Mastering market shifts in the current recession by refreshing your segmentation!
We at the EMM Group consider customer segmentation or market segmentation a key building block in organic growth strategies. We start with segmentation for a simple reason: unless one understands how customers are segmented or, more accurately, how their needs are segmented, it is impossible to build an effective marketing strategy.
Let me illustrate this with some (lack of) segmentation examples I picked up during my business travel last week. While reading some European newspapers, I was being confronted with the necessary but all too frustrating hassles of inconsistent European airport security. This is a direct consequence of the “refreshed traveler segmentation” after 9/11 by (airport) authorities who are catering to the overriding governmental need for national security, thereby creating one segment of everybody being a potential terrorist.
Flying from Geneva and passing through my “favorite” airport in Frankfurt where, contrary to Geneva airport security, I had to strip naked, indicating I was being segmented for a higher level of security risk than in Geneva…..or the day before in Paris or London. As a frequent traveler, this experience created the need to avoid Frankfurt airport when possible in the near future.
However, I got a chance to read the following paradoxical newspaper headline: Lidl, one of Europe's biggest discounters of German origin, stimulates sales of high quality wines! Apparently, the economic crisis for wine has not seen a reduction in private consumption, but has induced consumers to go out less often, as evidenced by reduced sales to the HORECA segment. Sales have decreased dramatically, but have been compensated for by home entertainment. While the average price for a bottle of wine at a German discounter is €2.48, at Lidl it is not uncommon to get a Châteauneuf-du-Pape at €11.99, or a Barolo for €9.99. Lidl is building on its established best value for money wine assortment reputation and playing nicely into this consumer’s need by offering “premium” wines at a reasonable price. Lidl is attracting shoppers who are willing to spend €10 or more per bottle to have a quality home entertainment occasion in these frugal times – making Lidl a smart choice.
Another example was the announcement of Burger King opening designer "whopper" bars - a lounge-bar-ambiance-with stylish design this summer in Europe, starting in Germany?! These projects take lot of preparation time and planning, and were initiated before the financial crisis started. Will they be successful with such a formula, building on up-trading and providing a more pleasurable comfortable fast food dining experience in the current economic climate? I hope they reviewed the needs of their target group consumers and re-validated their marketing strategy to avoid a potential mismatch of needs-value shifting in a bad economy: how relevant are the new “stylish whopper lounge bars” versus good value for money during the current recession?
Lastly, an impressive US “refreshing your segmentation in the credit crunch” read. Hyundai discovered that as the market changed, so did their segmentation. Significant numbers of prospects were no longer focusing on gas mileage performance, and they weren't necessarily looking for more discounts. David Zuchowski, vice-president of national sales for Hyundai, noted in a New York Times article, "It doesn't matter how many zillion dollars you put in rebates, or what APR you give them. If people are worried about their job, they don't really care and they're just not going to get off the fence." Hyundai determined that the fear of losing one's job was a high barrier preventing prospective buyers from purchasing a car. By targeting prospects concerned about job security, Hyundai broadened its audience and increased the number of customers who considered its cars. Next, Hyundai developed a strategy to ease the fears of this segment: the company's Assurance Program releases customers from car payments, without harming their credit score. "We're introducing Hyundai Assurance to show you the faith we have in you. Right now, finance or lease any new Hyundai, and if in the next year you lose your income we'll let you return it. That's the Hyundai Assurance." When January sales came out, it was official: Hyundai's Assurance Program had hit a home run. The company was one of only a few automakers to post an increase in sales by really playing into the need of its prospects in providing (family) security.
In summary, you will master current challenging times when you review your understanding of your key customer needs and behaviors, know which segments you are targeting and update the functional and emotional needs profile of your target segments to develop the most compelling proposition.
