When Fallon Worldwide was searching for a strategy to win Citibank's business in 1999, its market researchers were casting about for a new way for the retail giant to segment its customers. But scores of focus groups weren't yielding any consumer passions when it came to banking products, until the agency began asking people about the role of money in their lives. "At this point people leaned forward, put their elbows on the table and began to talk," says Fred Senn, one of Fallon's founding partners, who chronicles the Citi case in the recently published Juicing the Orange: How to Turn Creativity Into a Powerful Business Advantage.
The result came to be Citi's "Live Richly" campaign, targeted at a segment of the population that Fallon nicknamed "balance seekers:" consumers with a healthy attitude toward money who sought to fulfill their other values in life: family, friends and happiness. This insight into how consumers think-beyond demographics to mapping their psychographics-has proved a valuable tool for Citi and other marketing trendsetters. But the next generation of market-research tools promises to go even beyond psychographics, marrying information about consumers' actual behavior to demographics and psychographics. "The newer trends in segmentation are to try to uncover genuinely insightful observations about how groups of customers behave, and use this input to design products and services accordingly," says Rita Gunther McGrath, associate professor at Columbia University's Business School.
Market-research vendors are now hyping products that tie proprietary consumer research with other databases to allow for more tightly focused segmentation slices. Disappearing are customer segments like Boomers and GenXers; entering the scene are groups such as New Mediacs or Rennaissancers. One of the leaders in the space is Simmons, which recently won a patent for its TV BehaviorGraphics engine, which integrates the Nielsen National Television Index with Simmons annual survey of 20,000 consumers. So far, TV and cable networks, along with ad agencies and savvy financial firms like MasterCard, are early users.
At the request of U.S. Banker, BehaviorGraphics product manager Eileen Mercken ferreted out four behavior-based consumer segments that rate high on the question: "Do you expect to buy your first home in the next 12 months?" These four groups turned out to be the segments that Simmons had characterized as "Pop Cultures," "Urbanites," "Sarcastics" and "Rennaissancers," based on psychographic and demographic characteristics. Mercken linked these four segments to form a "first-time home buyer" cluster.
Mercken found that this "first-time home buyer" segment, like most other Americans between the ages of 18 and 49, faithfully watch "American Idol" and "Grey's Anatomy." But when these consumers were analyzed through the TV BehaviorGraphics lens, she found other surprising viewing habits. Who'd have guessed that consumers who intended to purchase their first home within the next 12 months would put in their top 10-list three FOX shows: "Family Guy," Simpsons" and "War at Home," when the rest of 18-to-49 year-olds in the Nielsen survey rank these shows 41, 43, and 63, respectively?
"Demographic segments still work, but I don't think they're as efficient or as effective as behavioral measures," says Max Kilger, chief behavioral scientist at Simmons. "If you choose, say, women [aged] 18 to 49, that's a broad target. And only a small segment of that is really interested, so you're sending a lot of images to people who don't really care."
How customers absorb marketing messages isn't new; Fallon Worldwide did it 10 years ago when it found the "Road Warriors" segment that Holiday Inn Express wanted to reach only watched TV on Sunday and Monday nights. The difference is Fallon did scores of focus groups for that insight; new market-research tools put the data on CD.
Other research firms have found ways to connect the consumer-behavior dots of not just TV viewing behavior, but a whole spectrum of media consumption. BIGresearch's Simultaneous Media Survey looks at 33 different media-from TV to Internet to cell phones, and found that only a small fraction of consumers do just one thing at a time anymore. Many are simultaneously watching TV, reading a magazine, surfing the Internet, and listening to an iPod, says Joe Pilotta, vp of research for BIGResearch. Knowledge about new segments can also help inform marketing strategy. "Any way that you can look at how your customer behaves or thinks will give you an advantage in what you've got to do," says Senn.
Still, even the most complicated algorithms can't conquer the complex mental equation of why people buy and when. "Demographics are far away from discerning: 'Why does someone purchase?'" says Kilger. "With behavior, you're getting closer."