number of bottles bought per purchase occasion times the average amount paid per bottle.

Next, there are those who buy their brandy from wine and liquor shops.  This defines the wine and liquor shop brandy buying market segment.  There are those who buy and drink their brandy in restaurants defining the restaurant brandy buying/drinking market segment. These buyer-drinkers may be also those buying from wine and liquor shops or even supermarkets. These are not a case of double or triple counting. A brandy purchase from any one of these three outlets counts as a legitimate sale and brandy movement.

For many drinkers, a favorite place to buy and drink brandy is the bar or pub of varying types. These watering holes define the bar/pub brandy buying/drinking market segment. And then there’s an emerging set of digital liquor stores that also defines the digital liquor store brandy buying market segment.

You can do some calculations of the segment market size of each of these brandy buying or drinking market segments by following the segment market size formula we gave above for the supermarket brandy buying market segment.

The ease by which we were able to identify several and different brandy buying and/or drinking market segments tells you that the business-growing model for the hotel applies and is true for your brandy product and brand. You may of course ask as we often are asked whenever we propose segmenting as a business-growing solution why we chose to segment in your case by where buyers buy and/or drink brandy. Why not segment by socio-eco class or by price responsiveness of brandy buyers?

The “Segmenting” book makes a persuasive case against socio-eco class segmenting for business-growing purposes. The usefulness of segmenting by socio-eco class is to define the boundaries of the arena where you’re going to play the marketing game. They are boundaries that cannot be changed in the coming marketing period of one year. But in marketing you are into changing market behavior. In business growing, you are basically after changing your target buyer’s or drinker’s behavior from less buying to more buying, from less drinking to more drinking. So why not segment then by your market’s buying and/or drinking behavior. Where buyers and drinkers buy and drink brandy captures that business-growing purpose for segmenting.

What about price segmentation? The chapter on price segmentation in the “Segmenting” book tells you that all markets for a service or an FMCG are price segmented. This segmentation will be at least for two levels, say, an economy price segment and a premium price segment. Or it can be for four levels, namely, a sub-economy segment, an economy segment, a premium segment and a super-premium segment. So this looks like a suitable market segmenting for your brandy product and brand.

It is actually a suitable business-growing segmenting model for your brandy. But there’s a practical difficulty. The “Segmenting” book tells you that price segmenting requires a quantitative price sensitivity research if you are to get an accurate segment market size for each of your two or four different price segments. In contrast, the data for estimating the segment market size of, say, your supermarket brandy-buying market segment are available from the supermarket data warehouse where the purchase data from the UPC [Universal Product Code] of your brandy brand and your competitor’ brandy brands are stored. This makes segmenting by where brandy is bought and/or drunk the preferred and more practical business-growing segmenting model.

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