MARKETING RX

Why cant we go on segmenting by socio-demographics?

By: Ardy Roberto, Dr. Ned Roberto Philippine Daily Inquirer 8:33 pm | Thursday, July 7th, 2011 Q: I once sent one of my brand managers to your market segmentation seminar. When he came back to the office, he echoed the seminar highlights. One particular highlight provoked a long and an unresolved debate. He said that according to you, we should stop segmenting by socio-demographics especially by socio-eco classes (SEC) because thats wrong. We should instead segment by usage behavior like non-users vs occasional usersvs regular users vs heavy users. Or else by product needs and values like the economy segment vs the premium segment vs the super premium segment. Youve written on socio-eco segmentation in a good number of your MRx columns and in none of them have you said that this was a wrong way to segment. In fact, in our real property business, we followed your Ayala Land example of sub-segmenting the Class A segment into the triple A segment, the double A and the single A. That did wonders for us! And its because of what you called the MMT, or magnitude of the marketing task. The units of condos we needed to sell were countable. So will you let us know what it is that you really said about SEC [socio-eco class] segmentation and tell us why we cant go on segmenting by socio-demographics? When should we then not segment by socio-demo and when can we go on segmenting by socio-demographics? A: At first we thought of answering you directly by e-mail. Thats because as you yourself said, weve devoted a lot of MRx columns to this subject, and its an issue that Dr. Neds new segmentation book, Segmenting, Self-Segmenting and Desegmenting, has resolved, or perhaps its more accurate to say, tried resolving. But the subject and the issue kept coming back. So we thought that if we position the issue in a more specific and more currently popular context like product innovation, wed get everyone to grow more and more in marketing wisdom and understanding. So that well also be thinking and talking in the concrete, consider the case of the QSR [quick service restaurant] or better known as fast food. If it wants to continue growing, this is a business that is and has to be into continuous product innovation and improvement. Lets suppose that Jollibees product development came out with a new menu item of something like the phenomenal KFCs Double-Down. However, in this case, suppose its even better in taste because, as the product development brief explains, it has superior langhapsarap taste (a poor translation of langhapsarap in English is savouring the delicious smell) taste. So following the companys new product development process, a consumer product test was scheduled. Guess what brand specified as the target segment respondents. Of course, the traditional and the conventional specification: Male/female Jollibee customers 18 to 36 years old Belonging to socio-eco classes of broad C and upper D Dr. Neds bestseller book, User-Friendly Marketing Research, recommends that to obtain the most helpful data, research the market segment consumers from whom you will learn the most about what youre testing. And for this product innovation those are consumers of Double-Down and who like the langhapsarap taste. If these are the male/female Jollibee customers, 18 to 36 years old and belonging to socio-eco classes of broad C and upper D, then by all means go ahead and test the innovation with these socio-demo market segment consumers.

But you have to admit that at least youre not sure if you will learn the most about what you want to test for from these segment consumers. So which consumers will you learn the most from? Those should be the Double-Down consumers or at least its triers (both Jollibee and non-Jollibee customers) and those familiar with the langhap-sarap taste. In fact, if you want this test to be an acid test, then you should specify not only familiarity with the langhap-sarap taste but are dedicated fans of that taste. It should be clear that when it comes to testing with consumers your product innovation, socio-demographically defined consumers are not a help. This is especially true when your product innovation is positioned in non-socio-demographic terms but in terms of product needs and values. In such a case, select consumers for the test who have had experience with those product needs and values. Now suppose you went ahead anyway testing with your socio-demo defined consumers. Then because your respondents are Jollibee customers most of whom have not tasted Double-Down because its too expensive, its most likely that in the product test, they may just score the product innovation average or just like the langhapsarap taste of Chicken Joy and give it a mere 15 percent to 20 percent definitely will buy purchase intention. This is the case where the socio-demo based segmentation is wrong. Your brand manager who attended the seminar failed to remember this context. So as you can see, in product innovation testing such as in the above example, socio-demo segmenting is not only wrong but can be a barrier to successful continuous product innovating. It is as if the test was made to protect the dominance of the existing product from being replaced by the new and the better product. Its a subtle way of resisting change. Beware of this well-meaning but misguided guardian of the status quo and the traditional. Thanks to all of our readers who sent their birthday greetings to Dr. Ned! In response to the birthday surprise column entitled My Marketing Mentor that the Jr. MarketingRx co-columnist wrote last Friday, Dr. Ned would like to send some acknowledgements: Thanks again for all the birthday greetings. Thanks also to my son and co-columnist, Ardy, for what you wrote in last weeks column. It was thoughtful and touching and brought back fond memories. But let me acknowledge and put forth the real story behind the Jollibee LanghapSarap and Happee success stories that Ardy shared with our readers. Readers might get the impression that I was the inventor of Jollibees LanghapSarap positioning strategy. This was the singular creation of the Creative Guild lifetime awardee, MinyongOrdoez. My involvement was in the research that validated with the consumers the concept and that was after that campaign took off. This was documented in the Asian Institute of Management (AIM) 1986 marketing case that I wrote and which Tony Tan (Jollibee founder) cleared. In the Hapee toothpaste campaign, the leading role in the story was Josiah Go who accompanied me in the visit to Happee founder, Cecilio Pedro, when I wanted to write a similar marketing case. The case was never written. Instead, I did relay the story of Happees success and my encounter with Cecilio Pedro with my son, Ardy.