Why Leading Brands Embrace Market Segmentation

Larry LightMarch 1, 20234 min

AB InBev is the owner of over 500 drinks brands including national beers (Budweiser, Stella Artois, Corona Extra) canned cocktails, craft beers, energy drinks, etc.. In an interview for The Wall Street Journal’s C-Suite Strategies section, the CMO of AB InBev discussed the changes in the Group’s brand marketing. One significant change is the focus on occasion-based segmentation.

Market segmentation is fundamental to successful strategies. Many marketers see segmentation as passé since personalization focuses on a market-of-one concept. But, that is wrong. As AB InBev is demonstrating, understanding the context for the brand’s users and their needs is essential. And, segmentation can drive greater personalization strategies.

The purpose of market segmentation is identifying and understanding a brand’s customers. Market segmentation divides specific people into specific markets that share common needs and common occasions, differentiating these specific people from other specific people who have other needs and other occasions.

Those who view market segmentation as just another research tool miss its strategic value. Viable, insightful, actionable market segmentation addresses several key areas for directing brand-business strategy and brand policy. Market segmentation can also help in managing resource allocation.

Proper market segmentation avoids product classification, price segmentation, industry segmentation and channel segmentation. These approaches provide generic manufacturers’ viewpoints rather than customer-driven realities. No guest says to a significant other that the dream vacation will be at an upper upscale hotel. No car buyer says the ideal vehicle will be a mid-luxury mid-sized car. Good, better best marketing is a mistake as every brand must be the best value in its specific market regardless of its price.

Market segmentation requires craft as well as research skill. Contrary to what many academics, researchers and consultants say, the output of a segmentation study does not reveal truth. In fact, it can raise more questions than you had beforehand. If analyzed and synthesized with intelligence and creativity, market segmentation can provide insight into the following:

  • Superior understanding of the customer so the brand can provide outstanding competitive advantage
  • Strategic focus that is fundamental to effective marketing
  • Identifying market priorities; effective market segmentation drives business strategy, not just brand strategy

A proper market segmentation study should help you answer these three key questions:

  1. Who are the prime customers and prospects?
  2. What are their needs and problems?
  3. What are the occasions in which these needs and problems occur?

The best market segmentation is threefold. It is the fact that what people buy and use is a function of who they are, why they need this brand and how, when, where (context) they use this brand.

Marketers must also remember that customers define the markets, not the marketer. If a brand is a source of a promised relevant differentiated experience – offered to the customer – then it is the customer’s perspective of the market that matters. Customers tell us what they consider when they have a particular need for a particular occasion.

This approach is what AB InBev is implementing in its current strategies. AB InBev sees that people are staying home more. Research indicates that not only are people eating at home more now, they plan to eat at home even more as time goes on. Recent US financial data show that eating out is becoming even more expensive. And, for many seniors on fixed incomes, eating out has disappeared as a dining option.

All sorts of at-home occasions are open to an AB InBev brand. AB InBev sees that although people are not going out to bars and restaurants as frequently, beer and spirits drinking is still happening. It is happening at home.

And, people are drinking more frequently with meals – whether dinners, snacks, TV watching, etc. These are people who will consider an alcoholic beverage as an accompaniment to a particular meal eaten at home.

AB InBev makes one out of four beers sold worldwide according to The Wall Street Journal. The company’s large portfolio contains beer brands but other beverages that might be considered as a meal accompaniment such as hard seltzers and ready-to-drink cocktails. AB InBev sees its brands as “adding more value to (at home) occasions.” Not surprisingly, non-meal occasions are also increasing at home for AB InBev brands.

According to AB InBev, these insights have already changed the advertising for its brands. For example, Stella Artois advertising tends to focus on meal occasions. For its Super Bowl advertising, rather than situate in a bar, the ad was situated in the home of a well-known couple who “… grab a couple of beers for an impromptu dance party in their living room to pass the time while one of them waits on hold on the phone.”

Satisfying customer needs and problems while understanding the specific occasions in which these occur is the key differentiator between marketing and selling. Selling is convincing customers to buy what you know how to make. Marketing is about profitably providing what specific customers need or might need or might solve their problems in specific occasions. Superior understanding of customer needs and occasions provides the basis for outstanding competitive advantage.

Contributed to Branding Strategy Insider by: Larry Light, Author of The Paradox Planet: Creating Brand Experiences For The Age Of I

The Blake Project Can Help You Understand Those That Matter Most To Your Future: Simply email us for more about our market segmentation services.

Branding Strategy Insider is a service of The Blake Project: A strategic brand consultancy specializing in Brand Research, Brand Strategy, Brand Growth and Brand Education

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