Millennials are so passé. And irrelevant for global marketing strategy design

5th April 2019

Outside Fortress Europe Excerpts
This Global Business Strategy Blog post is based upon unabridged excerpts from Chapter Six, Strategic Marketing and Global Brand Management, in Outside Fortress Europe: Strategies for the Global Market.

Additional commentary reflecting current ‘hot topics’ and global strategic management challenges is presented in the Context and Analysis sections.

Context

Godwin, R. (2019, April 4). ‘Move over, millennials – why Gen Z are the new big spenders: Having badly misjudged millennials, the advertising industry is desperate to work out what makes the latest young generation tick.’ thetimes.co.uk.

The lifestyle section of The Times on Thursday 4th April 2019 included an entertaining, insightful and, at a push, a penetrative examination of the enigma which (who?) are (is?) the (a?) ‘millennial(s)’. Churchill’s description of Russia fits the bill perfectly here when applied to a ‘millennial’: “… a riddle wrapped in a mystery inside an enigma”. Borrowing from the lexicon of fashionistas, millennials are the new ‘baby-boomers’, born at a certain point in time which supposedly but always incorrectly defines a generation.

Lifestyle was highlighted in the previous paragraph because tapping into this extraordinarily elusive notion has been the holy grail of marketing and advertising professionals in a pursuit which long pre-dates the Don Draper et al. Mad Men of cable network box-set legend. That challenge is known as market segmentation and in the short extract from Outside Fortress Europe which follows its fundamental principles are briefly discussed.

 


Outside Fortress Europe Excerpt

Exploring the principles of the market segmentation process
At the core of effective strategic marketing is market segmentation, a process that determines which areas of a market to compete in (‘market space’) and, by definition, which to avoid. In many companies, including those who the author has worked closely with over many years, this is typically described as participation strategy. As with all dimensions of the marketing discipline, segmentation lends itself to a rigorous, process-based approach which should be embedded within the organization as ‘a way of working’. Figure 1 illustrates the four key categories of task involved in combining market segmentation and brand positioning, the horizontal arrows indicating the process flow.

Figure 1: Aligning marketing strategy with global brand positioning

At the core of the market segmentation principle is the age-old exam question which students typically fear: ‘compare and contrast’, i.e., profile similarities and differences. In the left-hand box in Figure 1, Market Segmentation, this is applied to groups and can be understood as similarities within, differences between, an apparently simple idea but one which in practice can prove extremely difficult to achieve. There are, though, some powerful multivariate statistical procedures to assist, for example, cluster analysis and discriminant analysis.

(A detailed discussion of these is well beyond the scope of this Chapter but excellent and accessible insights can be found in the recommended book for this dimension of market segmentation and brand positioning: Hooley et al., 2017, Marketing Strategy and Competitive Positioning).

Figure 2 presents a broad overview of segmentation in practice: there are three general categories of segmentation criteria and these are displayed in the left-hand column as:

  1. Macro background criteria;
  2. Benefits-sought criteria;
  3. Behavioural criteria. Brief examples are given for each category in the figure and a broader narrative follows.

Figure 2: Market segmentation categories and supplier significance

Please note that there are three rows and two columns in Figure 2. Reading top-to-bottom, left-to-right, the first column presents the segmentation categories which we identified above, and they represent demand. The second column presents a brief summary, per customer segmentation category, of the implications and significance of these for a supplying company as they develop their ‘go-to-market’ operational marketing programme.

Macro background variables are useful as they inform the company about who the customers are and help it to know a little about them. However, their insight-value is often limited since they ignore what value propositions the customer should be targeted with and with which marketing strategy and tactics. Suppose, for example, that the firm knew that the customers were located in Japan, that they were in the supermarket business and that they operated large national chains. All the supplier would really know from this is that the segment comprised large Japanese supermarkets operating multiple outlets. This information has little or no value to a professional marketing manager with the task of designing a meaningful value proposition and creating a detailed marketing plan for each individual large Japanese supermarket chain.

Benefits sought segmentation variables are of value to marketers since they concern the needs and buying criteria of the customers; please note the emphasis placed on preferences. Note also the significance of this segmentation category: it influences the supplier’s value proposition design.

(See Osterwalder et al., 2014, Value Proposition Design: How to Create Products and Services Customers Want, for a very popular, academically robust and extremely practical guide to this crucial marketing task).

Behavioural segmentation criteria comprise elements of customers’ actual buying and product/service usage behaviour. These are important factors because they can/must be used to guide the company’s marketing plan and, crucially, they should guide the firm’s design of its strategic marketing mix (see below for a fuller description of this). As a general rule, the more thorough and extensive the segmentation analysis is, the more effective it is likely to be. Essentially, the more criteria that are examined, the further the market can be sub-segmented and the further the offerings and the marketing strategy can be tailored to fit customer preferences and buyer behaviour patterns.

The holy grail of the market segmentation process for the supplier is to achieve mass customisation, the scenario whereby the individual consumer in a mass-market receives a uniquely crafted value proposition. Swatch provides a contemporary world-class manufactured product example and the potential of ‘Big Data’ in this regard is huge, privacy caveats duly noted.

To take the segmentation process to a deeper level of analysis, we can now examine two broad macro segments (Consumer and Business-to-Business) and provide for each a detailed list of segmentation variables categorised under two broad headings: (i) demographic; (ii) behavioural.

(In the lists which follow we make use of the ‘Anything else?’ variable. This is aimed at ‘forcing’ decision-makers to include factors which are relevant, to exclude those which are not and to add those which are pertinent to the specific business case scenario being assessed. The ‘Anything else?’ variable is used to guide managers towards affirmative, appropriate, actionable and culturally acceptable strategic decision-making. It explicitly replaces the lazy and excessive use of ‘etc.’, the scourge of many prescriptive marketing and strategic management tools).

Consumer market segmentation variables

Demographic

  • Gender.
  • Age groups.
  • Education.
  • Income.
  • Occupation.
  • Social class.
  • Family life cycle stage.
  • Family size.
  • Geographic.
  • Anything else?

Behavioural

  • Usage rates (heavy usage; medium; light).
  • Adopter groups: (relates to ‘diffusion of innovation’: innovators; early adopters; early majority; late majority; laggards).
  • Channels used (intensive; selective; exclusive; www).
  • Loyalty status (solus loyal/mostly loyal/fickle).
  • Psychographic, for example:
    • Lifestyle;
    • ‘Geeks’;
    • Personality;
    • Status seekers;
    • Beautiful homes.
    • Anything else?
  • BENEFITS SOUGHT.

Business-to-Business (B2B) market segmentation variables

Demographic

  • Geography:
    • Country;
    • Region;
    • City;
    • Climate;
    • Topography;
    • Anything else?
  • Industry (normally identified by Standard Industry Classification – SIC – categorisation):
    • Retailing;
    • Financial services;
    • Manufacturing;
    • Telecommunications;
    • Automotive;
    • Anything else?
  • Customer Size:
    • Large; medium; small; very small.
  • Key Account Profile:
    • Strategic; A+; B+; end-consumers served through intermediaries, e.g., value-added dealer networks (VADNs), retailers, etc.

Behavioural

  • Usage rates (heavy usage; medium; light).
  • Adopter groups: (relates to ‘diffusion of innovation’: innovators; early adopters; early majority; late majority; laggards).
  • Distribution versus direct sales.
  • Strategic versus operational purchasing philosophy.
  • Decision Making Unit (DMU) influences.
  • Loyalty status (‘locked-in’ contracted/solus-loyal/mostly loyal/fickle).
  • Psychographic:
    • Lifestyle characteristics of employees;
    • Health & Safety;
    • Diversity & Inclusion;
    • Demanding versus tolerant;
    • Anything else?
  • BENEFITS SOUGHT.

Please note that ‘Benefits Sought’ is capitalised in both the consumer and B2B categories. This is not a typo; rather, it reflects the fact that for both consumer and B2B markets this segmentation factor is the most powerful because it reflects most closely what the customer is actually buying and should have the biggest impact on a supplier’s value proposition design, as demonstrated in the second row of Figure2.

These segmentation variables are comprehensive in scope and no doubt reveal the complexity of what appears at first sight to be a relatively simple concept: that people and organizations are different, and some might say ‘strange’. Greater insights can be found in the Hooley et al. text mentioned already; also, the author is currently completing the forthcoming text The Ascent of Marketing and Innovation: Strategies for Profitable Growth which is designed to be complementary to this book and which will develop these segmentation process challenges to a level where practical frameworks, processes and tools are provided to execute the principles examined.

Reverting to the central principles of strategic marketing management illustrated earlier (not shown in this extract), we have now reached the point where we can discuss the meaning and relevance of the strategic marketing mix. A simple definition is provided here ahead of a more detailed discussion of its complexities, subtleties and nuances in subsequent sections:

The strategic marketing mix is customer-focused and competitively differentiated. It categorises the mixture of controllable variables that the organization blends to provide customer benefits and differential advantage in the target market segments it has chosen to participate in.

We can now assert that ‘customer-focused’ means that a value proposition is created based upon a well-researched and deeply-understood customer segment. The principles with regard to consumer and B2B macro segments are exactly the same. The point of departure is in the design and delivery of specific marketing programmes to each macro segment and a discussion to that level of detail is beyond the scope of this Chapter and book.

It is also worth noting here a point for which there is no space to develop in detail here but is extremely important in marketing management practice: the popular label B2B is excessively generic. Small and medium-sized enterprises (SMEs), especially towards the smaller end of the small category, share many of the buyer behaviour characteristics of consumer markets. Also, a huge amount of organizational buyer behaviour is in the public sector, an arena which has quite different buyer behaviour characteristics than typical commercial businesses, large or small.

 

Outside Fortress Europe Excerpt References

Hooley, G., Piercy, N., Nicoulaud, B., & Rudd, J. (2017). Marketing Strategy & Competitive Positioning. Harlow: Pearson.
Osterwalder, A., Pigneur, Y., Bernada, G., Smith, A., & Papadakos, T. (2014). Value Proposition Design: How to Create Products and Services Customers Want. Hoboken, NJ: John Wiley & Sons.

 


Analysis

 

Under Expert Panel review

 

Analysis informed by…

Economist. (2019, February 16th). Millennial socialism: A new kind of left-wing doctrine is emerging. It is not the answer to Capitalism’s problems. The Economist, 9.
Economist. (2019, February 16th). Millenium socialism: Life, liberty and the pursuit of property: Do the radical left’s ideas about “democratising” the economy make sense? The Economist, 17-21.
Godwin, R. (2019, April 4). Move over, millennials – why Gen Z are the new big spenders: Having badly misjudged millennials, the advertising industry is desperate to work out what makes the latest young generation tick. thetimes.co.uk.
Lyons, K. (2016, 7 March). Generation Y: a guide to a much-maligned demographic: Tech-savvy? Open-minded? What does being a millennial really mean? theguardian.com.

 


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All content © Colin Edward Egan, 2019