Consumer segmentation data: giving an old concept new meaning

Consumer segmentation is one of the main pillars of any marketing strategy — for any type of company. Segmentation is the process of dividing a population of people into distinct groups according to specific criteria (socio-demographic, age, consumer behaviour, geography, etc.) But what makes it so essential?

Each person has their own likes and dislikes making it impossible to please everyone. We are living in a mass production and consumption society, where oftentimes supply exceeds demand as people have so many options to choose from. Consumer segmentation is the most effective way to make businesses sustainable by adhering to groups of buyers’ expectations and distributing products accordingly. This is even more true for the FMCG market as the competition between brands vying for consumers’ attention is at an all-time high.

Consumer segmentation, an old practice

The concept behind this approach is nothing new but has grown and evolved over the years as a result of globalisation. In the FMCG sector, segmentation is primarily performed based on geography and demographic criteria that determine the common characteristics of particular groups of people.

However, with the explosion of technology in a digital world, these types of segmentation are not enough anymore. With the rise of new channels people use to communicate on, a market shift has taken place in which individual expression is at the pinnacle. Grouping people by geography and demographic data no longer define an individual in a way that allows brands to speak their language and establish a relationship — this now does the exact opposite as consumers find “cookie cutter” strategies to be generic. Brands that segment their consumers in this manner run the risk of losing credibility with their customers resulting in leftover stock, less margins and much higher costs which will impact their overall market share in the long term.

So, how can FMCG companies develop their strategy around new types of consumer segmentation data? As new technologies emerge and gain traction in the market, will these brands be able to stand out amongst the competition? Let’s find out.

Geolocalised data, the contextual way to segment consumers

The rise of big data offers high-level segmentation opportunities to meet this challenge. New tools making their way into the market such as Location Intelligence have started to pique the interest of some forward-thinking FMCG brands who are looking to transform big data into laser-focused insights about their target customers. But what exactly is this technology that’s capable of high-performance segmentation for FMCG brands and how does it work?

Location Intelligence is the process of deriving meaningful insight from big data to solve the business-related challenges. Different data sources are compiled, crossed and treated through advanced analytics processing and machine learning techniques (artificial intelligence) to provide extremely granular and actionable insights on a map-centric tool. With Location Intelligence, FMCG brands can move past the traditional way to segment target markets and organise them in more efficient and personalised ways. This technology makes it possible to segment not only geographically and demographically but also behaviourally and by the time of day to ultimately boost sales and optimise distribution for points-of-sales areas.

Optimise distribution and points-of-sales strategies

Developing distribution routes based on where certain customer segments are is one-way Location Intelligence tools are changing the rules of the game. Depending on the level of dispersion of certain types of customers in particular areas, FMCG brands can effectively define their distribution routes as to not waste time or resources.

Before the development of location-based segmentation data, companies would opt for labour-intensive distribution strategies attempting to reach general masses of consumers. This “be-everywhere-at-once” type of mindset is no longer practical for FMCG brands as it incurs steep costs and does not necessarily translate into sales. Some points-of-sales areas generate more revenue for a particular product category than others. It is not logical for FMCG brands to distribute their products to points-of-sales areas that do not perform well for their product categories anymore. Geolocated data helps these brands adopt selective, but powerful distribution strategies where they can benefit from the points-of-sales areas that present the most lucrative opportunities.

See how Danone Spain is using geolocated data to optimise their points-of-sales strategy:

Maintaining market share intelligently

The production and distribution of massive quantities pose a unique challenge for the FMCG sector when it comes to incorporating new technologies that fit into their business models. Nevertheless, there is no denying that the industry cannot hold off any longer on digitally transforming their operations to stay efficient and top-of-mind for consumers. People expect omnichannel strategies to be seamless and promote a better experience with the brand and its products — communicating value strategically (at the right place and time) is now more important than ever. Progressive FMCG brands such as Danone have found this to be true and have already started using geolocated segmentation methods to distribute their products and connect with customers better. In the case of Location Intelligence, less really does mean more where brands can distribute their products in a smart, more efficient way that both minimises cost and maximises revenue.