Understanding how to maximize your customer value

The need for innovation in the Mexican retail market drove one retailer, Retailer M, to question whether or not they should focus on specific segments in terms of range, value, and service. What is the size of the potential growth opportunity for an international brand that acquired a discount chain?

To answer this question, Retailer M used NielsenIQ Segmentation Science to segment Mexican retail shoppers using our Individual, Mind space, and Behavior (I-M-B) framework and determined how to identify the segments to target that would maximize customer value.

Nielsen IQ Segmentation Science identified the three customer segments that accounted for over 50% of sales value. Equipped with this metric, Retailer M focused on gaining a detailed understanding of each segment as well as identifying the right levers to better engage with each group of shoppers.

Deep dive on shopper segments: Understanding the shopping enthusiast

Retailer M found that although they had eight distinct shopper segments, just three of those segments accounted for both 46% of the shoppers and 54% of the value. The retailer decided to focus on maximizing customer engagement, meeting customer needs, and targeting customer behavior patterns.

Of these, one segment was of particular interest to Retailer M, as it comprised a sizeable 12% of shoppers and 17% of value. However, shoppers in this segment, who were identified as Shopping Enthusiasts, were spending a substantive part of their wallets in competitors’ stores or in a discount chain that had been acquired by the retailer.

Shoppers in this segment were more likely to be assertive and sociable, taking action quickly. They were also much more likely to prioritize their own best interest. Additionally, they participated strongly in loyalty programs. If Retailer M posted a limited-time deal on social media, email marketing, or sent any other marketing messages, these were the shoppers most likely to respond.

The Shopping Enthusiast segment has the smallest percentage of working shoppers, at 48%. Typically a lower income than the other two segments, Shopping Enthusiasts score highly in agreeableness and openness, and poorly in neuroticism (with the low score indicating a tendency toward strong self-confidence and self-esteem).

These shoppers tend to think through problems to find solutions, and they are open to trying new products that offer perceived value. While they may have lower perceived value than the other two segments, learning how to maximize the profit from this one segment would play a key role in Retailer M’s continued growth.

As we move into each customer’s needs and customer behavior data, we can see certain patterns begin to emerge. For example, Shopping Enthusiasts have a high purchase frequency, are constantly looking for value, and enjoy shopping but are more likely to visit the discount chain than they are to visit the original retailer.

From insights to action

Now possessing a deep knowledge of their shoppers, Retailer M was in a stronger position to answer two questions:

• How do we increase Shopping Enthusiasts’ engagement with retail locations? 
• To increase spending from this segment (or steal market share from the competition), which aspects of the store, product or experience should we communicate to this segment? 

Based on this segment’s average employment rate, income, shopping needs, and personality traits, the discount chain is closest to the Shopping Enthusiast’s needs and expectations.

The discount chain offers a range of value for money (VFM) brands and has a heavier focus on maximizing deals than the original retail brand. The discount chain is also both easy to navigate and is conveniently located.

If the retailer wants to foster customer loyalty and encourage the Shopping Enthusiast segment to shop at this retailer, the business should focus on enhancing the shopping experience (when compared to the competition). The Shopping Enthusiast appreciates an attractive shopping environment and a wide variety of well-displayed products.

This segment responds to being introduced to new things that make their shopping experience complete. They like to be introduced to new products, categories, and brands throughout their journey. They are likely to try new things while expecting an easy navigation process during their shopping experience.

As a retailer looking to communicate with this segment and tap into that need for discovery and experimentation, the best option would be to share the latest, newest and most exclusive with this segment. It’s important to leverage this segment for additional engagement, as they are likely viewed as “knowledgeable experts.” Creating an exclusive tier or custom messaging for this profile is likely to generate excitement and further engagement.

Qualitative deep dive on shopper segments: The shopping enthusiast

With the information gathered on this segment, Retailer M can start to envision how they will react in more complex situations. The first order of business is to clearly determine the segment’s personality and shopping needs. At this point, we’ve established that the Shopping Enthusiast’s key decision-making pivot points are variety, value for money, and experience.

They like to be introduced to new things: it’s what makes their shopping experience complete. Variety and assortment are both highly valuable to this segment, which when coupled with deals make these things accessible to them and produce a high-quality customer journey.

They are not stingy or cheap by orientation; they are simply operating within a budget. This means that good deals and low prices are difficult to ignore, particularly when paired with attractive displays.

With access to high-quality data and guidance, even segments that seemed destined to underperform can be improved through behavioral segmentation optimization.

NielsenIQ segmentation science: Turning behavioral data into deep strategic guidance

Contact us today and learn more about NielsenIQ Segmentation Science and what we can do for you.

Sharper targeting, portfolio optimization, and identifying untapped opportunities, all while making the process simple and easy to implement. NIQSS goes beyond simple purchase behavior tracking. NIQSS is the flexible, customizable data collection solution that helps you unlock your competitive advantage.