WELCOME TO OUR BLOG!

The posts here represent the opinions of CMB employees and guests—not necessarily the company as a whole. 

Subscribe to Email Updates

The Price Is Right (or IS it?)

Posted by Abe Vinjamuri

Thu, Jan 22, 2015

describe the image

When Redbox, the movie rental kiosk company, raised their prices 25%, many analysts saw the move as desperate—predicting significant losses to market share in 2015 and 2016. At the same time, the company’s stock rose, with investors expecting customers to adapt to the higher prices. So who’s right?  I have some predictions, but we’ll leave those for another blog. Today, I want to write about some of the fundamental questions companies need to ask before they embark on a new pricing strategy.

If you think pricing isn’t all that important, here’s something to ponder: a 1% increase in prices of Wal-Mart products ($10 on a $1,000 TV), assuming a demand around existing levels, would increase operating profits by about 20% and add about $48 billion to Wal-Mart’s market cap.

Companies rarely approach pricing from a “value to customers” perspective. Even when they do, they don’t fully exploit the potential of value based pricing for fear of backlash. For decades, airlines have understood the importance of pricing, and, in my opinion, outside of CPG companies (and some new tech entrants) have best implemented and used pricing as a tool for competitive advantage.

For any pricing strategy to succeed, you need a well thought out plan. Answer the following questions to get started:

1. Who is the customer?

a. While you might have customers you've served for a long time, you still need to ask yourself how people interact with your products. Are there touch points you’re currently ignoring? Are your current customers the ones you should be serving?

      • How can you answer these questions? Start by observing and getting these discussions going.
      • When’s the last time you did a Segmentation? If it’s been more than 2-3 years, that’s another potential starting place.

2. What are the closest competitive offerings?

3. What is the monetary value of your product to the market?

a. Think of this in terms of the savings your product could offer customers over competitor products. This doesn’t automatically mean a lower price. A higher priced product could offer savings in multiple forms—a few examples include a lower cost of ownership, lower maintenance costs, and peace of mind. 

4. How are the different product features valued?

a. To figure this out, you can conduct choice exercises that replicate the market behavior of consumers. A good choice exercise must include, at a minimum, products that together control 60% of the market. Here’s another tip: make sure you also include future offerings and even some potentially ridiculous products you would never offer. 

5. Based on the above steps, are there different customer segments? If yes, what are the optimal product and pricing tactics for each segment?

a. You also need to consider whether there are psychological price barriers for different customer segments that must be kept in mind.

Answering the above questions is a battle half won. For pricing to be truly successful, you need to go beyond coming up with tactics. Answering the next set of questions can be the difference between a good strategy and a great strategy.

1. What is the messaging and communication strategy for...?

a. Product value?

b. Pricing?

2. Is the above pricing strategy feasible? Think:

a. How crowded is the marketplace?

b. Is there a clear market leader?

c. How mature is the market?

d. Is your organization trying to maximize profits, gain a foothold in the market, or maximize share?

3. What is the action plan to react to competitive moves in the marketplace?

4. How do you plan on approaching end-of-life pricing for your products and services?

As you can see, building a thorough pricing strategy is not an easy task. At CMB and South Street Strategy Group, we take our pricing research seriously. We're experts at not only conducting research but also helping clients with rollout plans, and we have a lot of experience guiding clients from a wide range of industries through these steps.

If you’re interested in reading about this further, I’d highly recommend Thomas Nagle’s The Strategy and Tactics of Pricing and Rafi Mohammed’s The 1% Windfall. And, of course, I’d be more than happy to chat with you about pricing structures in the comments! 

Abe is a Senior Project Manager, strategy junkie, and CrossFit enthusiast. He's recently taken up snowboarding so watch out if you're headed to the slopes. 

Topics: strategy consulting, market strategy and segmentation

Focusing in a World Full of Distractions

Posted by Judy Melanson

Fri, Nov 21, 2014

cmb, focus, communicationOur company’s Internet was down for a few hours earlier this week. While the IT team scrambled to identify and fix the problem, the project staff’s reaction to the news caused many of them (us!) to look like a deer caught in headlights: stunned. But because we, by nature, are problem solvers, the staff quickly sprang into action. The “work-arounds” were identified and shared, and people dispersed. Some, in the quest for free Wi-Fi, temporarily moved into Starbucks or the train station for a few hours. Others took the time to engage with colleagues in-person (!) to brainstorm, strategize, or simply catch up. It wasn’t long before the IT team got the company back online, but the service interruption has caused me to reflect on our work and purpose.Years ago, in my M.B.A. capstone strategy course at Babson College, I competed in a strategy game with other teams in the class. The teams had to use the information available to make decisions and set the strategy for our pretend companies. We had to answer questions like: what markets should we conquer? What should the features and pricing structures be for our products? What investments should we make in research, advertising, and operations?

My team chose a simple strategy: world domination. We decided we could outmaneuver our competitors with a first-to-market strategy. We flew out of the gate, introduced our first generation product in multiple markets, and, over the course of several weeks. . . we failed in a dramatic fashion. The lesson I learned from the course is one I carry with me to this day: focus. The teams that performed best studied the market and adapted their products and pricing structures to reflect market needs. Only then did they proceed with a plan and a goal to execute their plan as well as they could. 

I’m celebrating my 22nd anniversary at Chadwick Martin Bailey this week, and one of the things that I love about what we do is helping our clients make decisions—particularly decisions that are complex and have some level of risk associated with them. The information we provide enables clients to focus on high potential opportunities across a range of areas: market segments, operational improvements, new products, digital marketing, high-value customers, and more. We help our clients determine which alternatives have potential (for growth, for profit, for brand extension) and provide insight into how they can tackle those high potential alternatives. Resources—like time and money—are limited everywhere. Deciding what to do and what to ignore is essential for business success, team focus, execution, and sanity.

The Internet interruption this week forced me to focus on what I had to do without distractions. It also, strangely enough, empowered me to choose how to spend my day instead of feeling like my job is to constantly respond to communications. At this very moment, I can be reached instantly via four phones, three social networks, two email addresses, and one online chat system. . . that’s ten communication channels. At this stage in my career, communication with clients, prospects, and team members is essential to my success, which is why I monitor and quickly respond to all ten communication channels.  But this week’s Internet interruption has caused me to challenge my use of these channels and to consider how I can be more effective and focused in a world of constant interruption. 

Anyone want to guess what my 2015 New Year’s Resolution will be? 

Judy is VP of CMB's Travel and Entertainment practice and loves collaborating with her clients. She's the mom of two college students and the wife of an oyster farmer. Follow Judy on Twitter at @Judy_LC.

WEBINAR: The New Hotel Path to Purchase: The Mobile, Social, and Online Journey – Listen to Judy in action as she talks about this study we did as part of CMB’s Consumer Pulse program. We asked 2,000 leisure travelers to share their journey from awareness to booking. This webinar will give you insight into the role of mobile, apps, customer reviews, and social media. 

Watch Now!

 

Topics: Chadwick Martin Bailey, strategy consulting, business decisions, consumer insights, market strategy and segmentation

Parents at the Tumble Gym: A Segmentation Analysis

Posted by Jessica Chavez

Wed, Jun 25, 2014

segmentation, parenting, cmb, chadwick martin baileyOn Saturdays, when the weather is not fit for the playground, I take my toddler to a tumble gym where he can run, climb, and kick balls around with other kids his age.  Parents must accompany kids in the play area as this is a free-form play center without an employed staff (other than the front desk attendant).  As a market researcher and a perpetual observer of the human condition, I’ve noticed that these parents fall into three distinct groups: the super-involved group, the middle-of-the-road group, and the barely-involved group.The super-involved parents take full control of their child’s playtime.  They grab the ball and throw it to their kid. They build forts. They chase the kids around.  They completely guide their child’s playtime by initiating all the activities.  “Over here, Jimmy!  Let’s build a ramp and climb up!  Now let’s build a fort!  Ooh, let’s grab that ball and kick it!”

The middle-of-the-road group lets the kids play on their own, but they also keep an eye out and intervene when needed. For example, a parent in this group would intervene if the child is looking dangerously unstable while climbing the fort, or if the child steals another kid’s ball and sparks a meltdown.

The barely-involved parents tend to lean against the wall and stay on their phones—probably checking Facebook. They don’t know where their kid is or what their kid is doing.  For all they know, their child could be scaling a four foot wall and jumping onto another kid’s head.

This just demonstrates this simple fact: people are more the same than they are different.  This is why I love segmentation studies—it’s fascinating that almost everyone can be grouped together based on similar behaviors.

At CMB, we strive to make our segmentation studies relevant, meaningful, and actionable.  To this end, we have found the following five-point plan valuable for guiding our segmentation studies:

  • Start with the End in Mind: Determine how the definition and understanding of segments will be used before you begin.
  • Allow for Multiple Bases: Take a comprehensive, model-based approach that incorporates all potential bases.
  • Have an Open Mind: Let the segments define themselves.
  • Leverage Existing Resources: Harness the power of your internal databases.
  • Create a Plan of Action: Focus on internal deployment from the start.

Because each segmentation study is different, using appropriate selection criteria ensures that segments can be acted upon.  In the case of the tumble gym patrons, we might recommend that marketing efforts be based on a psychographic segmentation.  What are the parenting philosophies?  In what ways does this motivate the parents, and how can marketing efforts be targeted to the low-hanging fruit?

Incidentally, I find that I fall into the middle segment.

Jessica is a Data Manager at CMB and can’t help but mentally segment the population at large.

Want to learn more about segmentation? In the “The 5 C’s of Great Segmentation Socializers,” Brant Cruz shares 5 tips for making sure your segmentation is embraced and used in your organization. 


Webinar: Modularized Research Design for a Mobile World

Join us and Research Now to learn about the modularized traditional purchasing survey we created, which allows researchers to reach mobile shoppers en mass. We'll review sampling and weighting best practices and study design considerations as well as our “data-stitching” process. 

Watch Now!

Topics: methodology, market strategy and segmentation

The Main Ingredient: The Market Research in your Pantry

Posted by Dana Vaille

Wed, Apr 17, 2013

market research foodThe New York Times article, The Extraordinary Science of Addictive Junk Food, caught my attention by linking the hot topic of “junk food” and the obesity epidemic to the market research that supports it.  This is where my inner geek gets really excited—it’s not often that two things I’m passionate about (nutrition and market research) are so perfectly linked. 

Ever wonder why it’s virtually impossible to eat just one Dorito? Or how they got the recipe for Dr. Pepper just right?  How do you think they engineered Cheetos into the perfect cheesy, crunchy, melt-in-your-mouth treat?  As any market researcher knows, it goes far beyond basic trial and error—this isn’t like asking a few people if they like your new brownie mix. But even for someone who lives and breathes market research, the article was incredibly illuminating. Companies put a lot of time and effort into developing foods that will both taste good and be profitable; they consider the basic principles of supply and demand, and couple that with food science and a lot of market research to fill our needs and desires.

Because I know very little about food science, I won’t talk about the “bliss point” (the levels of sugar, fat and salt in processed food that keep us craving more) though I find it fascinating.  Instead, here are some fascinating examples of how market research plays a role in determining what foods end up on the shelves of your local grocery store and in millions of pantries around the world.

Qualitative research identifies a need
In the article, we learn how Oscar Meyer conducted focus groups comprised of working moms to learn not what they were feeding their kids for lunch, but how they felt about the challenges and expectations they had in providing meals for their children. Oscar Meyer learned that these moms were strapped for time and felt pressured to provide a full lunch, while also getting themselves out the door, and to the office. The qualitative research revealed some of the tremendous sociological, psychological, and economic pressures faced by moms.  The company’s solution was Lunchables—a hugely successful product, with sales of $218 million in the first year.

Conjoint analysis configures a new product
Campbell’s Soup used a statistical method called conjoint analysis, to determine the optimal product configuration(s) for their soups.  We use conjoint analysis quite often ourselves because it lets us measure and evaluate the relative importance of individual characteristics and determine the right combinations of these characteristics. Campbell’s used conjoint the same way—to optimize the perfect combinations of ingredients, texture, taste, mouth feel, and so on, to (literally) engineer the ideal food.

Segmentation pinpoints a new target audience
Prego conducted segmentation research to find that there are three primary segments of spaghetti sauce consumers: those who like their sauce plain, those who prefer it to be spicy, and those who like it extra-chunky; the key here is that when the research was conducted, there was no extra-chunky tomato sauce on the market! Prego was able to identify a huge segment of the market whose needs (for extra-chunky tomato sauce) were not being met; the result was a new Prego “extra chunky” sauce that dominated the market.

Food is more than just fuel, especially for those of us lucky enough to have plenty to eat… it’s about things like family, comfort, convenience and love.  And whether you won’t touch a GMO or want Mayor Bloomberg to leave your giant sodas alone, it’s important to know when you grab that bag of chips—the first ingredient is most likely a ton of market research.

Dana is Research Director at CMB. Her husband’s recent conversion to a vegan diet has her thinking about food science even more than usual, though she continues to enjoy cheese.

Check out our latest webinar: The 6 Secrets of Succesful Segmentation, it's much healthier than Doritos we promise.

Topics: advanced analytics, qualitative research, market strategy and segmentation

The Segmentation Research Crisis

Posted by Rich Schreuer

Mon, Mar 25, 2013

A lot of time and money is wasted on segmentation studies. Here’s why, and what to do about it.

Segmentation Secrets CMBLast November I partnered with a banking client for a conference presentation on a segmentation study we conducted to help guide his organization towards greater customer-centricity. The study provided market insight to help transition from a product-based to a customer-centric organization by identifying need, attitude, and behavior-based segments.  The results helped them develop value propositions customized for each segment, which addressed products, messaging and customer experiences. 

The study was a great success. It’s used by our client in many ways, and was “actionable” in every sense of the word.  But rather than dwelling on our very great success, it got me thinking about why segmentation studies are often not acted upon.  In my 25 years of market research experience, I have found that segmentation studies are often found “interesting” but not “actionable.”  And it’s often not a function of the quality of research.  Poorly executed studies are never actionable.  But even well executed studies may not be actionable.  (And, by the way, when a client finds a study “interesting,” for me, that’s code for “I don’t want to hurt your feelings, but you failed.”)

Back to the conference presentation…at the start of our talk I asked the audience how many had worked on  well-executed segmentation studies (either as a supplier or a client) that were ultimately deemed “not useful.”  I knew the situation was bad, but I was shocked when about four-fifths of the audience raised their hand. So, here are a number of things we at CMB have learned over years about how to make segmentation actionable.  Note they don’t have anything to do with the mechanics of execution.

  1. It’s the process, stupid (apologies to James Carville)
    While any good market research firm can write a decent questionnaire, structure a sound sample, and use state-of-the art analysis techniques, it’s the process that usually determines the project’s fate.  Simply soliciting client input, executing the study and presenting results is not enough.  The study will be a success if the process involves making information-users partners by capturing their definition of success, upcoming decisions and hypotheses, and then including these partners in selection the final segmentation solution.

  2. Articulate and agree on business decisions
    Our experience shows that while, many research consumers are good at listing information needs, few actually identify the decisions they intend to make with this information.  Most seem to believe that if they have enough information they will find insights to help make as yet undetermined decisions.  This problem is especially acute in segmentation studies, because different types of decisions (product development vs. messaging vs. targeting) require different type questions and measurement techniques.

  3. Many options, but no silver bullet
    Over many years and many studies I have never had an engagement where one segmentation solution worked equally well for all decisions.  For example, solutions that are stronger for targeting will typically be weaker for messaging.   At CMB, our process involves examining and rejecting up to 50 solutions, and then presenting four or five really good ones to our client. This is where management art blends with science.  By understanding competing decisions at the start, we make rational tradeoffs to select the best solution.

  4. Real work begins when the study ends
    A segmentation study is typically treated as a discrete project with a beginning and end date.  If the final presentation is well-received the supplier and client may have celebratory drinks or dinner, if not the supplier quietly slinks off to the airport.  But the reality is that no matter how positive the initial reaction, segmentation studies can die on the vine if planning for implementation doesn’t occur before the final presentation.  In successful segmentation engagements, the final presentation is not “the end,” but rather “the end of the beginning.”  Segmentation often requires managers to think differently about the market, and this can’t occur without a process to support and reinforce this way of thinking.  We typically use a set of cross-functional workshops in which participants work with the information and participate in exercises to develop plans with input and support from the group

If you can internalize and act on these principles you’ll never have to slink back to airport after a final presentation. 

Rich is Senior VP and Chief Methodologist at CMB, he also knows the secrets of raising chickens, and the lost art of ski ballet.

You didn’t think we’d give away all our secrets did you? Join us this Wednesday the 27th at noon to learn more secrets to successful segmentation.

Topics: business decisions, research design, webinar, market strategy and segmentation

Upcoming Webinar February 28th: Segmentation as a Change Agent

Posted by Mark Carr

Fri, Feb 22, 2013

describe the imageAs with many financial services firms, SunTrust Bank has had to re-consider its strategy over the past several years. My colleagues at Chadwick Martin Bailey (CMB is South Street’s sister company) and I had the privilege of recently working with the company as it shifted into a decidedly customer-centric approach to the way it designed its products and services.

Next Thursday, I am pleased to be co-presenting a webinar with Jeff VanDeVelde from SunTrust and Rich Schreuer from CMB. We’ll be covering SunTrust’s use of customer segmentation to drive its shift to customer centricity.

What’s a strategy consulting firm doing talking about segmentation, you might ask?

Well, strategy is as much about saying “no” as it is about saying “yes” to opportunities for growth. Being able to identify, understand, and then remain true to your target customers is at the core of any good strategy. Clarity around target market segments helps businesses crystallize and rally around the strategies that will drive the most value for their best customers, profitably.

At some point, all our projects hinge on being able to answer the question: will this product feature/marketing message/overall initiative/etc meet my most valuable customers’ needs? Because we believe customer-centric strategy and innovation leads to more profitable growth, all our work contains a strong foundational element of re-grounding the client in the market and their best target segments – for today and the future.

We hope you will join us to learn more on the 28th, and please drop us a line to let us know what you think! Click here to register.

Posted by J. Mark Carr, Mark is co-founder and managing partner of South Street Strategy Group.

South Street Strategy Group, an independent sister company of Chadwick Martin Bailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies.

Topics: South Street Strategy Group, strategy consulting, webinar, market strategy and segmentation

Predicting Championship Weekend-Segmentation Style

Posted by Sean Kearney

Tue, Jan 15, 2013

After 19 weeks, we’re finally ready to see which two teams will meet on Super Bowl Sunday, battling it out to determine the NFL’s best. I'm really looking forward to February 3rd, because I love football, and because I've got a new take on looking at the teams. After 3 years at CMB, it’s not surprising that a market research perspective has crept into a few areas of my non-work life. Case in point, I found myself thinking about how the NFL season compared to deciding on a segmentation scheme.

I got my first experience with a segmentation project last year, and I found the process of evaluating the different schemes particularly interesting. The schemes that move past the initial round of evaluation often have a few things in common, but there is usually a differentiating factor that makes each scheme unique. In the end, the winning scheme will be the overall strongest of the bunch based on how it supports key business decisions like audience prioritization, messaging and targeting. Evaluation in the NFL is simpler— more points wins.

In the NFL, the 12 teams that make it to the playoffs also have a few things in common. A team usually needs strong (or at least competent) quarterback play to make it to the playoffs, as well as strong coaching. As of this week, we have four teams that definitely have those two factors, but there are distinguishing factors as well:

 

Atlanta Falcons

 

Atlanta Falcons
The Falcons have a dynamic passing attack led by a quarterback who seems to be reaching his full potential this year, along with two Pro Bowl caliber receivers and a Hall of Fame tight end.  This gives the offense the ability to go downfield with ease, which helps to open up running lanes for Michael Turner and Jaquizz Rodgers.

 

 

San Francisco 49ers
San Francisco 49ers

The 49ers spent Saturday night putting the rest of the NFL on notice; they finally have an explosive offense to match their bruising defense. With Colin Kaepernick at quarterback, the 49ers have the ability to make big plays on the ground or through the air. They have arguably the best offensive line in the league, with a coach who is a creative offensive mind that takes advantage of this strength.

 

 

Baltimore RavensBaltimore Ravens
The Ravens have a reputation of being a strong defensive team that does enough on offense to win. This year has been kind of a change of pace, with the offense carrying a number of games. The defense is as healthy as it’s been all year, but I would say the offense is still the better of the two units on this team. Joe Flacco has the ability to throw the ball down the field and is a proven playoff performer, and they have a strong running game with Ray Rice.

 

 

New England PatriotsNew England Patriots
No other team can score like the Patriots. Just last weekend they showed they have guys on the bench, like Shane Vereen, who can come into the game and make plays. They have the best quarterback (by far) of the remaining four teams, and enough offensive personnel to run any number of different formations and plays. The scary part about this team is how well their defense is playing. With that combination of two strong units, this team doesn’t have any glaring flaws to point out.

 

Taking a look at these four teams, I think two stand out. If I were picking my ideal team/scheme I would want to use the Patriots or the 49ers models for victory. If I’m right these two teams will meet in the Super Bowl, which would make for a great game.

Sean is a Senior Associate Researcher at CMB. His lackluster high school football career, spent mostly on the sidelines, led him to the hobby of amateur football analysis. He is a lifelong 49ers fan, but this bias barely affected his prediction.  

Learn more about our proven approach to Segmentation Research.

Topics: television, market strategy and segmentation, digital media and entertainment research

CMB Voices: The 5 C's of Great Segmentation Socializers

Posted by Brant Cruz

Wed, Aug 08, 2012

Don't let your segmentation study languish on the shelf. CMB's Brant Cruz, shares the five C's of great segmentation socializers. Learn how to get your segmentation embraced and used by your organization:

Brant Cruz is our resident segmentation guru and the Vice President of CMB’s eCommerce and Retail Practice. Read more of Brant’s thoughts on segmentation here.

Topics: Chadwick Martin Bailey, our people, market strategy and segmentation

Key Questions for Insurers in Wake of Supreme Court Decision

Posted by Amy Modini

Mon, Jul 02, 2012

Obamacare and health insurersAlong with millions of Americans-patients,doctors,lawyers and, politicians-health insurers also waited with bated breath for last week's Supreme Court’s ruling on health reform. Now that the Supreme Court has upheld the basic provisions of the law, health insurers face the challenge of understanding how traditional markets will be impacted by the individual mandate and implementation of health insurance exchanges.  

Even with the ruling, there is still much that remains unknown about the law’s impact, and significant uncertainty about how the law will be enforced in each state.  But there are still critical questions insurers must consider now as they adapt to a new era in health reform, including:
  • How will this ruling and the establishment of exchanges impact company revenue and profitability?  Are there ways to take advantage of this ruling and increase company margins and revenues?

  • How do we compete effectively in an open exchange?  If price is the key criteria to consumer decision making, is there a way to minimize its influence and yet be successful?

  • Is there a need to re-examine the existing client base beyond the traditional demographics? Will an alternate classification help create a competitive advantage?

  • How do we move beyond the traditional employer sponsored channel?  How can we take advantage of technological shifts?

  • How relevant is the present communication strategy? Is there an opportunity to approach the future in a new, cohesive way that complements the product and distribution strategy?

Addressing these questions and mitigating the coming challenges will not be easy; surviving and flourishing in a changing market requires a truly new and innovative approach. We believe insurers must:

  • Reconsider how they approach product development – the insurers who will be successful in this new reality will be those who are able and willing to stretch boundaries of what insurance products look like to meet the needs of the customers, including offering supplemental insurance, wellness programs, incentives and monetary gains for meeting health goals, etc.

  • Go beyond traditional ways of looking at the market – motivations, attitudes, goals, and behaviors will become as, if not more, important to understanding and effectively messaging to insurance customers. Alternate classification of consumers could help insurance companies underwrite consumers in a more effective and efficient manner.  This could be especially advantageous for smaller insurance companies that cannot compete solely on price; perhaps it is time to start looking at a niche strategy. For a more detailed look at alternative market segmentation for health insurance, read our white paper: A New Approach to Segmentation for the Changing Insurance Industry.

  • Embrace the leaps in technology – insurers must explore the possibility of reaching consumers directly (internet, smartphone, etc.), and simplifying the purchasing process.  A simple product lineup with an easy buying process can go a long way in increasing an insurer’s favorability rating.

  • Consider a new messaging strategy – the health industry’s transition is a great time to consider resetting the existing image. Great products and great service need great messaging.  What are the goals people are trying to achieve? What is it that truly motivates them? What is it that truly sets us apart and does it add value to our customers’ lives? Is there a need to have specific messages to specific groups of consumers? Think about the answers to these questions. Insurers in the end must be able to convince consumers that they are partners in this journey and are mutually dependent on each other’s success.

Amidst all the uncertainty insurers are facing, we believe that to mitigate the uncertainties of the reform landscape, insurers will have to go back to the drawing board, rethink how they look at the market, engage in product development and address the fundamental goals of their customers. Insurers must recognize and leverage core capabilities that others cannot replicate. Competitive advantages stem from not one but from a series of strategic decisions. The correct mix of product, distribution, message and market coupled with inherent operational strengths (e.g., knowledge of a local market, ability to underwrite at low costs,  relationships with existing customers) can set insurers apart from competition and pave the way to long term success.

Posted by Amy Modini. Amy is an Account Director for CMB’s Healthcare Practice, when she gets the time she loves going to the beach with her two kids.

Topics: healthcare research, product development, health insurance research, market strategy and segmentation

Why Boozers Become Juicers on Planes: Adventures in Segmentation

Posted by Brant Cruz

Wed, Jun 20, 2012

All seasoned business travelers have their share of funny or painful airline stories, and I’m no exception.  But a particularly memorable incident on a recent flight to SFO got me thinking, and it’s the genesis for this blog.

Long story short, I was sitting by the window and celebrating the open middle seat next to me when a 6’8” 350 lb. man shuffled down the aisle and plopped into it.  Our conversation went exactly like this:

Giant:  “I know, I know, I’m a giant. Sorry.”
Brant:  “I have to admit, I was chanting ‘not him, not him’ from the moment you walked on.  Sorry.”

From there the conversation (between my snores) was amiable.  And then, somewhere over the Great Plains, my new friend spilled cranberry juice all over his seat-back table, and himself.  Have you ever seen a man that size try to clean himself in an area that small?  Not pretty.

My mind ran with this incident, and I immediately started thinking about the seemingly ridiculous (to me anyway) amount of cranberry and tomato juice that is consumed on airplanes.  The data below is completely fictitious, but I bet it is directionally accurate.

 

Needs-state segmentation CMB

Now, what does this have to do with market research?  Not much… but I’ll reach.

To me, the chart above segues nicely into a discussion of the differences between Market Segmentation, and Needs-State (AKA “Occasion-Based”) Segmentation. 

Market Segmentation groups people or businesses into mutually exclusive and collectively exhaustive (MECE) groups.  It is limited by the realities that people and businesses are complex, don’t always think or behave the same way all the time, and because of this any segmentation scheme is forced to be an over-simplification of reality.  However, despite these limitations, great market segmentation can provide businesses with a common lexicon to use to describe the audiences it serves, prioritization of who to invest in, and the foundation for understanding what to say and where to say it in marketing at a brand level.  Market Segmentation is great for setting strategy.  If I’m a cranberry juice company, I’m going to go after segments that drink a lot of juice (kids, active women in their 40s, health/energy motivated people, etc.)   But it is far less useful in some important areas … namely in identifying the best places to reach our core segments, what improvements to make, and how to grow our business beyond the core.  This is where Needs-State Segmentation comes into play.

Needs-State Segmentation groups together occasions (e.g., shopping trip types, travel trip types, usage occasions and information gathering moments) based on common needs, rather than grouping people or businesses.  While the Needs-States are mutually exclusive, each person/business can experience multiple needs states as they interact with the category.  Needs-State Segmentation has two major orientations:  purchase decision occasions, and usage occasions.  A segmentation focused on purchase decision occasions will break down all of the critical moments in the purchase funnel where the process of buying is impacted (from seeing a commercial on T.V. to chatting with a friend / WOM).  This type of segmentation will dramatically improve a company’s ROI on their integrated marketing plans by highlighting the most important occasions to hit and what to communicate in them.  In contrast, a segmentation focused on usage occasions will lay out all of the moments when actual product usage occurs and what distinct needs must be fulfilled in each.  This is the bread and butter of innovation for both short-term improvements within an existing line of products and for longer-term high growth innovation where a new niche in the market is identified (like when Red Bull figured out that it could target the mid-night clubbing need state rather than the afternoon-pick-me-up occasion).

Market Segmentation and Needs-State Segmentation complement each other.  I can only assume that cross-country flights are a unique need state, where multiple segments swerve from their typical behaviors and begin pining for bright red liquids.  The question here is do the bright red liquid companies know this?  And if they do, do they understand the need state deeply enough to take full advantage of it?

Posted by Brant Cruz and Lori Wahl, Brant is resident segmentation guru and the Vice President of CMB’s eCommerce and Retail Practice. Read more of Brant’s thoughts on segmentation here.

Lori is a former CPG marketer turned researcher, who now runs her own strategic qualitative research consultancy, BIGinsightz.  Lori is an expert in strategic market research, having built three best-in-class insight processes for her former company that drive product, branding and selling strategies.  You can reach her at BIGinsightz@gmail.com

Topics: travel and hospitality research, market strategy and segmentation