Thoughts on Brand Segmentation and Data

There used to be a simple way for a company to target different segments, and that was to create a brand that was customized to the preferences of each segment.  I think a great example of this is Gap, Inc. three core brands developed specifically for their customer segments:

Gap: This is the core brand, and targets the widest variety of segments for Gap.  The other two brands were developed to help reach other segments that Gap could not reach in one store.  So they created a few other brands.

Banana Republic: This brand is targeted to the young urban professional.  Probably without kids, and most likely very healthy, because I never met a pair of BR pants I could fit into.  The price point is higher, but the designs are much sharper.  The target here is clearly a more affluent customer.

Old Navy: This brand is clearly targeted to folks with a lower income, due to their lower price points.  It is also family friendly, with more kid choices.  This brand has thrived in the recessionary environment, giving Gap a secure revenue source even in difficult times.

Gap also has a few other brands with specific targets, Piperlime, a brand focused on style and trend, and Atheta, a brand focused on the active crowd, sort of a Lululemon competitor.  

Developing multiple brands to target specific segments is an expensive proposition for most.  It requires separate stores, separate brands, and separate advertising budgets.  While it can be done successfully, it probably won’t be cheap.  And a lot of companies are doing this, and doing it well.

Another approach is leveraging your internal data to market to customers on a 1:1 level, without redefining the brand experience overall.  It requires a robust CRM system to identify targets, and a delivery system to reach those targets at a personal level, through direct marketing or in store experience.

A recent article in the New York Times showed how retailers like Safeway and Kroger are using their customer data to target customers to the point of different customers paying a different price, based on their segment and past shopping behavior.  The article explains how one customer could pay one price for the same product another customer pays a higher price for, all in effort to get them to buy more or “build the basket.”

Retailers have been recieving robust data for years, but have been slow to use it to their advantage.  Kroger, one of the few grocery retailers reporting positive STS sales, reports in the article that customized direct mail coupons, with a redemption rate of up to 70% (The article notes this is a high result.  I would like to report – this is a HUGE UNHEARD OF RESULT) is directly driving higher sales and more loyal customers.

I agree with this approach, and think there is a huge upside opportunity when a brand presents offers that speak directly to their target market.  A key approach is building a program that is automated, leveraging data to deploy customized offers targeted to various segments through direct mail, email, and even inside the store.  Capturing data is easy.  Using data to create a customized, ongoing marketing program that drives sales, repeat visits, and higher transactions is the hard part – but worthwhile if you can do it.

Data.  It’s what’s for dinner, if you can find it, leverage it, and deploy it.

Chris Lovett

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