International Consumer Segmentation

International Consumer Segmentation

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Targeting niche consumer groups with umbrella brand and sub-brands 

Summary 

In the fast-moving consumer goods (FMCG) industry, companies expend vast resources on marketing, for
products that more often than not fail. Throw in regular economic pressures and the growth of private label,
and FMCG manufacturers are facing massive pressure to find economies of scale while searching for successful products. One particularly attractive strategy is to lower costs by developing broad brand platforms that serve like-minded consumers internationally, using sub-brands and niche brands that target demographic and psychographic segments, as well as specific need states and dayparts.

Demographic segments

  • Many brands tweak their products with new flavors, fragrances, formulations, and packaging designs
    specifically to extend their appeal into female or male markets. There are, for example, now more
    female- (and some male-) oriented brand extensions coming to market.
  • The same thing is happening with children’s products as extensions of traditionally adult-oriented
    brands. And while seniors have long been addressed directly in skincare, this trend is now spreading to
    haircare and food.
  • Ethnic markets have traditionally been tackled with standalone brands, although there are now a
    handful of examples of ethnically oriented sub-brands.
  • As mega-brands spread up and down into the value and premium tiers, FMCG companies are better
    able to target different income groups.

Psychographic segments

  • A significant segment of the population values an everyday, all-round healthy lifestyle, and this is
    encouraging the development of ‘total health’ products that do not address one specific health condition
    but bundle several together.
  • Although multinationals have invested in the ‘natural’, organic, and vegetarian markets, this has tended
    to be through standalone brands rather than sub-brands. This may be changing.
  • ‘Natural’, organic, and vegetarian brands have not tended to be international in their scope, but some
    companies are building economies of scale through the common ownership of niche brands.
  • Many marketers have introduced sub-brands with greater sensory appeal, be it heightened fragrances,
    better design, or even a designer name.
  • Some companies are now segmenting their sub-brands based on the level of engagement that different
    consumers have with the product category

Need states and dayparts

  • More NPD is being targeted at particular need states, but to get brand loyalty and premium pricing the
    needs have to be specific and valued by consumers.
  • Sub-brands are increasingly targeting the largest health need states – heart, bone, and gut health – as
    well as putting together ranges of products that between them cover a number of functions.
  • Some international brands are emerging to serve common niches, including lactose intolerance, gluten
    intolerance, and diabetes. Indeed, products that meet a need during a specific daypart – such as a
    morning wake-up drink – can be very successful.

Conclusions

  • The most important lesson of this report is to get the segmentation right. It is important to target a
    distinct, specific, addressable segment rather than trying to serve too many segments.
  • In a crowded marketplace it is increasingly necessary to educate consumers about how a product
    might fit into their lifestyle: they need to understand the benefits of the product and if necessary its key
    ingredients.
  • The potential of the niche might be greater than you think. Plus there could be further opportunities for
    customizable products and direct sales, both offering the potential of even higher margins.

 

Targeting the individual versus broad marketing initiatives
The long-term trend among Western consumers, now being repeated in emerging markets, is towards
greater individualism. People are demanding products that are more tailored to their needs and lifestyles,
resulting in ever-more specific offerings from manufacturers. At the same time, those manufacturers have
expanded internationally, resulting in even more new brands on supermarket shelves.
The effect has been a proliferation of brands and stock-keeping units in consumer packaged goods. For
example, in the US Hershey found itself in the habit of launching new pack types and flavors, creating what
was, from a consumer’s point of view, “a bewildering sea of choices on the store shelf” rather than “the
exciting array of products and packaging it imagined for its offers” (Ivey Business Journal, March/April 2012).
This has also been expensive for manufacturers. Marketing budgets have been pushed up by the need to
support a number of different brands, sometimes with different names in different countries. This process has
been reversed in recent years, and multinationals are increasingly focusing their attention on mega-brands –
existing brands that consumers already know and trust – rather than on creating new ones. For example,
Procter & Gamble (P&G) “is throwing its weight behind fewer, bigger ideas” (Women’s Wear Daily,
November 2012). This allows for economies of scale in their marketing efforts.
Companies are now finding that treating a mega-brand more as a marquee (or as an umbrella) allows them
to develop niche-oriented sub-brands that satisfy individualistic consumers while at the same time retaining
many of those economies of scale. This is ‘brand multiplicity’, described as “multiple products and services
from one brand, multiple target audiences, multiple need states and different insights communicated and
connected across multiple channels and touch-points” (Journal of Brand Management, December 2012).
Such brand multiplicity reflects consumer multiplicity. “There [can be] a single consumer who at different
dayparts or at different need states, different stages in the development of their life will consume for different

Publish Date: November 2016

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