A stunning finding of a recent Marakon Associates and Economist Intelligence Unit study which surveyed 200 senior executives of large companies reported that, though 59% had conducted a major market segmentation exercise within the past two years, only 14% said they derived any real value from it. Perhaps this high level of interest/low level of satisfaction with segmentation is the inspiration behind the Harvard Business Review's sudden interest in this historically overlooked and neglected marketing decision area. In the second of what appears to be developing into a series of articles on the topic, our former mentor and father of market segmentation Daniel Yankelovich and David Meer, a partner at Marakon Associates, offer their perspectives on why market segmentation has failed to deliver and some recommendations for how to derive value from it.

One of their biggest beefs with market segmentation today is that it has become "the marketing equivalent of central casting," a guide to the kind of characters that should populate commercials. Indeed, we've come across many recent examples of firms creating "personas" to help marketers and their advertising agencies "empathize with their customers and to understand what moves and motivates them," to quote the Wall Street Journal. Chrysler has actually gone so far as to build different "persona rooms" complete with a color-scheme, furniture, knicks-knacks, bric-a-brac, and other items that reflect the unique tastes, personalities, attitudes, and lifestyles of consumers in different segments. If only Chrysler—and Chrysler is by no means alone—spent as much time on making the targeting decision as they do constructing rooms and fake personal histories..... There's bringing customer segments to life to help operationalize a marketing strategy, then there's obsession. As Yankelovich and Meer rightly point out, "segmentation can do vastly more than serve as a source of human types."

The authors go on to tell companies to first consider the level of importance people generally attach to a purchase decision in a category. "Some decisions people make, such as trying a new brand of toilet paper or applying for a credit card, are relatively inconsequential.... But decisions such as buying a home or choosing a cancer treatment have momentous significance...." The end of what they call the "gravity of decision spectrum" on which the category falls dictates the types of issues business should address, what the buyer's concerns will be, and the criteria on which to base the segmentation. For example, in low importance categories, the segmentation should consider buying and usage behavior, price sensitivity, and degree of loyalty to a brand, say the authors.

We have some significant problems with this recommendation. First of all, the importance placed on a purchase decision, what we refer to as "involvement," is a characteristic of an individual buyer, not of the product or service. Some people will spend almost as much time weighing the merits of different toilet paper brands as others do choosing a new car, and vice versa. To assume that buyers in a category will all feel the same way about the inconsequentialness of a purchase decision is simply incorrect. Based on our work in hundreds of different categories, we've discovered a general distribution of actual individual buyer involvement across conventional wisdom-dictated product category involvement and Yankelovich and Meer's corresponding "spectrum" headings.

As the table suggests, the conventional wisdom is just wrong. In categories where involvement is allegedly high, there are actually more average and low involvement buyers than there are high involvement buyers. In supposedly low involvement categories, average or high involvement buyers represents 36% of the market—hardly an insignificant number. It's important for marketers to know the relative distribution of low-, average-, and high-involvement buyers which will differ by category because each type requires a different kind of marketing strategy. Involvement could be an important criteria on which to base a segmentation—it could be predictive of buying behavior and an indicator of potential profitability—but it should never be used as the deciding factor on what types of questions, buyer concerns, and segmentation criteria companies should use.

This brings us to our next point. No one can know a priori the best way to segment a market. The authors agree that, in order to be valid, "a segmentation must identify groups that matter to a company's financial performance," but there's just no way to know what factors will be predictive of behavior and profitability before one morsel of data has been collected or ounce of analysis run. Marketers should consider hundreds of ways to break up the market—not some pre-prescribed list—in order to create detail-rich, proprietary segments that competitors don't even know exist. This is how a market segmentation can become a valuable strategic asset instead of a door stop.

Targeting is the single most important element in the marketing plan. "To win a war you need to know where to attack," Dwight Eisenhower might have said to an audience of business managers. "We wouldn't have brought the Nazis to their knees if we had landed the Allied forces at Calais instead of the beaches of Normandy." A segmentation exercise should enable a company to identify which group (or groups) of buyers represents the best opportunity to grow sales and profits over time—in other words, to make the targeting decision. Market segmentation doesn't just "reflect the company's strategy," as the authors maintain, it drives it.

The only thing on which advertising critics, reporters, and analysts could agree on when it came to the advertising of the 2006 National Football League's (misnamed) world championship game, Super Bowl XL, was that no one could agree. Instead of gathering around the water cooler to recount favorite commercials and universally panned spots, everyone seemed to have a different take on the 58 ads that ran nationally during the big game. "Who won the Super Bowl's contest of ads depends on whom you talk to," reported Advertising Age. USAToday's famous Ad Meter named Bud Light's "Secret Fridge" spot as the best; Adweek's ad critic Barbara Lippert was partial to Burger King's "Whopperettes," and Sprint's "Crime Deterrent" and "Burning Couch" spots; a panel of graduate MBA students and faculty at Northwestern University's Kellogg School of Business picked Dove's "self-esteem" spot; Ad Age's ad critic Bob Garfield seemed particularly taken with Motorola's ad for Moto PEBL; and members of international ad network ICOM selected Fedex's "Stick" as the best of the bunch. According to CBSnews.com's Blogophile, bloggers also had very different opinions on what was good and what was bad this year, though generally most were unimpressed.

While there's no consensus on what made for advertising brilliance, what made for disaster this year on advertising's "Night of Nights," we thought we'd put forth one notion that we think many, if not most, will agree: the majority of Super Bowl advertisers and their agencies have suffered a break from reality. Maybe it's because they got swept up in the pre-game hype for the commercials that now rivals—we'd venture to say even exceeds—the pomp and circumstance for the football game itself. Or perhaps the notion of a single TV program with an audience of 90+ million pulled from a multitude of demographic, sociographic, and psychographic groups is just so mind-blowing it trumps rational thought. But whatever the reason, it's clear that a sizable portion of the 40 or so Super Bowl advertisers have taken leave of their senses.

Reality Break #1
Just prior to the game, "the ad world's most experienced and most Super Bowl-savvy advertising executives," went on record telling the USAToday that companies SHOULD NOT spend $80 grand per second to actually sell anything because, frankly, selling something has become "almost taboo" during the Super Bowl. "The game is great for bolstering a brand's image," explained Nina DiSesa, chairman and chief creative officer of McCann-Erickson, part of the world's largest advertising agency network, "but not to nail the sale."

Let's suppose, just for the sake of argument, that spending $2.5 million for 30-seconds on ONE night, plus at least $300K on the execution and still more on any additional "leveraging" activities to promote the relationship to the Super Bowl prior to the game, not to impart any sort of reason-to-buy message, but to boost the image of the brand is a logical business decision. How many ad spots actually made people feel more positively about a brand? Objectively speaking, the only two brands that definitively and actively promoted any sort of message that would universally enhance the brand image among the viewing audience were Dove with its support for a self-esteem fund for girls and Westin Hotels with its smoking ban at all of its properties (unless you're a smoker, of course). The nostalgia of the Walt Disney 50th Anniversary spot and Budweiser's "Young Clydesdale" execution might have conjured up warm feelings among some folks, and if you're environmentally inclined, Ford's "green" hybrid Escape may have changed the perception of the SUV brand as a gas-guzzling contributor to global warming for the better. But that's five out of 58, or barely 9%, of all the executions at best.

Reality Break #2
The rest of the commercials used humor or artistic imagery to "bolster the brand image." "Humor won the day in this year's Super Bowl," commented the VP of consumer marketing at TiVo. Yet what constitutes humor and artistic imagery differs from person to person. We thought Bud Light's "Secret Fridge" spot, for instance, was more of the men-are-generally-stupid genre of advertising that has characterized Budweiser advertising for years and contributed to the decline in beer consumption in general. We didn't even crack a smile when watching the spot. Meanwhile, the Boston Globe's sports reporter Joanna Weiss clearly got a chuckle out of it, describing the ad as "stupid-funny." Likewise, we thought the spot for Motorola's Moto PEBL was completely bizarre [we admit now that we know the name of the product is pronounce "Pebble" not "P-E-B-L" as we originally thought, the black and white spot that depicts a meteor crash, an ocean forming rocks, and a pair of feet walking over to a case marked "PEBL" on a rocky beach is a tad less of a mystery.] But then Ad Age's Bob Garfield thought it was "really cool." While about a third of men in a ComScore poll said GoDaddy's spot, a "funny" play on network attempts to censor its advertising "improved their feelings" about the brand, about a third of women said the ad "damaged their impression" of GoDaddy and most critics sided with the ladies.

Did GM really think car buyers would universally feel better about GM and Hummer after watching a robot and Godzilla-like creature mate and bear a child in the form of a Hummer? Did Emerald Nuts presume snack food buyers would think "hey, Emerald is a great brand" after watching three strange men act out some sort of samurai ritual while a Joe Pesci-like character in a Yoda costume talks on a phone under the stairs and an anagram flashes on the screen? Did Pepsi honestly believe that consumers would think more highly of Sierra Mist as a beverage brand after an airport guard threatens a rectal exam to an airline passenger if he didn't fork over his beverage? Did Ameriquest genuinely suppose that mortgage seekers would feel better about it after watching two doctors electrocute an insect over an unconscious patient? Did Gillette consider the Area 51-esque setting for a "secret experiment" where test tubes of an unidentified blue and orange substance are combined in some sort of particle accelerator with a gaggle of sinister quasi-governmental and scientific officials looking on would make folks think more highly of the new Fusion razor? In what reality could these executions possibly be considered image-enhancing and brand-bolstering?

Back in the rational world, the purpose of advertising is to sell. It's a marketing tool, not an entertainment device. If, as we suspect, the main reason most of the 90.72 million viewers of this year's Super Bowl remember any of the brands and/or commercials is because of all the pre-promotion and media coverage of the advertising and not the advertising itself, somebody needs to give the advertisers of Super Bowl XL a good slap across the face and tell them to snap out of it.

Back to top.

1. The restaged brand has a history. It exists. People have bought it—or in MTV's case, watched it—in the past. So the trick (and it is a trick) is to measure the difference in sales (or viewership in MTV's case) between the restaged brand and what they would have been without the restaging.
2. Often incremental growth is so small, it is hard to measure. It's hard to tell whether you're measuring an actual change or random noise. To do STM for the restaging of an existing product usually takes a much larger sample size than for a new product or service, and it takes much more sensitivity in the research measurement process to pick up true differences.
   

For more insightful marketing discoveries, visit http://www.copernicusmarketing.com/discover/index.htm

Have a hot discovery for our next release? Contact us at info@copernicusmarketing.com

Back to top.

Innovation remains an arduous and painful process for many companies, doing untold damage to brands, profitability, and careers. Some have used line extensions to mitigate risk, but all too often they have ended up extending the core brand into oblivion. Others have used test markets to help gauge opinion before a national rollout, only to have competitors snatch ideas and undermine results. Given the problems with conventional approaches, it's not surprising that 90% of new products and services fail.

Enter Market New Products Successfully, the definitive guidebook for using simulated test marketing (STM), a technology that can help companies dramatically improve the odds of introducing a successful new product or service. The book examines why STM is important, what the differences are between the major systems, how to do a simulation, and what insights it offers a marketing plan. Every marketer wants to improve the financial outcome of the innovation process and Market New Products Successfully shows how marketing science tools can make this possible.

Back to top.

5th Annual Six Sigma for Sales and Marketing
Presented by IQPC
The Venetian, Las Vegas, Nevada
March 28 & 29

Copernicus' own Kevin Clancy will give a talk on March 29, Day 2 of the conference, at 8:45 am, entitled, "Six Sigma Marketing: Changing Brand Trajectories, Career Paths, and Even Entire Companies," and will do a book-signing and Q&A session at 10:15 am during the morning break.

2nd Annual Senior-Marketing Executives Roundtable, Linking Marketing to the Bottom Line
Presented by The Conference Board
InterContinental, The Barclay
New York, New York
April 5 & 6, 2006

Kevin will give at talk at this conference on the subject of his forthcoming book, Your Gut Is STILL Not Smarter Than Your Head. He will speak at 11 am on April 6.

2nd Annual Senior-Marketing Executives Roundtable, Linking Marketing to the Bottom Line
Presented by The Conference Board
The Westin River North, Chicago, Illinois
May 16 & 17, 2006

Kevin will give a repeat performance of his New York talk at 11 am on May 17.

American Marketing Association's 2006 Strategic Marketing Conference
The Fairmont Chicago, Chicago, Illinois
May 21-23, 2006

Kevin will present new data from a study of the decision-making styles of marketing executives and offer suggestions for steps marketers can take to improve the performance of marketing programs.

Back to top.