CPGmatters: Coke Focuses on Segmentation For New Go-to-Market Strategy
By John Karolefski
Through a special arrangement, what follows is an excerpt of a current article from CPGmatters, a monthly e-zine, presented here for discussion.
The right product in the right place with the right message for the right shopper. That’s the goal of Coca-Cola’s new go-to-market strategy that focuses on a segmentation platform to address shopper needs and deliver customized beverage solutions to supermarkets.
“We start with the premise that no two stores in America are exactly alike. Each store has its own DNA consisting of different shoppers who have different needs and different purchase behavior,” John Carroll, Coke’s vice president of shopper insights and marketing solutions, said recently at Nielsen’s Consumer 360 conference. “Once you understand the store’s DNA, you will be able to recommend the right brands, right packages, and right occasions for the right people.”
In the past, the same products were largely available in every supermarket. Today, trading partners are looking for differentiation and segmentation, according to Mr. Carroll.
Coca-Cola’s Shopper Segmentation Methodology starts with shopper insights by using the Nielsen Homescan Panel of households and grouping shoppers into segments based on their purchase dynamics, demographics, and psychographics. That information is used to group stores into five clusters using Spectra targeting tools that identify high-value consumers. Coke scores each store according to beverage purchase segments. Once the stores are assigned a score, they are clustered together based on degree of similarity within the clusters and differences between them.
Each store typically serves one shopper cluster. Gaps in actual volume versus demand indices are opportunities. The latter estimates potential, indicating high consumer fit for the brand.
One challenge is taking Coke’s segmentation model and matching it up with a retailer’s own segmentation model. Mr. Carroll also admits that the system requires art as well as science.
“We’ve done our best to develop the science and to be accurate with clustering. But when the account manager walks into that Winn-Dixie in Cluster #1 in Florida or that Safeway in Cluster #2 in Northern California, they see that the clustering that we have identified as matching up with the people shopping the store. It’s really important to have those two things working together. So, we identify the shoppers in the store using eyeballs and the science and then we figure out what the merchandising differences are by cluster.
“That may mean loading up on Coke Zero in a suburban affluent store and Fanta in a Hispanic store. The process aims to figure out what that shopper’s needs are and what brands they are most likely to buy. This information helps Coke develop planograms for the shelf set, displays and cooler.”
Discussion Question: What do you think of Coca Cola’s new shopper segmentation strategy? What do you think are some of the opportunities as well as challenges in implementing such a system?