24. Zeroing in on Consumer Target Markets
If your market is consumers, consider using a segmentation tool like PRIZM (Potential Rating Index by Zip Codes), a clustering tool developed by Claritas Inc. Consumer groups are broken into 39 different sectors within five different categories, comprised of education and affluence, family life cycle, urbanization, race and ethnicity, and mobility. The sector clusters are names of fun and descriptive groups such as The Cosmopolitans, Blue Blood Estates, and Hometown Retired. Each of the clusters is segmented by zip code so you can easily target like-minded individuals.
As you become more experienced in understanding your target market segments, your goal should be to continuously refine how this is applied to target customer segments and marketing programs. A company that does this really well is Globus family of brands, an international travel organization that has been in business since 1928. In an initiative launched to improve their understanding of how and why diverse groups of customers purchased trip packages, Globus discovered very unique qualities and preferences among people who purchased travel packages.
Scott Nisbet, COO of Globus, was Executive Director of Customer Acquisition and Retention at the time the segmentation project was initiated. He said the ability to creatively and specifically define customer segments enabled them to create new customer segmentation strategies and customize messaging that was more precisely directed toward the needs of each group. For example, a traveler who craves adventure in exotic locations would never appreciate a well-organized trip around the UK and Scotland. Likewise, a traveler who appreciated the group interaction and an informative guide would be a fish out of water in the jungles of Ecuador. If a customer prefers guided travel, this group of customers fit into a segment they called “Hold My Hand.”
On refining its understanding of customer psychographics and travel styles over several years, Globus developed new target market segmentation descriptions. The company now overlays three different databases, each with specific segmentation criteria. They use segmentation developed by a company called Cohort that is comprised of demographic and psychographic data. Through database analysis, Cohort identified cohesive segments of U.S. households. The households are grouped into 30 cohorts based on overall similarity across 7 demographic and 40 behavioral characteristics (see Burt and Marilyn and Alex and Judith in Figure 24.1, who are creatively named after typical names in the groups of survey participants). The groups included 13 married segments, 9 single female segments, and 8 single male segments. Cohorts were appended to the database to further analyze and segment customers so they could surmise if a person would be more interested in a trip to Egypt or Italy.
Figure 24.1 Globus customer segmentation example
This data was then overlaid with an Equifax database of demographic data and preferences. For example, if the Equifax database shows the traveler is a dog owner, this person is less likely to take a trip than a someone who does not own a dog. Several data points like this serve as indicators of who is more or less likely to travel.
The third database integrated into segmentation is the one million customers in the Globus customer database, which contains profiles of customer preferences gathered over many years. The information was collected through surveys after every customer trip. It defines how likely a customer is to travel again with Globus (see Figure 24.2), as well as when and where they want to go. Segments define the number of times a person has traveled with Globus and the likeliness of the customer wanting to travel with them again. Travelers in the Platinum segment have traveled with Globus four or more times and will likely travel with the company again. Gold travelers have traveled with Globus two or three times and are likely to travel with the company again. Shooting Stars are defined as travelers who have traveled with Globus only once but are very likely to travel with Globus again based on their positive first experience; therefore, this segment requires special nurturing to increase travel over time. The bottom tier is “Tin” because these people have traveled with Globus once but are not likely to again.
Figure 24.2 Globus family of brands loyalty tiers
As you can see in Figure 24.2, the result of the company’s ongoing segmentation efforts is a very specific and targeted list of customers to whom Globus can direct specific marketing campaigns. Each campaign describes exactly the kind of trip the customer would be interested in taking. Globus direct mail campaigns do not result in paltry industry averages of one to two percent return on investment—they average 14 percent.
Businesses continue to find ways to segment their products to capture new, more precisely defined target markets that have more precisely defined needs. This is part of a growing trend of micro-niching that is enabled by the ability to capture information about customers using sophisticated software programs, bar codes, and RFID technology. By cross referencing where people shop, when people shop, what people buy, and how products are used, more information can be learned about customers, allowing you to hone marketing strategies and programs.
Marketing Tip for Mid-size and Large Companies
Take your existing target market profile and evaluate if your assumptions and descriptions are accurate. Pay close attention to how you can make them more specific or refine the description based upon the results of the “A, B, C, and Deadbeat Customer” exercise from Chapter 14, “Micro Perspective: Focus on High-Value Customers.”
Also look across business units to see how markets are segmented and target markets are defined. If markets are defined as large, medium, and small businesses, is this too broad to effectively target market programs? Are target market segments organized around products instead of customers? If this is the case, your company is probably missing opportunities to expand the account. Another common occurrence of targeting based on products instead of customers is several salespeople from the same company may be calling on the same customer. Not good.
Look for new ways to fine tune target market profiles based on the information in this chapter, with an eye on opportunities to cross-sell products and services across the organization.
You now have several different methods you can use to define your target market. Summarize this information into your marketing plan so that it is specific for each of your products and solutions. Note the information and questions you need to ask customers directly so this can be used in the primary research plan.