Segmentation & Target Marketing

July 27, 2020

As we enter the Fall season and all of the hoopla that will surround this year’s Presidential election, we are continuing to adjust our lives around the changing conditions that COVID-19 has given us. It is important to pause and understand that regardless of what situation we are in, we still need to know who our customers are and understand what they want. If we can answer these questions, we can develop & implement our plans to ensure our success.

Over the past year, we have discussed Food Marketing Strategy, Brand Strategy and Marketing Planning. An understanding of these is essential to the success of any business, especially one that deals directly with the consumer. Now that we have “planned our work” we need to “work our plan”. The first part of this process is identifying who our customers are and more specifically, who our BEST customers are. The added twist given COVID-19 is that these customers MAY be different now given how perceptions and behaviors have changed.

If you’ve never heard of Pareto’s principle, you probably have heard of the 80/20 rule. The premise is that the top 20% of your customers represent 80% of your volume or profits. If you take this one step further, you will see that the top 4% represent 64% of your volume or profits. If you believe in this principle some important questions arise.

Do you know who these people are?

If you do, do you treat them any differently with regard to products, pricing, promotions or merchandising?

If you don’t, how can you find out who they are? You want to identify, who, what, when, where, why and how.

The first step in the process is called segmentation. This involves putting people into groups based on criteria that allow you to describe them. It can be characteristics like demographics (age, gender, ethnicity, income, education etc.), geographics (where they live, where they work, where they shop), psychographics (attitudes, interests, lifestyles) and behaviors (how they use your product/service).

We use the following questions to get at the center of the issue:

Who is your customer? (Male/female, old/young, ethnic/white, blue collar/college educated). Watch and keep track of the people that come into your business. You can set up your own spreadsheet or tracking system. The key here is that you want the people who deal with your customers the most to have control of this process.

What do they buy/consume? (Craft, seasonal, established brands, cans/bottles/draught). Have they switched their buying habits to hard seltzers or FMBs? Use your POS system to create a spreadsheet by category, container, size and flavor. You can then sort and rank the data. See if the 20/80 rule applies to your products/services.

When do they buy/consume? (Morning/night, weekday/weekend, special events, seasonal)If your POS system has a time/date function keep track of what is sold and when. This will help with inventory control & staffing.

Where do they buy/consumer? (On-premise (in store/take out/curbside, off-premise (delivery/ ecommerce), at home, at a party, at an event)

Why do the buy?  (Thirst, try something new, social/share with friends, take to a party)

How do they buy/consume? (alone, with friends)

The last three questions will require a bit more work and can be as formal as a questionnaire or as informal as asking your best customers a few questions.

Once you segment the market, you need to identify who is your “Target Market”. Who is the primary group of people that you are going to market to? This will help you with your marketing communications. Finally, you need to position your brand in the minds of your customers.

In the next blog, we will discuss Millennials, who have become the largest target market for many food and beverage companies and Gen Z, the next big group you will need to understand.

And remember, Marketing is a race with no finish line.

George Latella teaches Food Marketing at Saint Joseph’s University in Philadelphia. Food Marketing which is the largest major at Saint Joseph’s University recently celebrated its 58th anniversary. George is also a partner in Beacon Marketing group which provides Marketing planning, research, and e-commerce/direct marketing communications for food and beverage companies. George can be reached at glatella@sju.edu or 610-660-2254.

 

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