Powerful Management Tool Builds Success for Silk and Peloton
Customer Segmentations enable leaders to get a firm understanding of distinct customer needs, where their products currently play and potential growth opportunities. There are many types of customer segmentation examples. Here are three:
- Demographic Customer Segmentation Example: Based on demographic factors such as, age, gender, marital status, race, occupation, education, income, etc. A classic example of demographic segments are age-based generational groups such as Gen Z, Millennials, and Boomers
- Behavioral Customer Segmentation Example: Leverages behavioral information such as, number of purchases, usage frequency, products purchased, etc. to group consumers. Volume-based segments of Heavy, Medium, Light users or One Time vs. Two Time purchasers are a clear output of this approach
- Psychographic Customer Segmentation Example: Based on beliefs, attitudes, values, interests, motivations, etc. Health and wellness segmentations typically layer in values and wellness aspirations to create distinct consumer groups
Each approach has its merits, depending on what it is being used for, but applying a singular approach to inform your overall brand strategy can be limiting. For example, a behavior only based segmentation will lack insight on the motivations behind the behavior.
I’ve seen more success when companies combine various inputs (demographic, behavioral, psychographic, etc.) and leverage advanced analytics to build a robust customer segmentation fact-base. This allows them to chart a more informed and actionable path for profitable brand growth, taking into account:
- Size and profitability of segment
- Brand relevance and competitive advantage
- Strategic fit, etc.
Below are customer segmentation examples that empowered two companies to refine their core and expansion targets, unlocking new growth opportunities
Customer Segmentation Example 1: Silk Brand Expansion Target
The Silk brand, now owned by Danone North America, launched in soy milk in 1996. By 2008, the soy milk market was estimated at $1.2 billion, with Silk driving $558 MM in sales.
The market was rapidly evolving and plant-based milks, in general, were gaining momentum with new players entering the market. To keep driving growth, the Silk brand team quickly recognized the need for a broader understanding of the nutritional beverage world (beyond avid soy milk users).
In 2009, Silk partnered with Insight to Action to build a broader value-added milk customer segmentation and nutritional needs framework to inform their marketing and innovation strategy. The result was the identification of two new target segments for Silk.
The expansion target – Convincibles – were a sizable segment open to more nutritional plant-based milk alternatives, but flavor was important. Silk launched PureAlmond targeting Convincibles in 2010 and is now estimated to be a $474 MM business for Danone. In the last 10 years, the Silk brand has continued to successfully diversify its plant-based product offerings to include coconut milk, oat milk, nut milk, creamers and yogurt. In 2020, Silk, along with other plant-based brands in Danone’s portfolio grew 17%, and shows no signs of slowing down.
For more detail on Silk, read our Customer Segmentation Update: Silk Brand Case Study article
Customer Segmentation Example 2: Peloton Redefining Core Target
Peloton Interactive launched in 2012, offering a high-tech stationary bike that allowed users to take instructor-led workouts at home. Basically, it’s an alternative to the gym. By 2019, Peloton had $915 million in annual sales (110% growth since 2018). In 2020, growth was further accelerated by the shutdown of gyms during COVID, and it is now estimated to be a $1.8 Billion dollar company.
According to global marketing lead Carolyn Tish Blodgett, to achieve that level of success, Peloton had to first do extensive research on the customer landscape and adjust their targeting and messaging strategy. Initially, Peloton was targeted to a more affluent suburban consumer that had the space for at-home exercise equipment – after all, it was a pricey, $2,000 investment.
However, an assessment of the customer landscape led to the identification of a new core target – a younger, urban and less-affluent consumer who was willing to pay for the convenience of having an engaging, at-home fitness regimen. This opened up an unprecedented growth opportunity for the company as they pivoted their communication strategy to focus on the underlying customer motivations and experience, as opposed to basic demographics or geographic segments.
These two customer segmentation examples show the importance of having a robust understanding of the customer landscape. By understanding the broader needs of consumers (e.g., beyond current usage or buyers), both of these brands were able to reach a broader and more profitable audience in a way that resonated with their needs and established them as market leaders in their respective industries.