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The 5th Way

Enabling Top Line Revenues ThroughIntegrated Customer Segmentation

A product o

2012

By Paul Garrison


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About the author

Paul Garrison (paul@garrisongroup.

eu) is Chairman o the Garrison Group,

Proessor o Marketing and the ormer

Dean o the Central European Business

School. He has had a long career as

a marketing practitioner starting with

Procter & Gamble in the US and later

arriving to Eastern Europe in the mid

90s to direct Coca-Colas marketing

activities in 23 countries across the

region. Paul currently teaches at

Maastricht School o Management

in Romania, Skolkovo in Moscow and

Dartmouths Tuck School o Business in

the United States.

Enabling Top Line Revenues Through Segmentation

In October 2012, Paul Garrison will come to Bucharest to be one o the

guest speakers o Leaders in Marketing, a unique marketing conerence andorum. Book authors, international marketing practitioners and leading brand

consultants will be sharing best practices and actionable learning that can

be used immediately to generate top line revenues and ensure that your

marketing initiatives are meeting ROI objectives.

Join Leaders in Marketing or a unique opportunity to network and learn rom

the very best in the business (www.leadersinmarketing.ro )

Check out more ree resources at www.leadersinmarketing.ro

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3/34Check out more ree resources at www.leadersinmarketing.ro

Table o Contents

Catch Up Or Leap Ahead 3

Getting The Customer On The CEOs Agenda 4What Do We Want Customer Segmentation To Do? 6Limitations O Current Customer Segmentation Models 14Looking For Love In All The Wrong Places 18The Solution Was Hiding In Plain Sight 20How It Works The Case O IKEA In Russia 22Who Are The Bell Cows? 30

Summary 33


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Catch Up Or Leap Ahead

Integrated Customer Targeting is an evolutionary segmentation process

developed originally in Eastern Europe. It is an example o a new way o

marketing thinking in the East that goes beyond merely catching up to the

west, but rather to nding new opportunities to improve on best practices in

order to leap ahead.

The need or a deeper understanding about customers and their motivations

is undamental to improving marketings eectiveness in both the West

and the East. However, marketers in the West are used to having multiple

customer research tools at their disposal so many that they oten nd

it dicult to decide exactly what to do with so much data and how thesevarious sources can best be used together to drive the business orward.

Because businesses in the East are oten operating on much tighter budgets,

managers there necessarily need to get that deeper customer understanding

cheaper and aster and in doing so have broken through on a more

comprehensive method o integrating customer data that is more ecient as

well as more eective.

Marketing departments are also oten smaller in the East than their

Western counterparts but they have also turned this size limitation into an

advantage through much greater daily interaction between marketing and

other departments such as sales, HR, and operations areas o the business

that can all benet rom a deeper understanding o customer needs and

motivations.

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Getting The Customer On The CEOs Agenda

Peter Brabeck, the Chairman o Nestl, a company with signicant operations

in the East and the West, stated in a speech to employees that he wanted

marketing to be completely embedded in the business.

Beore the marketing people could get too excited about being at the

center o the Nestl universe, Brabeck quickly added, And business must

be completely embedded into marketing. Brabeck was not contradicting

himsel - he was simply pointing out the reality that good business and

good marketing are one and the same. In a successul business you must

integrate your business goals and objectives with the driver that makes it allpossible increased customer value.

Financial objectives are certainly important, but there must be an

understanding that specic customer actions drive the overall nancial results

o the business (see chart 1.a.). There needs to be a customer ocus across

the entire organization. O course, most successul executives would agree

wholeheartedly with that intention.

But i the ocus is truly on the customer and we agree that our core strategies

are meant to drive specic customer actions that ultimately drive superior

nancial perormance and shareholder value, then how much do we really

know about our customers so that we can optimize the inter-connected

results?

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While we are all very busy developing a lot o strategies to drive improved

business results, the truth is that we oten do not have enough data about

who our best customers are, or could be, and as such the chances that these

strategies will ully impact the customer are severely marginalized.

Most o us simply do not have the customer inormation we need to guide our

business growth strategies. We have bits and pieces such as some liestyle

segmentation that we hope increases the eciency o our media strategies,

and perhaps some current customer sales data that can help guide our

CRM (Customer Relationship Management) program, but do we really have

the relevant customer data we need to drive all o our customer based

strategies? The answer is probably not.

Chart 1.a. Integrated Customer and Business Objectives

(retail example)

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What Do We Want Customer Segmentation To Do?

Most current segmentation models that drive customer targeting simply

run out o gas beore they are able to reach the goal in depth customer

understanding that can guide all o our go to market growth strategies.

Beore we move into a more versatile orm o segmentation - Integrated

Customer Targeting - we should rst identiy what it is exactly that we want to

use the customer segmentation or in the rst place.

Like a lot o new marketing tools that require a lot o resources and a new

level o complexity in how you go to market, it is easy to get so lost in

the journey that you lose sight o the goal remember how technology

applications overwhelmed the original repeat and cross-selling intent o CRM?

In chart 1.a., we listed several go-to market strategic areas where an

enhanced level o customer segmentation can signicantly help target the

strategy with greater precision and thereby achieve much stronger results

attract more visitors who convert to purchasing customers who buy a lot, or

more money, more oten! The ollowing are several examples on how a moreeective customer segmentation model can drive some key go to market

strategies:

Brand positioningThis is the most obvious place to put your segmentation to work. To develop

a more involving brand positioning strategy that connects at both the

unctional and emotional level (see graph 2.a) you will need not only

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need category usage and attitude data that will help you identiy the

unctional drivers o purchase and consumption, but you will also need

broader liestyle data to uncover the crucial emotional levers that you will

need i you are going to move beyond merely satised customers to brand

advocates the highest level o customer brand involvement.

Brand archetype developmentUtilizing archetype methodology (hero, innocent, sage, outlaw, etc.) in

creating stronger brand connections is a worthy pursuit but can easily lead

you out into the poppy elds. The problem is that archetypes are not

Source: Zyman Group

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Chart 2.a. - Effective consumer research can establish the persuasionhierarchy of the brand architecture

Preference (Emotional Experience)Core benets that drive exponential growth

- Provides signicant points ofemotional leverage with customers

- Can propel to, and then maintain category

leadership

Differentiation (Functional Benets)Differentiate vs. competition

- Begins to positively differentiate your brand from the pack- But lacks the appeal to drive signicant growth

Cost of Entry (Required Features and Benets)Must meet cost of entry requirements

- Must have to gain entry into the competitive set- Wont help your brand if it has it- Will hurt your brand if it doesnt




eective as a segmentation devise in their own right because most customers

are drawn to a wide variety o archetypes.

However, better segmentation on the basis o both liestyle and category

usage can help determine which customer segments are more, or less

likely to respond to a particular brand archetype. Understanding infuencer

patterns among dierent segments can also shed considerable light on whicharchetype message will travel with greater impact rom segment to segment.

Localization strategiesThis is basically an extension o the brand positioning strategies listed in the

rst two strategic areas, but it deserves a separate point because this global/

local brand relevance debate remains a dicult balancing act with most

multi-national companies.

Global brands need consistency in how they go to market rom one country

to the next, but they also must have some local relevance. To achieve this

crucial balance marketers are very much in need o insights both rom the

category and the customers lie in general.

Category data can help you connect the global product and usage imagery

elements to ensure your brand is consistently communicating and delivering

on the key eatures and benets across multiple markets (see chart 2.b).

But or the brand to truly take hold in any market it must have some sort o

relevance to local customers, otherwise they simply wont buy

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and will instead turn to another brand that oers more relevance and

meaning to their lives.

Communication strategies

To create a more engaging communication strategy that can deliver a strongerbrand message at the right time and place you need to know when your best cus-tomer prospects are more likely to want to engage with the category and yourbrand (see graph 2.c).

Again, category driven data will tell you when, how and even partly why they pur-

chase/consume, but it will not look at their lives in a broad enough

Product Imagery

Feelingsandattitudesdirectlyrelatedtothecorebrandexperience-unctional eatures and benefts. (i.e. Disney is clean and wholesomeentertainment)

Usage Imagery Thefeelingsandemotionsassociatedwithactuallybuyingandusingthebrand(i.e.thesenseofcommunitypassiveoractive-whilebeinginStarbucks)

User Imagery

Theconnectionwiththetypeofpeoplethatusethebrand(i.e.arethey like me, or what I aspire to be?)

Associative Imagery Thelinksbetweenyourbrandandtheimageoftheotherbrands,activitiesandeventsyoualignyourselfwith(i.e.Coca-ColaandLakeBala-ton in Hungary)

GLOBAL

LOCAL

Chart 2.b. Global/local optimization

Source: Garrison Group

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context to tell you how they move through their days and nights, the media theyuse, the networks they are increasingly connecting to, and most importantly, theadvice and powerul word o mouth recommendations they receive rom socialand business networks.


Retailers need to create better in-store communication and store layouts thatenable customers to become more involved during a visit to drive both purchaseconversion and increase transaction size.

Chart 2.d shows how it could be possible to construct the physical layout o a book-store to address dierent customer segment need states.


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Chart 2.c. - Target the right message to the right people at theright time and place

Purchase IntentPurchase Intent &

Purchase Behavior

Loyalty Programs

Costumer

At home

At work/school

Entrance

Signage

Getting

Homing

Commuting

Packaging

Call-Center

News-letter

Pricing

Pre-Purchase Post-Purchase

Satisfaction &

Recommendation

Purchase

Displays

Promotion

CRM

Out and

Outside SellingEnvironment

Inside SellingEnvironment

Post-Purchase




Manuactures also need to create more involving packaging designs and a range o

availability options that have greater application to how customers use the prod-uct. Both require insights rom a deeper understanding thatrefects both the broader lives as well category usage or their existing andpotential customers.

Product developmentThe product development process or new goods and services must have the abil-ity to anticipate new demand and refect the role o the brand/products in provid-

ing a wider and/or deeper value to the customer


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Chart2.d.-Orientationandattractionpointsthatcouldguide

differenttypesofcustomersin-store(bookstoreexample)




Chart 2.e. illustrates some break-through product innovations that would havebeen very dicult to conceive without a deeper understanding about customerslives as well as a more thorough understanding o the nuances o the category, thebrand, and the business system as part o a more customer integrated ideationprocess.


The explosion o the SUV category 15 years ago wasnt driven by insights rom thecategory usage o pre-existing outdoor enthusiasts; otherwise Jeep would have

continued to oer such predictable added value benets such as ree 5,000 lbswenches and CB radios.

Chart 2.e. Customer insight driven innovation

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What is the undamental purpose/benet o this product or service?What business are you really in?

Club Med discovers that they are really in theescape and rejuvenation business the TeAntidote or Civilization and the practice ono money required on-site.

What customer target is most likelyto buy this product or service? Whatdo they really care about in theirhead, heart and gut relative to thistype o product or service?

What can this product replace? Whatother uses can it do that have notbeen considered, or what categorycan it potentially compete against?A wider look at alternatives.

What can the product do that isdierent better and special thananybody has done beore in that areao business based on what we havediscovered in the earlier steps?

How can a customer value idea be

leveraged into the business system.How can the sales, distribution andproduction resources be leveraged ormaximum eectiveness and eciency

Porsches loyal sports car anatics dont buyofen enough. Porsche shifs target to prestigeoriented customers who are more likely tobuy every two years with Cayenne and themore luxurious 911.

Vail Colorado adds simple metal bracketson back o chair lifs to hold mountain bikesand creates huge summer sport business withunder-utilized winter assets that can now at-tract repeat as well as new customers.

IKEAs room design layout allows them tomotivate more sophisticated customers tocome to IKEA rst or new ideas rom lowprice urniture positioning to much a moreinvolving inspiration positioning.

McDonalds leverages their real estate pres-

ence in Europe to launch McCae concept todominate the neighborhood third place co-ee market prior to Starbucks entry into mostEuropean countries

Ideation Area Purpose Break-Trough Example

CoreBenet?

ForWho?

Insteado What?

DierentBetterSpecial?

ValueChain




The importance o new suburban mom customers wanting to eel in control (theysit higher) and sae (all-wheel drive) was a key liestyle driver or potential newcustomers that would never have been recognized unless someone at Jeep in theearly 90s had the imagination to look broader than Jeeps existing category ornew product and positioning ideas.

The same sort o dynamic is now happening with the rapid demise o SUVs in avoro hybrids also refects a much deeper sociological issue than just rising gas prices.

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Limitations O Current Customer SegmentationModels

Customer segmentation is a hot topic in marketing globally and has been well cov-ered over the years. Daniel Yankelovich introduced the idea o moving beyond sim-ple demographic segmentation over 40 years ago and has argued that segmenta-tion has more recently moved too ar into nebulousness with an over-ocus on

segmenting customers on the basis o their liestyle rather than sticking closerto category perceptions and attitudes that he and others argue are more closelyaligned with met and unmet product needs. Hes right.

On the other hand, the practitioners o liestyle oriented segmentation would ar-gue that i you segment customers only on the basis o category involvement suchas what yogurt marketer Danone has called; Late Night Snackers or Early MorningNurturers, where exactly would you nd these customers in the real world?

Its not like these customers go to the store as strictly a yogurt consumer, and theycertainly dont engage in various orms o media with yogurt solely on their mindand a cup in their hand. It is their lie that we must understand better i we aregoing to nd them and convince them to buy more yogurt. This argument is alsoright.

Below is an overview o some commonly used segmentation models with a brieexplanation o what they can do:

1. Category based segmentation

Most large marketing driven companies have usage and attitudinal data that re-lates primarily to their category and have segmented their customers accordingly- such as what Coke has done or years with their Drinks and Drinkers studies.

As a result, these companies have some good insights into how customers spe-cically interact with their brands and with those o their competitors, as well as

some relevant current customer relationship data they can mine.

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These insights can be very helpul in developing new packaging options, competi-tive pricing strategies and seasonal promotional programs. The problem with thiscategory based segmentation is in attracting new customers to the category be-cause this segmentation model doesnt know enough about their customers over-all lives and so it is dicult to create relevance where it doesnt currently exist.

Also, in terms o emerging markets, it is typically the case that strong category us-age data isnt available because your brand, or many o your potential competitors

brands, may not be present in the market, or have been or a very short period otime.

2. Lifestyle based segmentationThe companies that have gone wholeheartedly into VALS research (Value andLiestyle) have become rustrated because although they have excellent liestylebehavior and attitudinal data that has proven useul in creating more customerinvolving advertising materials, it alls short on providing actionable insights thatcould help those marketers develop better products and services because it is lack-ing the insights on how these VAL segments specically interact with the brand orcategory.

3. Price/quality based segmentationThis is the last o the major segmentation methods oered by the likes o BCG(Boston Consulting Group) and McKinsey that seeks to dierentiate between sixor seven dierent customer groups driven purely by price on one end to premiumquality on the other (see chart 2.).

Brand

Loyalist

Brand Switchers

Pure

Price

ValueValue

SeekerUninvolved ConvenientQ

ualityDemanding

Pure

Premium

Share of Grocery Spending

13% 14% 15% 16% 19%11%12%

Price

Focused

Chart 2.. Price/quality continuum

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This price/quality segmentation is especially popular these days among FMCG (FastMoving Consumer Goods) marketers because it tends to conrm their world viewthat todays customers are looking only at two intersecting actors - quality andprice.

Their stay awake at night ear is that retailers recognize the same version o real-ity and are rapidly grabbing more market share by introducing retailer brands withincreasingly higher quality levels that moves their appeal rom what has beenprimarily lower income groups necessarily gravitating towards price as the key di-

erentiator, to higher end customers who are driven on the basis o quality moreor more and worth it. It is these higher end consumers that are starting to sus-pect that brand value is less about quality and more about an advertising acadewhich they are less inclined to buy in to literally as well as guratively.

4. Demographic based segmentation

With the most experienced o marketers divided into one o the three camps listedabove, less sophisticated marketers are avoiding any orm o psychographics andinstead nd themselves sticking with act based demographic actors such as age,sex and income.

Although banks, retailers and white goods manuactures who predominately usethis most basic orm o segmentation nd it convenient and easy to access romexisting customer data, they are increasingly coming to the realization that it lacksthe customer insights needed to create better products or better communicationstrategies.

Chart 3.a provides a summary o the various segmentation models with an indica-tion o where they can and cannot help the business develop better go to marketstrategies.

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Integrated Customer Targeting, as its name implies, doesnt attempt to avor oneorm or the other o current segmentation models in terms o what is most im-portant, but rather seeks to develop much stronger growth strategies by integrat-ing multiple orms o customer data (demographics, liestyle, category usage andprice sensitivity) into a single tool that enables you to go to market with products

that are more meaningul within customers lives, deliverable relative to existingbrand and category usage and expectations, and deendable because your brandhas added value that can better resist purely price driven competition.

Brand Positioning

Communication Strategies

New Product Development

Cust. Relationship Mgmt

Supply Chain Management

Availability Strategies

Corp. Social Responsibility

Localization Strategy

Packaging and Pricing

Most Commonly Used Customer Segmentation Models

Yes

Lifestyle Based

Segmentation

Brand/Category

Usage and

Attitudes Based

Price/Value

Based

Se mentation

Demographic

Based

Se mentation

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

Yes

No No

NoPartl

Partl

Yes

No

Yes

Yes

Yes

Partl

No

Yes

Yes

Yes

No

Partl

Yes

Yes

Partl

Partl

Partl

Key Go-to-MarketGrowth Strategies

Chart 3.a Linking customer strategies with existing customer segmentation methods

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LookingForLoveInAllTheWrongPlaces

The seeds or this Integrated Customer Targeting method was inspired rom an un-likely source MTVs Room Raiders TV program, a modern adaptation o the clas-sic Dating Game show that was aired in various orms around the world in the 60sand 70s. The original show was basically a ocus group on dating.

A young woman would ask three men sitting behind a panel a series o category

questions. The three bachelor respondents would typically answer in a way thatmost marketers are all too amiliar with on why their ocus groups so oten gowrong.

The young bachelor on the Dating Game show would usually answer the givenquestion such as do you believe in kissing on the rst date or their avorite rstdate places based on one o three primary intentions, rather than on what he re-ally believes:

Whathethinksthegirlwantstobelieveabouthim Whathethinkstheaudiencewantstobelieveabouthim Whathewantsthetwoguyssittingnexttohimtobelieveabouthim

When the girl nally picks bachelor number two, you groan and say she got it allwrong. From your perspective (as the audience you enjoyed a broader contextthan she can rom the other side o the view blocking panel) you were able to seeand read acial expressions, could see what he was dressed like, how he interactedwith his peers, and so orth all o which led you to believe that you had better

insights on who was the better date choice or the girl beyond the stated answers.

MTVs Room Raiders went deeper and revealed much better insights about thethree bachelors than you or the girl was ever able to do within the old Dating Gameormat. In Room Raiders, the girl visits each prospective dates home while theyare away beore she ever gets around to asking them questions in person whichin eect become more validation questions based on what she has already discov-ered in their kitchen, bathroom, bedroom and closets.

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Because there is now an even larger perspective on the lives o the three datecandidates, we ound that we almost always agreed with her nal decision as be-ing the right choice or her. She could see what clothes they really wore based onwear and tear, what was in their cupboards, rerigerators, or medicine cabinets.She could discover their avorite sites on the internet, what magazines or booksthey read, and even see the mail they received.

The MTVs Room Raiders illustrated in a very undamental way that we need a

more integrated (category and liestyle) model o segmentation and customer un-derstanding.

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The Solution Was Hiding In Plain Sight

There is typically a broad single source data base available in almost any marketin the world that large research companies have developed over the years to e-ciently research hundreds o categories and then sell this essentially category andbrand data on a piecemeal basis to individual brands and their agencies. One othe most known o these researches is TGI a data base that has primarily been

used by a wide range o brands rom sot drinks,automobile manuacturers, mobile phone operators, and retailers to betterunderstand how their customers and their competitors customers interact withmedia.

To answer the media question TGI goes into incredible detail on not only whatmedia customers interact with, but also how they move about in their daily lives sothat media planners can identiy new media opportunities. However, because thedata covers so many individual categories, it becomes possible to look at the sum

o the parts TGI data as a composite picture to determine who people are based ona wider selection o brand, product, media and leisure choices.

All o the liestyle choices that this data represents within a single source database oer much deeper insights than how the data base has typically been usedon a micro category level, rather than on the macro liestyle level that the compos-ite data can now refect. TGI and several other single source data bases like themgo well beyond room raiding because they cover a lot more about what people dothan what happens only within their home. It tracks where they go on vacation,how oten they go out per week and where.

And these data bases are much larger than what most companies could aord ontheir own 36,000 respondents or TGI in Russia, or example. Because it is con-ducted quarterly in most markets, you can even dig into the data with the righttools to determine who is the rst to buy a new product in a category the valu-able early adopters.

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We all know that the key actor in movie marketing is to reach those people thatwatch movies the opening weekend because they are the infuencers who make ittheir job to tell the rest o us which movies to watch. But how does this dier oran action movie, a romance, or a amily movie. Thats whyliestyle segments (i.e. Actualizer Parents) layered on top o categorysegmentation (i.e. First Weekend Movie Goers) is so crucial to answer theimportant infuencer question. Marketers need to know who these people are spe-cically and what else are they buying and using so that we can better

understand their lives rom a much more holistic standpoint (see graph 3.a).

Life Driven Product Driven

3.a Integrated Customer Targeting Inputs Process

Customer attitudesabout their lives

High Value Target

Selection andInsights Mining

Customer usage andattitudes about acategory(Phones, Beer, Cars etc)

More PersonallyInvolving BrandConnections

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How It Works The Case O IKEA In Russia

We developed a methodology to utilize these large single source data bases, com-bine them with other existing category data available within most companies tocreate a new segmentation process that we call Integrated Customer Targeting.Not an incredibly innovative name, but it gets the job done. The rst step in theIntegrated Customer Targeting process is to create a mathematical model that

enables us take the entire TGI data base and lter it through a personality map-ping model.

We preer the Adlers personality dimensions as a base model (see chart 3.b) be-cause it is popular tool that enjoys wide use in research circles and also increasesthe cross correlation capabilities with other researches that are important later onin the process as we layer on additional primary research studies rom theclient company or elsewhere. What happens in the initial ltering process is thatthe thousands o respondents begin to cluster on the basis o similar purchasing

behavior and attitudinal statements included in the TGI survey that refect sharedvalues, attitudes and behavior.

In each market there are a multitude o brands that are highly indicative o lie-style values and attitudes. Choices in automobiles, mobile phone, cigarettes andalcoholic beverages are the most obvious liestyle indicators, but in the case oHungary we ound one particularly revealing brand/liestyle indicator within 100%

juice brands. HohesC and Granini are two high end juice brands that refect verydierent values. Granini, as the name and beautiul designer package would tell

you, is all about style.

In contrast, HohesC, as the name and very scientic looking package would tellyou, is much more about substance. It is basically the same product 100%orange juice, but the type o mom who puts HohesC on the table is very dierentthan the mom who puts Granini on the table. Within the data base there are liter-ally hundreds o brand choices that indicate a very distinct liestyle story.

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As a second step we dig into the new clusters to better understand the core char-acteristics o each cluster. IKEA in Russia has used liestage demographic criteriabecause understanding this actor is so important in separatingundamental home living circumstances. The three liestages they use in the seg-mentation we developed or Russia are early (18+ pre-kids), parents, and seniors.Graph 3.c. is an example o parents lie stage segmentation orRussia.


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3.b. - Personality dimensions serve as the bases o theIntegrated Customer Targeting lie segmentation

Source: Alred Adler




From the demographic aspects o the database we know that Fulllers,Balancers and Guiders are among the highest income segments. However, theway they live their lives is remarkably dierent, and, consequently, how and whythey shop at IKEA is also strikingly dierent (see graph 3.d). And that is what IKEAmust know i they intend to increase the percentage who visit, visit requency, pur-chase conversion rates on each visit, and o course, potential transaction size the

our most important business success drivers or IKEA.

3.c. Parents liestage segments

Source: Garrison Group and IKEA Russia

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From the demographic aspects o the database we know that Fulllers,Balancers and Guiders are among the highest income segments. However, theway they live their lives is remarkably dierent, and, consequently, how and whythey shop at IKEA is also strikingly dierent (see graph 3.d). And that is what IKEAmust know i they intend to increase the percentage who visit, visit requency, pur-chase conversion rates on each visit, and o course, potential transaction size the

our most important business success drivers or IKEA.

Chart 3.d. IKEA customer penetration or Parents lie stage

Source: Garrison Group, IKEA Russia, TGI (data or Moscow, St. Petersburg and Kazan)

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Balancers is a segment name that represents a widely recognized liestyle in theWest. They exist in Russia, as well as throughout Eastern Europe, but what and howthey balance is somewhat dierent. The insight or these people in Eastern Europethat is much more pre-dominant than in the West is that the Russian Balancers areincredibly guilt driven due to the act that they desperately want to provide a betterlie or their amilies than their own parents could oer them in previous times, yetthey also want to be a tight amily unit like it was in the old days when they werechildren beore the political changes.

Add to that an enormous amount o opportunities available in Russia today thatoer one liestyle advantage but take rom the other and you begin to understandthe guilt picture. Because they dont eel that they spend enough time at work orat home and eel badly about it in both places that they tend to over-compensatein bursts o spontaneity that refects their home living category usage. Like otherRussian parent segments, Balancers spend a lot on their children, but they are morelikely to edge towards spoiling their children with race car themed bedroom setsand big home entertainment centers equipped with the latest gadgets.

Guiders are another high value segment in IKEAs parents liestage segmentationand again, relative to demographics such as income and educational level, theyare similar to Fulllers and Balancers. The dierence is that they do not eel guiltyabout their time spent at work because they have a well-ocused plan. They maylive in the suburbs or in the center - the deciding actor is typically the quality olocal schools. Their children may have computers and other gadgets, but the ocusis less on spoiling than on preparation. The category hot button or them are livingrooms that are connected to the kitchen so that they can cook and interact with the

amily at the same time. Unlike cocoon driven Fulllers, bedrooms are much lessimportant or Guiders and they like them to be in close proximity to the childrensroom, all o which are centered on the amily room/kitchen.

The Fulllers, as graph 3.c. showed, are one o the most sel-ocused o the seg-ments. Fulllers would tell you that the 16 hour days and extensive business trave-ling and other engagements are or the sake o their amilies and the better lie theyare determined that such hard work and success will provide or them. But the real-ity is that they are doing it because they have a consuming obsession o living up

to their own expectations and the expectations o others around them. It is aboutthemselves.

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They were expected to be the most successul out o the university and they havebeen wholly ocused or quite some time on proving that assessment correct. Orperhaps they were even underestimated in school (the Russian equivalent o BillGates), but the point is that they are still obsessed with ullling expectations hence the name we gave them. They shop at IKEA at a rate o about hal the lies-tage average but their ocus, more than any other segment, is on bedrooms.

They spend disproportionately on big comortable beds and the reason has muchto do with their liestyle. They are on all the time and the only treasured

moments they get is to retreat into the secure cocoon o their warm and soothingbedroom. We also know that in the living room and kitchen areas they are moreconcerned about style rather than substance, but it is in bedrooms that IKEA isable to really capture them emotionally.

The early liestage segments (see graph 3.e) are even more distinct than with theparent liestage not only in how they live their lives, but also in how and why theyshop at IKEA (see graph 3.).

Chart 3.e. Early liestage segments

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The two highest value segments (potential to shop at IKEA) could not be any more

dierent rom a liestyle standpoint, but demographically they are very similar asboth are well educated and nancially relatively well-o compared to their peers.They also shop a lot at IKEA, but it is here that the dierence is most striking andit is directly related to who they are as people rom a more holistic standpoint.Chardonnay Girls are basically the Sex in the City TV show characters Russianstyle. Like their New York counter parts they have a problem nding Mister Rightbecause they typically go or single Russian Peacocks or married Fulllers. Style ismore important than substance which is refected in their dating choice as well asmuch o their social and ashion choices. However, they yearn or small studio liv-

ing settings with lots o mirrors (condence builders) and matching accessories aremajor hot buttons or them.

3.. IKEA customer penetration or Early liestage

Source: Garrison Group, IKEA Russia, TGI (data or Moscow, St. Petersburg and Kazan)

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The internal IKEA merchandising group that puts together those living areas on the upper

foor are well aware o this because they have been ully brieed on the particulars includingsegment day in the lie and day in the store training videos that IKEA has produced orthe Russian market so that when a Chardonnay Girl walks by one o the settings targetingher, she immediately eels this is me.

Pull out soas are also important or visiting amily and riend rom the countryside (a lot oChardonnay Girls are small city girls attracted to the uzz and buzz o Moscow) and or thosegirls only nights spent commiserating over the latest boyriend break up.

Progressive Intellectuals is a group that IKEA was surprised to nd they attracted in suchnumbers the highest percentage o IKEA shoppers in the entire liestage, neck and neckwith the Chardonnay Girls. Unlike their western counterparts that we would call Alterna-tives, the nearest Russian equivalent called Progressive Intellectuals are less green and typi-cally work or multi-nationals or local big companies just as the Chardonnay Girls do. Buttheir liestyle and resulting purchasing patterns dier dramatically.Progressive Intellectuals are much too eclectic to nd comort in soas, tables, chairs andcurtains that all match. Where Chardonnay Girls are likely to place a mirror, a ProgressiveIntellectuals will add another bookshel (their source o intellectual condence). So whythen do they go to IKEA at a rate o almost two times the liestage average? It is to visit and

shop in IKEAs amous Market Hall on the ground foor. IKEAs Market Hall is a wonderulassortment o nick knacks, abrics and accessories that allows the Progressive Intellectualsuniquely personal style to fourish and be ully realized.

Time spent in the store is also dramatically dierent as we have learned by combining thetraditional category and brand usage and attitude studies IKEA uses with the broader seg-mentation the TGI data provides. Chardonnay Girls tend to spend between 2.5 to 3 hours inan IKEA visit that happens about once per month.

Progressive Intellectuals only visit about every six weeks and stay only about one hour in

the store. Furthermore, Chardonnay Girls are more likely to all into to the sweet temptationo all the ad-on sales placed around the room-settings (even beore arriving to the MarketHall), whereas Progressive Intellectuals do more conscious and planned purchases and areless likely will be driven by impulse.

The ability to combine the data rom IKEAs usage and attitude studies within the broaderIntegrated Customer Targeting process is possible by nding the attitudinal statement thatoverlap between the two data bases and then using these as data doorways to either bringin broader inormation into the IKEA customized research ndings

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WhoAreTheBellCows?The nal benet this Integrated Customer Targeting process oers to marketers is the abil-ity to determine which segments are more likely to infuence other segments and why. Asindividuals living in a society we all recognize that we routinely look to certain people weknow to help us with inormation and knowledge that we believe they process, that orsome reason or another, we lack. By digging into purchasing patterns o a very broad andvery deep data base in Integrated Customer Targeting we can identiy certain characteris-tics that help us determine who these infuencers are. What is important to marketers whohave specic products and services to sell, is the ability to understand who the infuencers

are relative to specic categories.

Chart 4.a. Fashion category infuencers


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We know rom the Russian segmentation that Chardonnay Girls are infuential establishingashion trends (see graph 4.a), but depending on the style, Progressive Intellectuals can alsobe quite infuential, but to dierent segments.

Chardonnay Girls and Progressive Intellectuals are both trend setters in ashion butthrough very dierent styles. In contrast the role hierarchy o infuence changessignicantly when we look at the travel and tourism category (see graph 4.b).

Chart 4.b. Tourism and travel infuencers


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Wellness hotels are a rapidly growing category in Eastern Europe and Russia, but almost all

are positioned with benets and packaging that target Fulllers.

The reason or this was interesting to discover in our research when we learned that mostwellness hotel owners are themselves Fulllers and consequently are caught in thesel-limiting trap o thinking they themselves are typical o their customers.

Consequently, they are in eect marketing to themselves. They have the Fulller segmentwell understood but it is a signicantly smaller market than they could enjoy i they had abetter understanding o who could be their best potential customers and their muchdierent needs.

Bolt On Capability

As stated earlier, the key to the impact o this Integrated Customer Targeting process is thatit does not attempt to rank one particular model o previous segmentations over another,but seeks to combine the unique benets o each so that a uller picture o your brand, yourcompetitors and your customers emerge.

While it is certainly a leap ahead methodology, it is more evolutionary rather than

revolutionary in application. This should be comorting to most marketers because it doesnot require throwing out everything they have expensively done previously, but builds on towhere they are by adding a new and broader data base combined with a new orm osegmentation modeling.

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Summary

Get on the CEOs agenda by better clariying why deeper customer understanding needs tobe there and how it can be best utilized to drive better shareholder value.

Beore you start down the complicated and oten expensive path o customer segmenta-tion, it is undamental in importance that the company rst assess what it is that they needthe segmentation or (brand positioning, communication strategies, distribution activities,etc.) and how these strategies will drive specic customer actions and the impact o theseactions on the overall nancial results o the business.

Customer understanding and how that links to core business growth strategies is too im-portant to leave solely to the marketing guys. It must be integrated into every aspect othe business that impacts the customer value proposition o the company and thereoredeserves to be high on the agenda o the CEO.

It isnt enough to know how customers interact with your brand. Its important, but itsnot enough. It is also important to know how customers view your brands relative to yourcompetitors as well as within the category drivers o satisaction. But unless you can under-stand how actors such as brand attitudes and category usage are refected in the broader

lives o customers, you will nd it very dicult to emotionally connect with thosecustomers.

And when you have the ability to truly connect emotionally as well as unctionally with yourcustomers, as IKEA has been able to do in Russia, and elsewhere where they have employedthe Integrated Customer Targeting model, you will nd it enables a greatly enhanced abilityto target your best customer prospects with the right products communicated at the righttime and place to optimize your marketing impact and eciencies. It is no accident thatthis model was developed in Eastern Europe where once again, necessity is the mother oinvention.

It is well accepted that the customer is changing at an unprecedented rate in these mar-kets and that this rapid change is refected in both their brand usage as well as within theirevolving liestyles.

And because marketing budgets are oten more restricted in Eastern Europe, it was im-perative that we not only nd a method to access better customer knowledge more costeciently, but also that the marketing strategies and tactics that result rom this new seg-mentation allows us to ensure that limited marketing budgets are truly targeting the rightpeople at the right time.

Th l th I t t d C t T ti h i t th i l

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001 the fifth way

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