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No More Mr and Mrs Average

September 7, 2007

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.

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