Category: Segmentation / Clustering

No More Mr and Mrs Average

Topics: Channel / Retail, E-Bulletins / Newsletters, FMCG, Segmentation / Clustering, Shopper

The release of the 2006 Census at the end of June highlighted the fact that Australia is now a vastly different nation to what it was 20 years ago. The key take out: ‘there is no longer an average Australian’. What does this mean for the retail environment? In the USA, the word on the tip of every tongue is SEGMENTATION.

ShopAbility attended the largest Consumer Packaged Goods conference in the Western World – ‘Consumer 360’ in Florida during May. The US is faced with the same trends:

  • There is no longer a mass of homogenous shoppers with the same needs
  • No more average family unit – the ‘middle’ has dropped out of the market
  • Vast differences in ethnicity, religious belief, age, income amongst groups and areas
  • Polarisation – the rich continue to get richer, the poor poorer – and products are polarizing too (growth of super premium products right alongside the burgeoning of private label at the value end)
  • Mature market where consumers and shoppers are weary of marketing messages and are spoilt for choice
  • In the USA media fragmentation is even more pronounced than in Australia – the average household has 90 television channels, for instance (there are 600 television stations in the US). This means the importance of instore marketing is increasing.

Retailers and suppliers alike are starting to recognize that the way forward is through ‘segmentation’ and ‘clustering’ . Essentially, it’s about understanding your local shoppers and their needs, and changing your execution accordingly. One size no longer fits most.

The trend is just beginning to become mainstream in the US, with major retail chains such as Safeway, Wal-Mart and Tesco leading the way with custom offers. On the supplier side in the US, Kimberly-Clark, Coca Cola and P&G are all implementing tailored shopper marketing strategies.

At ShopAblity, this is one of our core service areas and we believe the way of the future in Australian retail – we’re at the beginning of a bell curve where segmentation or ‘clustering’ will be used as a key driver to generate sales uplifts and create savings (through minimizing wastage) in a market where most other traditional levers have already been pulled.

So how does segmentation work? The first step is to look at localised shopper insights: who they are, how they shop, when, where and why (key drivers/ needs).

  • From this information, the next step is to divide the market into segments. This can be done by store type (retailer segmentation) to find store segments (and later, ‘clusters’) and/or by category.
  • On the retailer side, a ‘cluster’ is a group of stores, consumer types, or segments with similar aspects. For example, a retailer may cluster stores in to different price zones based on the demographics of the shoppers in their area: price zone A at the premium end, through to price zone C at the value end, and change the offer accordingly (we are not ‘there yet’ in Australia yet with this).

Once the market has been segmented, this follows on to the implications for:

  • occasion
  • brand
  • pack
  • price
  • range
  • space and layout
  • visibility and merchandising
  • promotion
  • persuasion and service

So does it really work? Well, one of our clients saved more than $3million through customizing their point of sale material in the foodservice channel. Another new pack initiative based on liquor channel segmentation resulted in a $9million addition to a supplier’s bottom line in the first year of implementation.

In a market where there is no longer a Mr & Mrs Average, it pays – literally – to understand difference.

A Convenient Truth

Topics: Channel / Retail, E-Bulletins / Newsletters, FMCG, Segmentation / Clustering

The convenience & petroleum channel is one of the fastest-growing channels in the nation. As more and more suppliers get squeezed in grocery, convenience is being seen as the new knight in shining armour. But what does it take to get on the white horse?

More than anything, an understanding of horses for courses, so to speak. With more than 4000 outlets in the total petroleum and convenience channel, it looks like one big, shiny, golden egg. But it’s important to understand that the convenience channel has segments, and different shoppers shop the different types of stores – differently.

Anyone who has read the 2007 Australasian Association of Convenience Stores report would note that there is now a shift in how the industry is talking about itself. Once upon a time, stores were split into ‘Tier 1, 2 or 3’ based on footprint and other factors. Now the industry is categorizing its stores more in terms of their function: Dual (petrol station plus large mini-mart), Petrol only (petrol station with small shop attached, stocking only the basics) and Convenience only (no petrol).

How each type is shopped varies. In general, observations from the school of the bleeding obvious apply: shoppers in Dual format may be there for auto or for non-auto reasons, petrol only shoppers are there for petrol (duh) and convenience store shoppers are there for quick-fix food, beverage and emergency household items. Not rocket science – but what it does mean is that often your category will not be appropriate for the whole P&C channel, it may only be appropriate for one segment. So 4000 stores may turn into 1400, for example, for your particular window of opportunity.

We have also found that there are variations in the age and gender of shoppers in each of the segments, along with variations in how shoppers move around each kind of store. For example, if your product is in the fridge in a petrol only store, you will have to work pretty hard to get people out of the petrol queue to even shop that part of the store. And doing that needs to be your POP focus, because the vast majority of shoppers there won’t even make it past the first four feet of the store. Understanding channel segment dynamics affect every decision you make about how to execute in store.

Often suppliers don’t necessarily make the adjustments that are required to enter the channel successfully, and try to repeat what they have done in grocery. This can have a disappointing outcome – the goose fails to lay the golden egg.

So what does it take to capitalize on the growth of the convenience channel?

Here is a checklist of thought-starters:

  • Are your competitors there? If so, what with, and how are they executing?
  • What are the shopper occasions for your category or product?
  • Can they be found in the convenience channel?
  • If so, do those occasions apply to the whole channel or to specific segments?
  • How many stores / $ in the relevant segments, and what percentage penetration do you think you can realistically get – what is the size of the prize?
  • Who is shopping the segments, and how (what are their key drivers and behaviour)? How can you appeal to this?
  • What kind of category are you? Could you be an impulse purchase (like CDs and DVDs in petrol stations are)?
  • What does your brand, pack, format look like? Is it appropriate for the channel, knowing that the majority of convenience shoppers are male and buying single serve formats?
  • What would be the most effective Route to Market strategy? Sometimes suppliers rely wholly on distributors without having a strategy for key account management – chains like 7ELEVEN make their decisions at head office.

These are starter questions – there are many more that need to be answered in developing an effective entry strategy for the P&C channel.

It definitely IS possible to get on that white horse if your strategy is well informed and thought out – otherwise it’s more likely to be ‘the horse you rode in on’.

Marketers losing brand control where it counts: why marketers are entering the channel debate

Topics: Channel / Retail, FMCG, Segmentation / Clustering

Media Release March 2007

More and more marketers are cottoning on: distribution channels are not just sales turf, according to Norrelle Goldring, Principal of ShopAbility.
‘Traditionally channel strategy has been seen as a function of sales because it is distribution based. However, as a marketer, do you want to relinquish control of your brand where it counts – at the coalface?’ Norrelle says.‘Brands, not just products, are in channels. More and more marketers are realising they need to be in control of how their brand is represented at every consumer touchpoint.’Norrelle, who has worked with global and national brands including Coca Cola, Nestle, Bundaberg Rum, Vodafone, Volvo and Keno, says the big brands are stepping up channel-specific brand execution.

‘It’s just not a one size fits all. Would you execute your brand the same way in a supermarket as you would in a pharmacy despite the fact that people are shopping them very differently? Smart companies are tailoring according to shopper behaviour.

‘Look around you; you’ll start to see coffee and cold beverage companies are offering cafes and bistros more subtle in-store branding than what is in supermarkets or convenience stores – to fit in with the ambience of their venue and the fact that their patrons don’t want to be beaten over the head with a brand while they are dining.

‘It’s about putting yourself in the shoes of your shoppers, and also your trading partners or retailers, and really thinking about how to be most relevant to their needs.’

According to Norrelle, some of the factors for consideration include:

  • Consumers versus shoppers (not necessarily the same) – who is interacting with your brand in which channel? How are they interacting with your brand?
  • How are the channels you are in segmented? Channels have segments, and often different target markets shop them differently. Brand execution needs to be tailored accordingly to stay relevant.
  • How the consumer purchase drivers differ by channel (how shoppers shop cafes is vastly different from how they shop department stores, for instance)
  • The role of marketing versus sales people in the channel debate, and the need to work collaboratively to ensure that ‘on brand’ execution is meaningful and effective at every consumer touchpoint.
  • The case for ‘channel brand identity’ where appropriate to increase relevance to shoppers in specific channels.

‘Ultimately, channel branding strategy will play an increasing role in marketing in the future, as marketers take a more proactive approach to how their brand is perceived (or not) at the coalface, where the shopper is.’