Targeting & Segmentation

1. Targeting & Segmentation Food Marketing Economics ApEc 4451/5451 Fall 2008 October 28, 2008 Dennis Degeneffe Research Fellow The Food Industry Center

2. Introduction • 24 Year Marketing Research Career on “Client Side”: • General Mill – Cereals, Family Flour, Food Service, and Subsidiaries • McDonald’s • Oscar Mayer – Kraft Foods • Pillsbury • General Mills • Independent Marketing Research Company – Consumer Centric Solutions LLC since 2002; Clients: • Consumer Packaged Food • Food Service • Financial Services • OTC Healthcare • Personal Care • Small Appliances • Auto Care • Academic • Research Fellow at The Food Industry Center • Occasionally Adjunct at Carlson School of Management – Part time MBA program

3. Targeting Consumers

4. I want something I can carry with me I want something simple and basic. I want an old standby I want something indulgent. I want something that doesn’t cost a lot. I want Something readily available I something exotic and interesting I wantsomething to tide me over. I want to avoid too many calories I wantfood that’slow In fat. I wantsomething unique I want something That really tastes great I want to Avoid fat & Cholesterol. I want Something Wholesome. I want Something light I want something Natural/ organic I want something to re-energize me I want something that I crave. I want something easy to prepare I want something on sale I want something filling Why Target Consumers? You can’t be everything to everyone.

5. Drivers of Buyer Behavior • Who the Consumer is: • Demographics • Attitudes • Culture • Values • The Situation a Consumer finds ones self in: • Needs Experienced • Benefit Sought

6. Product Positioning • Fundamental Elements: • Target – The Who • Benefit – The Why based on needs experienced in the situation • Frame of Reference – The context • Support - How Example of Positioning Statement: To Time Pressured Moms… Hamburger Helper is a great way to get an fresh hot meal onthe table inonly a few minutes, that the entire family will love. That is because Hamburger Helper includes all the fixins – just add it to one pound of hamburger, simmer and serve.

7. Targets?

8. Segmentation

9. Role of Segmentation “Fish where the Fish Are”

10. Good Segmentation Approaches • Can be used to identify targets • Discriminates behavior • Provides insights • Can be used to reach targets

11. Ways to Segment Consumers • Geography – e.g. Minneapolis SMSA • Demographics – e.g. College Students • Lifestage – e.g. expecting moms • Behavior – e.g. McDonald’s Heavy Users • Attitudes: • The basis for why consumers behave the way they do – closely linked to behavior. • The insight to develop effective Marketing programs. • Products • Services • Advertising

12. Approaches to Attitudinal Based Market Structure • Consumer Segmentation – Identify groupings of consumers with similar attitudes out of a diverse population. • Need States – Identify product usage situations with similar set of consumer needs. • Affinity Models – Identify groups of consumers with similar degrees of commitment to a brand.

13. Segmenting Consumers

14. Attitude Segmentation Methodology Typical approach: • Collected by a “survey.” • Questionnaire constructed to cover comprehensive set of attitude statements • Also collects other measures to relate to the attitudes. • Uses a “cluster analysis” to identify segments.

15. Seven Different Consumer Types With Respect to Food Attitudes Traditional Recipients Mainstream Nurturing Cooks Mobile Munchers Healthy Traditional Cooks Food On Demand Healthful Explorers Weary Providers From General Mills, How We Eat 2000 Excerpts from ADA Conference

16. Food Segment Profiles • Each Segment has a distinctly different approach to eating. • Mainstream Nurturing Cooks • Nurture their family through food • Meal time = quality time • Good taste is #1 consideration • Want to make the occasion special • Healthful Explorers • Actively trying to eat healthy • Focus on quality/freshness • Creative & Experimental tastes • Frequently too busy to cook, need easily accessible alternatives • Weary Providers • Dinner time is family time • Meals are a balancing act, and stressful • Prefer easy, quick, familiar foods • Tend to cater to kids tastes • Healthy Traditional Cooks • Also nurtures through food • Emphasis is on balanced nutrition • Favor wholesome, traditional foods • Discourage snacking

17. Food Segment Profiles • Each Segment has a distinctly different approach to eating… • Food on Demand • Other activities tend to have a higher priority • Do enjoy food • Food must be easy, accessible • …or not at all. • Mobile Munchers • Busy, active, on-the-go • Meals and snacking blur together • Looking for portable foods • Traditional Recipients • Want good tasting, wholesome traditional food • Rely on someone else to prepare

18. Food Segment Summary Traditional Recipients Mainstream Nurturing Cooks Food Is … Healthy Traditional Cooks Catered Love Mobile Munchers Grazing Balance Later Fresh Compromise Food On Demand Healthful Explorers Weary Providers

19. Mainstream Nurturing Cooks Healthy Traditional Cooks Weary Providers Mobile Munchers

20. Scratch Pie ala Mode Frozen Pie Lighter Fruit Tart Mainstream Nurturing Cooks Healthful Explorer Weary Provider Examples: Good Pie - Any Pie Pie to Go Mobile Munchers Traditional Recipients

21. Time To Shop 9 3 Tue 6 Savvy Game Playing Born To Shop It’s Just Groceries Haven’t A Plan Want Out Of It Budget Weary Practical & Systematic Primary HH Shoppers 15% 16% 14% 16% 14% 13% 13% This Really Neat Foods, You Do What Oops … I Forgot Why Is It That Smart Isn't Any Fun. Careful New Ideas, You Have To The Bread Again. No One But Too Many Planning Shopper -- Nice People … Do So You Guess I'll Just Me Ever Buys I Define Decisions. Makes All What's Not Can Eat What Come Back Food For The Term! To Little The Difference! to Like! You Want To Eat. Tomorrow. This House?! Money. Feel About Stressful Actively Love It! Committed Responsibility Means To End Disorganized Shopping Chore Dislike Complete, Efficient Sales / Stretch Not -- Trip Planning Real Systems Limited Ineffective (menus, lists) Savings Budget On The Fly (menus, lists) Support Coupon Necessary -- Not Worth Too Savings / Deals To The Max Planned Oblivious Savvy Confusing The Effort Bothersome Purchases Budget No Real AMajor No Real No Real Some No Real Aware Conscience Constraints Concern Constraints Constraints Concerns Constraints Range -- Many … Best Accessibility / Wherever -- Stores Shop Regular One Usual One Experiences Best Prices Sales Proximity Not Loyal Exploration, Sales, Pantry Sporadic, Items Shop: Familiar Routine Convenience Variety Deals Option Loading Forgetful Segmenting Shoppers The Seven Consumer Grocery Shopping Styles

22. Segmenting Occasions

23. Need State Segmentation Methodology Typical approach: • Collected using a “diary.” • Questionnaire constructed to cover multiple occasions • Collects what needs consumers experience, and the 5 W’s. • Uses a “cluster analysis” to identify “need states.”

24. Need State Definition • Hierarchy of needs surrounding usage occasions: Hunger Satisfaction Sensory Gratification Nutrition Nurture Others ConsumerNeeds Indulgence Emotional Needs

25. Dinner Need States Quality Time Dinners Healthful Dinners Time Constrained Dinners Traditional Family Meals Budget Stretchers Kid Pleasing Dinners

26. Defining Needs and Benefits Sought: Vs. Quality Time Dinners Kid Pleasing Dinners Are Are Not

27. Examples of Successful Marketing Initiatives Based on Segmentation

28. Affinity Consumer Structure • Divides consumers up into groupings with varying strengths of commitment to the brand: • Devoted … Staunchly loyal to the brand. • Adopters … Use the brand along with others. • Acceptors … Willing to try the brand, or infrequent user. • Available … Know little or nothing about the brand. • Rejecters … Brand is irrelevant, no intention to try it. • Identifies the proportion of the volume coming from each group • Identifies reasons for their commitment level.

29. Reasons For Commitment Level • Guinness – Among Devoted, brand is: • Authentic. • Mark of personal distinction. • Highly unique product characteristics • Heritage • Says I am a beer connoisseur • Guinness – Among Adopters, brand is: • A change of pace. • Premium imported. • Implication … Huge opportunity to leverage brand authenticity and unique product characteristics to deliver emotional benefits to users.

30. Summary of Segmentation • A powerful marketing tool. • Many different ways to segment the market. • Should: • Identify targets • Discriminate behavior • Provide insights • Be reachable • Three types of Attitudinal Segmentation studies: • Consumer Segmentation – People based on attitudes • Need States – Occasions based on needs • Affinity Segments – People based on relationships