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The Concept of Segmentation

To appreciate the importance of segmentation, just try to imagine what it would be like if magazine racks were not segmented, and titles were displayed in, say, alphabetical order! Segmentation is central to how we present, measure and market our titles to both retailers and consumers. And, says Elizabeth Newman, the segmentation process should be under constant review, preferably, on an industry wide basis.

By Elizabeth Newman

The concept of segmentation is not new or unique to magazines but is a well known method of grouping people, products and services into distinct groups. Everyone and everything can be segmented. Segmentation can be simplistic (male or female) or more detailed (age group and income bands). An example of segmentation within magazines would be Women’s Interest, which is then further grouped to reflect shoppers’ interests such as Hair and Parenthood.

Despite the constant evolution of the magazine market, segmentation is not reviewed regularly, and even then often only reviewed from a data integrity perspective. Taking Women’s Weeklies as an example, there have been several launches into this market in recent years, with the introduction of fashion focussed titles such as Grazia and Look. These clearly sit in their own group, yet this market remains split into only traditional and celebrity sub sectors. We are potentially missing out on opportunities to define and redefine product groups, the way we and our shoppers view them and therefore the way we market, range and merchandise magazines.

Segmentation is the basis of all range reviews and, after defining the category, it is the most important stage in any category management process. It establishes the ground rules from which to review a range and can positively influence listings of titles if done correctly. The industry views these groupings as simply a way of making reporting easier, when in fact segmentation is a powerful, strategic tool in establishing your title’s position in the market. Put simply, it is the difference between being ranked 10th in one sub sector and number 1 in another. It also helps the shopper navigate the fixture whilst communicating a title’s content.

How is it done currently?

Industry segmentation is managed by ANMW but home grown variations also exist having been devised by publishers, distributors and retailers. This results in inconsistencies across the trade which could lead to confusion for retail buyers in identifying which titles are market leading. It will also confuse shoppers if their magazine sits in different competitor sets in different retailers. Magazines have traditionally been segmented based on their content with little consideration being given to the different shoppers. This results in definitions that are too broad and doesn’t acknowledge the differences in those that buy them. For example, Vogue and In Style’s content is focussed on fashion yet they are bought by distinctly different shoppers.

Historically, Women’s Weeklies in WHSmith High Street sat together in one group. When it was decided to apply further segmentation, tellingly, they applied segmentation used across the trade that differs from the industry standard. This speaks volumes about today’s relevance of some of the ANMW classifications.

So, why do we sidestep official segmentation in favour of our own? The answer is simple. As the number of titles in the market has increased, content has evolved, and shoppers change, so does our requirement to reflect these differences when segmenting our magazines.

Put simply, it is fundamental for market survival. Successful segmentation enables you to effectively target your core shopper whilst enforcing your position in a crowded competitive market. We’re not just referring to the UK, but also to export as it’s important to note that effective segmentation isn’t based on UK principles alone.

Benefits of Segmentation

Historically, some people have viewed segmentation as simply a method of reporting on the performance of groups of comparable titles. Whilst it is recognised that segmentation aids the reporting of a title’s past performance, what is sometimes underestimated is segmentation’s power to shape and influence a title’s future performance. Influencing performance can be done in a variety of ways, such as marketing, range, merchandising, product development and industry leadership:

* Marketing Strategies

Segmentation identifies groups of titles that will appeal to shoppers with similar traits who will respond in the same way to marketing activity. The way in which we target these customers should be tailored to reflect this. For example, shoppers that buy ‘Real Life’ titles such as Take a Break and Chat are different to those who buy Pick Me Up and Love It! Therefore, not only should segmentation reflect this but the way in which we communicate to these customers needs to be different. Never before has this been so critical when return on investment firmly asserts its importance in the current climate.

* Range

In a complex and highly populated category, buyers and category teams rely on segmentation to identify and support optimum range decisions. Buyers frequently ask, "do I need to stock the 10th title in an existing sub sector or shall I range the number 1 in a new sub sector?" Take ASDA’s recent successful range rationalisation of some of their food categories; segmentation enabled the reduction in SKU’s whilst maintaining shopper choice. Similarly, when Tesco expanded their magazine range in May 2006, introducing new sub sectors, they used segmentation to identify gaps in their offer.

The benefit for publishers and distributors lies in striking a balance between offering shopper choice and stocking the best sellers within the sub sectors that you operate. The more a market is segmented, the more opportunity there is for smaller titles in a sector to gain exposure at retail. However, it’s not only the number of sub sectors that is important to a retailer but how represented particular sub sectors are in relation to the retailer’s customers.

* Merchandising

Achieving a retail listing is clearly the first and most crucial stage in getting your title into a shopper’s basket. However, listings alone will not guarantee sales. Your product must be located where your shoppers would expect to find it. Product location will also help communicate the title’s content to new shoppers, encouraging trial purchasing.

* Developing New Products

Segmentation is also an opportunity to identify gaps in the market where shopper needs are not being met. Research into new product development can be an expensive process and therefore segmentation can be a powerful and relatively inexpensive supporting approach.

* Thought Leadership

Revising segmentation is an effective way of demonstrating thought leadership. Making sense of our market and understanding shopper dynamics is pivotal to leading change. However it is not sufficient to approach segmentation projects half heartedly. Many industry bodies have embarked on market segmentation, but if done incorrectly without full knowledge of the market or shoppers or with bias for your own titles, the full benefits may not be realised, thereby defeating the objective.

Marketforce recognises the many benefits in keeping segmentation relevant and has invested in re-segmenting the established markets of Women’s Weeklies, Women’s Lifestyle and Home Interest. The purpose was to review and either validate the current segmentation or revise in line with market developments. The results have been widely adopted with positive results from recent range reviews from WHSmith Travel and Sainsbury’s Convenience.

The category management team at Marketforce devised its own approach to segmentation. Much time and effort has been spent on the methodology behind segmentation to ensure confidence and buy-in of the final results.

It begins with a thorough assessment of each title’s characteristics from content and features to size, cover price and paper quality. This is followed by in-depth focus groups attended by a mixed shopper base to gain insights into their view of a title and their relationship with it.

These assessments are supported by independent quantitative research and data sources; TGI, NRS, Nielsen, DunnHumby, WHSmith Transactional data to name but a few. This data provides a wealth of insight which helps identify the difference between the shopper and consumer, the purpose for buying and allows us to get to know them better by understanding their lifestyle choices and interests.

It is essential to use data that is independent of publishers and distributors to ensure the findings are based on true shopper behaviour and needs.

When embarking on a segmentation project, it is important to operate with full knowledge of the market. In addition, utilising a specialist category focused resource enables a credible objective view of the market and adds the ability to execute the results with pace through well established retail relationships.

Future of Segmentation

Segmentation done successfully is not a one-off exercise but a process of continual learning. As shopper behaviour changes and people exit and enter the market, reviewing and addressing your customer base, and therefore your segmentation, is fundamental to ensure continued sales.

Segmentation will be an important tool in the battle for retail space and driving sales and ultimately profit. Increasingly, more people will understand and therefore adopt segmentation as an integral part of any successful product strategy.

It is also essential that the industry promotes and adopts improvements to segmentation and, most importantly, streamlines the process for distributors to implement change.

Segmentation is a critical task and thus the question is not ‘should we’ segment but ‘how and when’.

It is a time intensive and complex exercise; the wrong approach could negatively impact revenue, sales and profit of a title. Also, recognition of where to draw the line is important; with products as individual as magazines, segmentation could end up too proliferated.

Get segmentation right, however, and you will assume a higher ranking position, better retail penetration, more effective promotions and a better return on your investment.