Nowadays, if a company knows their customers’ needs, it will gain the competitive advantage in the market. The companies try very hard to market products to the customer who will respond by making purchase. (Wisner and Stanley, 2007) The first thing for the firms to know is identifying the customers. Capon and Hulbert (2007) found that identifying the customer is the vital first step in securing customer insight. The firms can use information about their customers to make right decisions. The goal of identifying the customers is recognizing each customer as that customer at every contact, and then linking those data to provide a full picture of the customer. Therefore, it is important to position the customer for a firm. As a result, customer segmentation is a useful tool to identify the customer in detail. Kumar (2008) pointed out that customer segmentation would help company design effective marketing plan for customers. Andler (2011) stated that customer segmentation could be used to challenge a company to acknowledge and respond to difference in customer needs, tastes, and preferences and to become more market oriented. More specifically, mosaic as a professional tool identifies and describes the customers in detail, locates where they live and outlines what makes them different from others. Therefore, marketing managers could use mosaic system to develop the customer segmentation strategy.
Analysis of the Mosaic Profile System
Customer’s buying behavior was influenced by many factors. Therefore, understanding customer is quite important when the company set up the market strategy. Therefore, a professional tool provided a unique way to view the customer and group them in a specific way and help the company to set up the useful strategy. Mosaic UK is Experian’s system for classification of UK households. It presents a comprehensive view of consumers’ demographic. If a company would properly use these data, it will find the investment opportunities and understand the potential risk.
Mosaic system of customer classification categories were based on the professional analysis of the latest information about UK society. It could help the enterprise explore the customer insights and understanding: who, what, where, how and why. It has detailed customer classification such as 155 Mosaic person types aggregate into 67 household types and 15 groups to create a 3 tier classification that can be used at the individual, household or postcode level. Moreover, Mosaic system processed the data by a sophisticated proprietary approach, and extensive fieldwork and market research to test the validation and interpretation of the segmentation. Thus, the data and classification is more reliable to the data user.
As the Mosaic gathered the information about households and classified them into groups, the key users of these data are the organizations or companies who conduct the business target to the households. For example, the financial services company may use these data to develop an investment plan for the household. The insurance company will develop a family insurance plan attracting the households like Suburban Comfort households. As this type of people has spare money other than the daily expenses and would like to minimize the financial uncertainty. Therefore insurance company could target this type household. Home shopping industry like grocery retailer may design the shop fits into households’ preference. Other industries like media, telecoms, utilities, automotive, leisure, charity, legal, property, healthcare and the public sector all can become the user of the Mosaic system. Especially in the grocery retailer, mosaic system help edge of town grocery retailers like Tesco, Sainsbury to understand their market share and the pull of their stores in relation to competitors. Mosaic Grocery divided UK into 10 different types based on the postcodes. It describes how residents trade off the price, against services, convenience, variety, promotion, package size, and attitude towards the products. It combined with mosaic demographic data help the grocery retailer build the most proper strategy to stand out in the industry. This in turn, the customer will feel they were respected by the grocery retailer because the retailer develops the strategy based on their preference. Thus, mosaic system is a useful tool for the organization no matter in financial industry or the grocery industry to understand their customers and build the feasible strategy to attract and retain their customers.
A discussion on the Mosaic Report by Experian
Obviously, knowing customer will help the firm to target their products and locations. This is especially important for the supermarkets. The volume of the customer directly decided the fate of the supermarket. Therefore, the location of the supermarket is quite significant. Experian’s geodemographic segmentation system grouped the customers by the postcodes and homogeneous lifestyle. According to the Experian report (2007), type G Career and Kids is the most important customer group for the supermarket in grocery retailer. It reached up to 130 index (Figure 1) over the central line 100 index. This shows group G is the highest potential customer for supermarket. They have some key characteristics. Firstly, they are usually families with young children. Secondly, they have stable and sufficient income to support their daily expenses, because they are well educated and established in a technical, junior, or middle management career, in which they benefit from their future prospect career. Thirdly, they like the comfortable modern life. The couples both are confident with what they were doing. Moreover, they will need large expenditure on the appliance when they invested in a new house. As they are doing some technical work, they may be interested in the digital products especially. Fourthly, they have family cars which make their supermarket shopping much easier. As they are families and have children, they have to shop at supermarket on weekly basis. For the marketer in the retailer sector, especially in the supermarket function, if a location surrounded by a large number of Career & Kids type households, it means a great commercial opportunity existing in that specific area. In this context, the large supermarket contains food, digital products, skincare, appliance and so on will be suitable in that location. Meanwhile, the small and medium supermarket like convenience store is also attracting to this type of households.
Another Group H (New Homemakers) also suggested its high potential in the supermarket retailer. This type of consumer is young singles or young couples in small modern starter homes. They have secured jobs even one has professional job. As they constituted the home at the beginning, they require large quantity grocery products at the supermarket. Therefore, they are also the key target consumer for supermarket. The large supermarkets will also suitable for this type of households. Moreover, the convenience stores are also attractable to Group H. Other types like Alpha Territory and Professional Rewards, they have stable incomes even luxury income. These people need the weekly shopping at the supermarkets. Large supermarket is also attracting to them, but the density of the large supermarket is not as much as the Group G and H. Rural Solitude and Small Town Diversity groups are located in the sub area. Now their lifestyle is going to the principal supermarket instead of the traditional market. These two types of households normally living in the small town and remote area, therefore, the density of large supermarket may be not as much as Group G and H. The convenient stores are not so attractable to them. As for Industrial Heritage group, they live in the same community when they were born, and they want buy the things value for money. In other words, they are economic type persons. If supermarket chooses to locate near this type, it has to provide the competitive price to attract them. The price in the supermarket should compare with other supermarkets and create its own advantage over certain brands compared to other competitors.
From the location point of view(Figure 2), Group G and H located differently around UK. In Scotland and the northern area of UK, the New Home makers’ density is above average, while the Career & Kids has low density in Scotland area and the northern area of UK. In the middle of the UK, both types showed below average density, but the density of Career & Kids is higher than the New Homemaker. In the southern area of UK, the density of Career & kids is also more than the New Homemaker. By understanding the density of each group on the demographics, the supermarket retailer may understand their potential market around UK. For example, the Scotland and the northern area of UK could open the new supermarkets as the New Homemakers resided in that area and the population of New Homemakers is relative high. For the southern part of UK, the grocery market retailer like supermarket should reinforce the consumer strategy in this area due to the fact that both group G and H has average and above average population there. The high population of these two groups means the great commercial opportunities existing in this area. For the existing large supermarkets, it could relocation to the high population volume area. It also could refurbishment the existing supermarket to attract more customers..
According to the Experian’s report, the internet online shopping will become a future trend in the retail sector. IMRG predicts in 2020, 90% of retail sales will be online or influenced by internet. In this context, group H (New Homemaker) and Group G (Career & Kids) shows the great potential because this type of households rely on the internet searching for information and advice about products and services. They may place the order via the telephone or internet. Therefore, marketer will get the inspiration to reinforce the online shopping in Sainsbury’s website. In addition, Group C (Rural Solitude) and Group M (Industrial Heritage) may be the potential customers for online shopping in supermarket. They have the knowledge about the internet shopping and know how to use it, but they infrequently use it. If the online shopping advertising of supermarket could clearly states the direct benefits such as 50 off 10 one time purchase, it may attract them to shop online. By understanding the customer segmentation of Mosaic’s profile, the supermarket retailer could use acquire the new stores in the northern part of UK, relocate or refurbishment the stores in the southern part to attract more new customers. Meanwhile, Sainsbury could reinforce the online market strategy to earn the potential customers like to adopt the online shopping method.
The importance of segmentation
Aaker (1995) proposed that the increased use of benefit segmentation, with emphasis on what motivates customers to buy or use the services of products, what attributes of the offering are important and what objective are sought by the customer. Fogli (2007) pointed out that customer segmentation helps an organization set services policies or standards for various segments and help to focus retention on the most profitable segments. Zoltner et al (2001) suggested that customer segmentation is the process of placing customers and prospects into groups with common characteristics. Good segmentation consists of identifying a small group of actionable segmentation characteristics or criteria and assigning customers and prospects to the segmentation. Segmentation homogeneity ensures selling process similarity within a segment. (Zoltner et al, 2001) Smith and Zook (2011) stated that each segmentation has its own specific needs or response to varying marketing mixes. The company may put great effort on the most attractive segments. Attractive target segment are those that will generally be more profitable. Kutty (2008) found that understanding the customer segmentation will enable a firm to adopt the different strategies which are tailored to appropriately address the requirement of each market segment. Sivanandam (2006) found that organization use customer segmentation to address two basic marketing problems: understanding the causes of customer action so that it can be reduced and discovering new customers. Elmore-Yalch (1998) concluded five benefits of consumer segmentation. It will help to design the responsive products to meet the needs of the marketplace. The company will develop effective and cost efficient promotional strategies. It also assists the company to review the current marketing strategy and provide additional insight on the present marketing strategies. The company will inspire by the data and allocate increasingly scarce resources. From the long-run, the customer segmentation will help the firm to develop the sustainable strategy on the market growth.
Kitchen (1999) claimed that after identifying the needs of customers, the company may meet several constraints factors which inhabit its ability to match their products and services to the segment customers. These constraints include financial and production resources. There is also increasing awareness of, and interest in environment and ethical issues in marketing communications. Dahlen et al (2009) found that understanding the importance of customer segmentation is fundamentally important to determine the marketing communication objectives. Smith and Taylor (2004) concluded that marketing communication refers to how the communication affects the mind of the target customer. The efficient and detail customer segmentation will improve the efficiency that the communication addressed to the customers.
Business Case Study:
Obviously, the supermarket is a places offer large number of products to the customers. However, some customers look for the value for money products. Some customers prefer the convenience. According to the Mosaic’s report, the group H (New Homemakers) shows great potential business opportunities for the grocery retailer in the northern part of UK. The supermarket could open new stores in main cities of those areas. Not only will open the large comprehensive market, but also increase the convenient stores. These type households on the one hand have a need to equip their homes. Therefore, the supermarket should have sufficient stock in appliance, home, digital products sectors. The stable incomes enable them to afford those expenditures. On the other hand, the food sector may increase the half-cooked products due to the fact that the households may not have much time to cook. In addition, these households are the professionals in the work and familiar with the internet. The online shopping voucher giving to them when they check out at the supermarket will attract them to have a try. Normally, the online shopping requires specific amount for the free shipping, therefore, the customers always purchase a lot one time on line. Such promotions will also increase the revenue for the supermarket. Furthermore, the club card will be a useful tool to cultivate the customer’s loyalty.
Knowing customers is the first indication of a firm’s success. Customer Segmentation provided a good way for the companies to know the customer’s wants, needs, and expectation. It will also help the firm to build up the unique marketing strategy outperform the competitors. In this context, Mosaic System developed by the Experian offered a good insight for the grocery retailer to know the customers. Especially the Group G and Group H showed its great business opportunities lies in the supermarket sectors. It suggested the supermarket retailer put great emphasis on the Group H households in the northern area of UK because they have stable income and access to the online shopping.
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Figure 1: Mosaic UK Profile towards the supermarket shoppers
Figure 2: Household Type by Mosaic
Figure 3: Key Mosaic Lifestyle Groups