Demographic Segmentation

The supplier’s natural advantage over the retailer.

Consumer-Centric Category Management

• The Eight Foundational Steps of Category Management

• Step One: Define the Category Based on the Needs of Your Target Market– A.C. Nielsen “Demographic Profile”

• Step Two: Assign a Role to the Category That Best Supports the Retailer’s Strategy– -A.C. Nielsen “Buying Behavior”

Demographics

• Age, income, occupation, education, number of children, marital status, and all combinations thereof.

• Census data and Internet web page make it available at no cost to retailers and wholesalers. www.census.gov

• How is it used in category management? • How can provide a competitive advantage, to

suppliers or retailers?

Increasing number of SKUs

Cat

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Low substitution

High substitution

Increasing number of SKUs

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Low substitution: Steady share with each addition

Low Substitution: Strong Brands

• High measures of brand loyalty for the category (no switching)

• Demographic differences among brands• Highly similar assortments across retailers• Strong supplier influence, weak retailer

interest• Category Captain: Supplier

Increasing number of SKUs

Cat

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High substitution

High Substitution Category

• Small incremental sales to category with additional SKUs—substantial switching.

• Little or no demographic differentiation• Retailers highly differentiated• Weak, or little-known supplier brands• High proportion of sales “on deal”• Shelf-space extremely important• Retailer should retain control of category

Suppliers have an initial advantage in product differentiation

• Manufacturers must introduce new products.• New brands and extensions are introduced to

address the “unseen” motivations of buyers and can segment markets.

• Retailers seldom have the scope of resources to introduce products for a particular segment.

• Retailers’ locations, and patrons, are their point of differentiation.

The Rising Retailer (?)Corstjens and Corstjens

“Retailers must adopt broad, bland positionings: in contrast to manufacturers, retailers cannot deselect important consumer segments.

“Shopper segments exist, but they must be targeted within the store.

“Retailers must learn to handle in-store data to recognise which of their shoppers of the greatest potential…”

The Rising Retailer (?)Corstjens and Corstjens

• Retail formula proliferation cannot fulfill the same role as brand proliferation: it can be effective only in limited circumstances.

The Rising Retailer (?)Corstjens and Corstjens

• “Price is the cornerstone of retail marketing. All mass retailers have to manage the perception of their prices to convince each of their shopper groups that they offer value for the money. Positioning solely on price is only plausible for a hard discounter.”

Primary zone - 60 to 65 percent of its customers

Secondary zone - 20 percent of a store’s sales

Tertiary zone - customers who occasionally shop

at the store or shopping center

Trade Area

Based on the premise that the probability that a given customer will shop in a particular store or shopping center becomes larger as the size of store or center grows and distance or travel time from customer shrinks

Huff’s Gravity Model

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Huff’s Model Formula

Store-to-store differences within chains

• No two locations are identical– Size and orientation of parking lot – Adjacent retailers– Square feet of display area– Entrances

• What are the economies of the chain?• Demographics (?)

Buying for the store:

• Differentiate from the competitor(s):– Minimize overlapping brands– Carry unique SKUs

• Match trade area and/or patrons with the assortment– Understanding of the patrons, and trade area– Knowledge of typical store demographics– Know brand demographics

POS (scan) data tells you what sells in a retailer’s stores -- Homescan consumer panel data tells you who buys what in the stores and what they buy elsewhere

• A group of households selected to be demographically and geographically representative

• Continually providing information about their purchases

• From all outlets using in-home scannersUnderstanding your customers’

preferences allows you to tailor merchandising and operations to better meet customer needs

Homescan collects more than just demographic information allowing you to understand more about customer lifestyles

• Female/male head of household– Age– Employment– Occupation– Education

• Other household members– Age– Relationship to panel member– Employed for pay

• Household income• Race• Hispanic descent

Cable TV

Type of residence

Own/rent residence

Length of residence

Pet ownership (dog/cat and number owned)

Vehicle ownership (car/truck and number owned)

Appliance ownership

Homescan’s allows you to look at your business globally and locally

• 61,500 households• Geographically dispersed• Demographically balanced

• Projected to U.S. Census at the national, regional, and market level

• Estimates are updated monthly to reflect changes in the

Buffalo/RochesterBostonCharlotteChicago

ColumbusDenverHoustonLos Angeles

MiamiMinneapolisNew YorkPhoenixDetroit

SacramentoSt. LouisSeattleTampaDallas

AtlantaBaltimore/Wash.San AntonioPhiladelphiaSan Francisco

Pacific

Mountain

West SouthCentral

West NorthCentral East North

Central

NewEngland

Mid-Atlantic

SouthAtlantic

East SouthCentral

9 U.S. Census Divisions

CONSUMER*FACTS• How do consumers purchase a brand or a category?

CHANNEL*FACTS•How do consumers shop and buy the category in a particular retailer?

CROSS OUTLET*•What categories are Wal-Mart’s shoppers buying elsewhere?

ACCOUNT SHOPPER PROFILER• What do Wal-Mart’s shoppers look like? Which opportunities do core vs occasional shoppers hold? Which brands match with their important customers?

Homescan syndicated databases

Percent of dollar volume

 

% of Households

DETERGENTS - LIGHT DUTY 4501-7008

CTL BR - L-D LIQ 7008-13784

DAWN - L-D LIQ 7008-13785

HOUSEHOLD SIZE - 1 MEMBER 26.3 16.6 20.0 15.0

HOUSEHOLD SIZE - 2 MEMBER 32.4 34.0 27.5 34.7

HOUSEHOLD SIZE - 3-4 MEMBER 30.6 35.2 37.0 35.8

HOUSEHOLD SIZE - 5+ MEMBER 10.7 14.1 15.6 14.2

Dollar Volume Index

 

% of Households

DETERGENTS - LIGHT DUTY 4501-7008

CTL BR - L-D LIQ

7008-13784

DAWN - L-D LIQ 7008-13785

HOUSEHOLD SIZE - 1 MEMBER 26.3 63 76 57

HOUSEHOLD SIZE - 2 MEMBER 32.4 105 85 107

HOUSEHOLD SIZE - 3-4 MEMBER 30.6 115 121 117

HOUSEHOLD SIZE - 5+ MEMBER 10.7 132 146 133

Dawn L-D Liquid:5+ Household Members

133100%7.10

%2.14

population %

volume$ %eIndex valu

Interpreting A.C. Nielsen Index Measures: Clues to the Buyer Profile

• Indices equal to 100 indicate that the percentage of dollar volume is equal to their percentage of households with that demographic characteristic.

• Indices greater than 100 (120+) show disproportionate purchasing, purchasing more than expected by their share of the population.

• Conversely, those below 100 (<80), account for less of the sales than their share in the population.

Homescan’s Buying Behavior

• Category’s Role• Size of the category, relative size of

competitors– Dollar size and shares

• Importance of category across households, – Penetration and purchase frequency

• Importance of brands, dependence on suppliers– Loyalty, share of needs, repeat purchasing