Market segmentation is sometimes based on categories or personas that have been constructed by independent market research service providers. One model for segmenting target markets is called the family life cycle (FLC) approach. FLC is based on the idea that the need for consumer goods and services and the amount of money available for purchasing those desired goods and services varies over the life cycle of the family unit. For example, the tourism and hospitality literature points to a relationship between the demographic attributes of families and the food purchases that they make while away from home. Foodservice is a viable market and growing market: the amount of discretionary money that American families spend on dining out increased from 25 percent of their food budget to 50 percent in the years spanning 1955 to 2006.
The Evolution of the Family Life Cycle Segmentation Model
As changes in the composition, structure, and flux of modern family units have occurred, the family life cycle model has needed to change in concert. Just as in the development of target market personas, the ideal is to categorize groups (households for the FLC model) in a way that maximizes between-group variance. Consider this: Market researchers collapsed the number of categories from the original eight in the FLC model to six. This essentially smoothed the evident distinctions across single parents, solitary survivors, and middle-aged couples without children, and reclassified all these consumers as mature single. In their efforts to streamline the process for assigning consumers to greatly simplified categories, the researchers created an indistinct amalgam that obfuscated some of the most influential attributes of the groups. In other words, the differences between middle-aged couples without children and single parents are likely greater than the similarities of their "singlehood."
What Should a Market Segmentation Model Accomplish?
A target market segmentation tool for use by an industry should demonstrably result in the following, expressed here as key decision criteria for choosing from alternative models, and as desirable outcomes of market segmentation:
- An increase in sales and market share
- Improved customer-brand engagement
- Affordable adoption given resources and capabilities
- Implementation ease
A Comparison of Three Approaches to Surveys Research
Suppose a market researcher may decide to conduct a survey that is loosely based on the traditional FLC model. The survey is designed to facilitate target market segmentation, and the underlying premise is that the stages of family life over time are key to understanding the consumer behavior of families. Many possibilities exist for structuring and conducting the survey. Each surveys research method used to identify consumer insights has its own set of strengths and weaknesses. Three of these alternatives are explored below.
Customer-Centric Model: A customer-centric model that employs the FLC framework but embeds the research approach within the context of the dining experience. Suppose the survey's research occurs in restaurants. The opportunity for restaurant proprietors to participate in and observe the data collection takes on an action research tenor and increases stakeholder interest. The primary objective — ensuring consumers are able to differentiate between the restaurant offerings — fits well with the focus on the customer dining experience. The basis for the customer-centric model is established through the efforts of a Delphi panel consisting of restaurant patrons, not restaurant proprietors.
Survey a Focus Group: The focus group approach used in alternative two entails the usual expenses associated with identification of the participants, travel provisions, and discussion moderation. Once the focus group process has completed, the restaurant managers are left with the task of socializing the research findings across and within the client spaces. Customer-brand engagement may be long-lasting for the research participants — if, in fact, certain restaurants stand out as superior as a result of the group processes — however, these customer-brand engagement outcomes are limited to the focus group participants. In-depth insights into consumer perceptions and the dining customer experience would be typical outcomes of this approach.
Syndicated Survey: Alternative three assumes that insights can be sufficiently gleaned from a survey that is tailored to the business interests of all the restaurants participating in the syndicated survey. With strong input from the restaurant businesses, the survey will tend to lean toward the generic and impersonal. In addition, the diffuse research focus can severely limit the availability of pertinent insights. Costs are shared across the businesses that help to structure the survey and design the questions, both processes that may result in weak alignment of the core capacities of the participating businesses or confusion about key drivers of the research outcomes of the individual businesses to the survey instrument as a whole. As with the focus groups, the researchers are left with determining how to best socialize the research findings across and within the client spaces.
Embedded Research May Be the Key to Differentiation
The purpose of developing personas for target market segmentation is to determine how consumers differentiate a product or service. One of the most important steps in action planning and implementation is determining a strategy for getting buy-in from stakeholders.
The perceptions of stakeholders can be weighted toward a positive valence if clear, granular action plans and roadmaps for implementation are provided early on. And the relationship can be strengthened if stakeholders can provide meaningful details to the action plan as it is rolled out. Even if there are just a handful of actions to implement, a plan of action is critical. Decision-making and ongoing monitoring should both be embedded in the action plan and implementation from the outset.