|
Joseph
Bucherer
Managing Principal
ACNielsen, Market Decisions Center of Excellence
Leah
Robinson
SVP, Product Management, New Products
Spectra
CPG manufacturers face an increasingly competitive and crowded
market. In this environment, strong brand and portfolio strategy
grounded in unique consumer understanding can make all the
difference. This article discusses how manufacturers can drive
portfolio analysis and strategy by integrating all available
data (attitudinal, behavioral, geographic and demographic)
to build a single, unified consumer segmentation framework.
All manufacturers and retailers have some view of their category
or aisle structure, or consumer decision flow, which is typically
referred to as market structure analyses or consumer decision
trees. And it can be challenging to pull insights from this
type of research. The difficulty typically lies in the execution
phase—making market structure analyses work in a world
of consumer variation.
Both manufacturers and retailers face issues with regard to
maximizing the use of market structure analyses. They can,
however, provide key insights into strategic and tactical
challenges. Strategic challenges—generally geared toward
addressing consumer targets—are the who and where types
of questions. Tactical challenges are the purchase driver
considerations and address the how and what issues. It is
important to be able to understand these challenges and address
them in an integrated fashion, without having disparate pieces
of information to resource.
Understanding Your Overall Product
Portfolio
With the advent and demands of consumer management initiatives,
the need to better understand consumer behavior in a general
market has increased. It is important to detail the long-term
types of decisions that consumers make from an overall product
portfolio or pantry perspective. This requires longitudinal
information or information across a series of purchase occasions.
Additionally, if we think about our business objectives, we
get a better understanding of our product mix, assortment,
shelving, and promotional impact against the primary target,
the consumer. Examples include:
- Defining the importance of product attributes and attribute
substitutability;
- Directing consumer-meaningful shelf assortment decisions;
- Understanding and developing product opportunity gaps;
- Determining promotion impact.
By evaluating the
purchase portfolio of individual households from a consumer
data source like ACNielsen’s Homescan panel, we develop
views of preferences for particular product attributes within
a product category or segment. This process, based on modeling
household transactions, allows us to establish and quantify
the importance of attributes like brand, size, form, position
and detail. By evaluating the products that certain households
buy over time, we can clearly establish the important aspects
of a product category purchase decision. When aggregated across
all households, a decision structure is developed.
Identifying Target Segments
However, not all consumers approach the category or category
segments in the same fashion. There are several reasons why
consumer purchasing varies across segments. Consumers vary
based on the importance of product attributes combined with
other factors such as the level of need, phase of lifestage
development, financial situation and seasonal factors. An
overall perspective is important to understand the general
population, but that view falls short when considering different
segments, such as ethnic groups or clusters of retail stores.
For example, in one particular analysis, ACNielsen was able
to determine a hierarchy for the category, but within the
category there were eleven segments of consumers who differed
based on things like product purchasing, demographics, use
of deals and class of trade. This confirmed that all consumers
do not purchase the category in similar ways.
Since there is rarely time or resources to target all segments,
this level of detail can appear somewhat daunting. However,
it is important to understand the differences between each
of them. The chart below outlines the differences by segment
based on the number of available shoppers (% households) and
the value they bring to the category on a volumetric basis
(% volume). It is important to ensure that our selected target
generates enough volume to capitalize on [See chart 1].
A consumer-driven approach to market structure analysis starts
with the right data. In some cases, the starting points are
natural—gaps from past analyses, strategic plans, etc.
In other cases, we may need to drill deeper into the data
to find the key consumer segments to concentrate on. In our
earlier example, we grouped consumers into eleven distinct
segments. While we would not target all segments because they
may be inappropriate for our business, we might concentrate
on the important core groups. Having the right elements allows
us to begin to bridge the gap between strategy and tactics.
Creating a Unified Segmentation Theme
While these behavioral segments provide a strong foundation,
even more consumer insights and opportunities can be tapped
by leveraging multiple data sources. Each data source yields
its own approach to segmenting consumers. For example, many
manufacturers have a segmentation solution based on attitudinal
data, another from behavioral data, and another from needs
states data. Trying to reconcile all the conflicting approaches
forces a regression to the mean. However, taking into account
all of the available data in combination eliminates the problem
of dueling segmentations by creating a single unified segmentation
scheme. The consumer segments created in this way can be used
as the basis for a variety of different analyses, including
market structure, and are also directly targetable across
all media and promotion vehicles [See charts 2 and 3].
Using Spectra’s data integration techniques [See chart
4], we can link these segments to executable targeting solutions.
We can then evaluate:
The size of targets, and growth and category trends;
Consumer target opportunities and execution strategies for
the marketing mix;
Differences across groups and specific brand strengths and
weaknesses;
The direct association between the consumer category view
(structure) and behavioral/attitudinal dynamics.
An Example: Ready-to-Eat Cereal
A category like ready-to-eat (RTE) cereal lends itself to
this type of analysis because it has high fragmentation in
terms of product elements such as positioning, flavoring and
additives. As a manufacturer, it is important to understand
the competitive leverage available both within segments and
across adjacent segments. As a retailer, all shelves do not
offer the same opportunity, since different stores have consumer
traffic patterns based on demographics, needs and other factors.
As one might expect, the RTE cereal category has a strong
skew toward households with children. But not all households
have children, and in fact, households without children and
older consumers also contribute substantial category volume.
Consumption in households with children falls as income and
affluence declines, while consumption increases with age in
households without children. There also appears to be an influence
of mobility that impacts RTE cereal consumption. So which
segments of consumers will offer the most opportunity for
the business? And how does the purchase decision structure
change in this case? What if I’m a retailer with stores
in neighborhoods that tend to be older? How should my shelf
be set? What should I consider for the long term as demographic
trends change?
We used Spectra analysis to cluster households based on their
actual purchase behavior measured through ACNielsen’s
Homescan Panel. The segments developed in this analysis showed
two distinct segments of kids’ cereal buyers (not just
one, as the manufacturer originally thought), as well as others
with more focus on all family and older consumers. Based on
a review of the client’s portfolio across these segments
and projections of growth potential for the segments based
on demographic trends, we identified two segments that were
most important for the client’s business. The next step
was to look at market structures within each of these segments.
In any structure, items at the top of the consumer decision
tree are most important and therefore not likely to be substituted.
Those at the bottom are areas where consumers will make compromises.
This market structure enables us to attribute importance and
determine strategies for product shelving, blocking and assortment,
thus limiting redundancy while maximizing incremental return.
Executing the Plan
Once we understand the variation in consumer clusters, structure
and targets, we have the framework to evaluate the brand portfolio
and its strengths and weaknesses, locate gaps for future development
and assess shelf set and retail assortment opportunities.
Additionally, this segmentation platform can also be used
to evaluate consumer-based marketing mix elements.
The key is keeping the focus on the consumer. To some extent,
consumers are creatures of habit. We can use behavior and
store clusters to drive and guide consumer-meaningful execution.
The knowledge we gain about consumers in this context equals
the potential to capitalize on differences and improve targeting
at retail and in direct-to-consumer efforts. It means developing
a consumer-centric view of the world and aligning resources
for greater ROI.
This segmentation provides a full 360-degree view of the key
consumer segments across categories and a framework for analyzing
all aspects of the business, including consumer marketing
mix and market structure analysis.
|
