The Power of Attitude

Consumer Segmentation Beyond the "Balance Sheet of Life"

Introduction

The science of analyzing, targeting, and marketing to consumers has expanded significantly since the advent of consumer segmentation systems in the 1960s. However, companies have complained in recent years about the effectiveness of these research tools as the consumer landscape has become more complex and the ability to segment consumers into dependable geodemographic groups by lifestyles, life stages, and behaviors has grown more challenging.

In the early 2000s, Synergos Technologies (STI) studied this diminishing-returns aspect of market segmentation to see if the science was still viable in today's fractured marketplace. STI found that market segmentation is, most definitely, still a powerful market research component — IF the process evolves to meet today's complex marketplace. One step in the evolution requires identifying consumers at smaller geographic levels. A second step requires adding innovative new consumer data variables to the segmentation methodology. STI achieved both objectives and created STI: LandScape.

Launched in 2004, STI: LandScape incorporates both traditional consumer demographic data (from STI: PopStats™) and groundbreaking new layers of consumer lifestyle data - such as attitudes about technology adoption, exercise habits, and the propensity to eat fruits and vegetables. The result has been the creation of a consumer segmentation system that delivers a wide range of new consumer insights. These dimensions include not only consumers' factual demographic factors ("The Balance Sheet of Life"), but also their attitudes about predictive lifestyle issues ("Lifestyle Attitude Analysis"). What's more, LandScape identifies like-minded consumer groups at the smallest geographic level — the neighborhood.

This white paper describes the power of consumers' lifestyle attitudes and illustrates how incorporating lifestyle data into the science of consumer segmentation delivers wide-ranging insight — and greater precision — right at the desktops of today's market researchers.

A Quick Overview of Consumer Segmentation Research

Do you hold foregone conclusions about consumer demographics? If so, these ideas could shortchange your market research.

After all, customers do not walk into retail stores as "35-year-old women who work full-time and have two children at home." They walk into stores with specific beliefs about everything from their health, to their political beliefs, to their desire to own the latest technologies. Knowing these lifestyle attitudes can open up companies' market research to new levels of power and impact.

Despite these fallacies, certain ideas about consumers have come to be taken as fact, such as that young people live in urban areas, families live in suburbs, and rich retirees live in Florida. Even if this is true, there may be other truths about these people that are more compelling from a market research standpoint. For example, young urban residents might be politically conservative versus liberal, suburban families might be health fanatics versus couch potatoes, and retirees might be gay versus mainstream American. Any of these lifestyle attitude characteristics will significantly impact people's purchasing propensities — far beyond what demographic data alone can reveal.

This advanced research into consumers' lifestyle attitudes is significant, because today's marketplace is so complex. Markets are more fragmented. Consumer groups are less homogenous. Diversity and individualism are more pervasive. Competition is fiercer. As a result, the search for ideal customers among the vast swath of U.S. consumers has become more difficult. Most importantly, this complexity means that companies can no longer rely on foregone conclusions culled from traditional demographic data. They must also know consumers' lifestyle attitudes.

Today's market research challenges reflect the fact that consumers' purchasing propensities no longer neatly align with their age, income, occupation, and other standard demographics. For example, today many consumers without higher educations have become affluent. People with sophisticated tastes have become price conscious. People who aren't technically proficient want the latest and greatest cell phones or televisions.

The simple truth is that consumers who share the same demographics may have very different attitudes about everything from technology adoption to health. Multiple research studies bear out this disparity. Here are just three examples:

  • A 2006 study by the Pew Research Center on people's attitudes about luxuries and necessities revealed interesting insights. "More than twice as many younger adults (ages 18 to 29) than older adults (65 and over) consider home computers and high-speed Internet access a necessity. Also, more younger than older adults say that cell phones are a necessity. On the other hand, more older adults than younger adults consider home and car air conditioning, dishwashers and clothes washers and dryers to be a necessity."
  • In a 2000 study of technology adoption demographics, Cahners In-Stat reported that "five potential wireless customer groups were determined after interviewing a cross-section of the U.S. population. Within the five groups, some demographic characteristics are similar, but they do not define the person's exclusion or inclusion in the group. People of the same age and marital status are distributed throughout the categories, which were: married with children, young suburban professionals, affluent empty-nesters, mature and moneyed middle-agers, and living off Social Security."
  • In 2004, a study published in Appetite compared the demographics of meat eaters, vegetarians, and non-vegetarian consumers of meat substitutes. It found that, contrary to expectations, "both vegetarians and non-vegetarian consumers of meat substitutes were comparable for socio-demographic characteristics: higher educated, higher social class, living more in urbanized regions, and smaller households than meat consumers."

It's clear that the only foregone conclusion that market researchers should hold today is that demographics alone or combined with non-specific consumer information cannot give them finely honed insight on how consumers approach their decisions to buy products and services. The addition of predictive lifestyle attitude data will reveal much more specific and actionable consumer segmentation knowledge than has previously been available.

Consumer Demographics — The "Balance Sheet of Life"

35-year-old female
2 children
$50,000 annual income
College educated
Office professional
Asian-American

Demographic variables such as these are the foundation of consumer segmentation. Undeniably, one aspect of market research will not change: Consumers' demographic similarities and differences help define their purchasing habits and capabilities. After all, a family of four living on $40,000 a year cannot afford a Mercedes. Similarly, a person who can afford a Mercedes will likely not purchase a Hyundai. Along the same lines, older citizens will likely not be in the market for new household items, while young families will typically not purchase condos in Boca.

By knowing consumers' age, household, income, education, occupation, urbanicity, and ethnicity, businesses can better compare and contrast customer groups, ignore low-potential prospects, and target their ideal consumers. But these common demographics — and resulting conclusions — only tell part of the story about consumers' propensity to purchase certain products. In other words, the data can only tell you if people need certain products, if they can afford them, and if they have the cultural propensity to purchase them. What they cannot tell you is why a person selects one particular product over another when given widely divergent options.

As a result, the information delivered through traditional consumer demographic data can be viewed as a general accounting or "balance sheet" of a person's life — which we have termed the "Balance Sheet of Life." This concept is comparable to a business's financial balance sheet. While it will tell shareholders and the public if the company is financially healthy or not, it won't provide more compelling facts, such as that the company has consistently ranked as one of the best businesses in which to shop and work for the past five years or that a growing consumer trend might position the company for new levels of success. To gain that auxiliary insight requires layering additional levels of data and employing sophisticated analytic processes to the picture.

Like a business balance sheet, consumers' "Balance Sheet of Life" provides a general accounting of consumers' lives, which provides a solid foundation for understanding their "facts and figures" — like blue-color worker, $40,000 annual income, and high-school education. With this traditional demographic information you can infer that certain consumers will be more likely to purchase a Ford rather than a BMW.

However, what the "Balance Sheet of Life" cannot tell you is which vehicle two consumers in the same economic bracket will purchase. For example, which type of vehicle will two families with $100,000 annual incomes purchase: a BMW or a Cadillac? For that answer and other high-impact consumer insight, you need consumer lifestyle attitude data — in other words, consumers' "Lifestyle Attitude Analysis."

Beyond the Balance Sheet — Consumers' "Lifestyle Attitude Analysis"

Liberal or conservative?
Tobacco or tea leaves?
All-beef patties or tofu burgers?
Gym rat or couch potato?

Do you know where your customers stand on these and other important lifestyle differences? If not, you are missing a huge opportunity to hone your market research beyond the basics of traditional consumer demographics. While researching market segmentation, STI found several untapped consumer databases, which offered the potential to elevate the science of consumer segmentation to a new level of precision.

While the "Balance Sheet of Life" categorizes consumers into groups according to their financial capabilities, the "Lifestyle Attitude Analysis" takes consumer segmentation to the next level to group consumers according to their lifestyle attitudes — and, therefore, their aptitude to choose certain products over others in today's universe of options. With this multi-dimensional approach to segmentation, you can not only infer whether a consumer can afford a BMW or Toyota, but also if, all demographic data being equal, they are more likely to purchase a BMW or Cadillac.

Using LandScape to obtain this insight, you might learn that if consumers score high on LandScape's Technology Pioneers, Eat Your Veggies, and Gay Chic indices, they will probably be more likely to purchase a BMW. On the other hand, if they scored highly on the Power Brokers, Conservatism, and Smoke Signals indices they might be more likely to purchase a Cadillac.

LandScape's health and lifestyle indices give market researchers 10 innovative ways to overlay consumers' "Balance Sheet of Life" with layers of "Lifestyle Attitude Analysis" data. Adding one or more of these indices will create multiple new dimensions of insight into today's complex consumer groups.

Here are examples of LandScape's unique consumer lifestyle databases and the type of purchasing attitudes they can uncover:

Consumer Attitude LandScape Lifestyle Indicator
Television or treadmill? CDC National Center for Health Statistics
Fast food or a farmers market? United States Department of Agriculture
Newsweek or Time? Precinct-level election results (conservativism)
Buick or bus ticket? STI: PopStats and STI: Workplace data
Lawnmower or landscape service? Federal Elections Committee
Ralph Lauren or Versace? Johnson & Johnson and The Kinsey Institute

How Does Panel Survey Data Fit In?

To gain a better understanding of consumers' purchasing decisions, over the past couple of decades, companies have used panel survey data compiled by consumer survey firms. This data provides excellent insight into consumers from a national perspective, revealing information on a wide range of issues, such as which magazines they read, to what brands they prefer, to why they purchased their current vehicles.

However, while panel survey data excels at the national level, it can develop problems when modeled at smaller geographies, in particular, the neighborhood level. The primary reason is that researchers cannot assume that consumers who live in the same neighborhood segments will all behave the same all across the country. In fact, there are subtle and non-subtle differences between the purchasing habits of people living in same consumer segments, depending on a wide range of lifestyle and geographic factors.

The greatest benefit of panel survey data would be to a national retailer who selects merchandise on a national basis versus neighborhood basis. However, even many national retailers today are moving away from a "mass merchandising" mentality and more towards a local sales attitude. They are responding to the fact that today's more challenging consumer marketplace demands a greater level of attention to consumers' specific purchasing desires. In fact, companies that have the greatest success today are the ones who are focusing their sales efforts on consumer niches.

As a result, today the dynamics of neighborhood purchasing attitudes far out weight the national purchasing attitudes of consumer segments. Unlike panel survey data, LandScape is focused on extracting insightful consumer data at the neighborhood level versus trying to model national-level data down to a regional marketplace.

This is not to say that panel survey data doesn't have a solid place in market research: It does. However, companies simply need to look at it differently than they have for the past 20 years. They need to realize the difference between valuable national-level consumer data and insightful neighborhood-level data.

Consumer Segmentation at the Neighborhood Level

Along with bringing powerful new lifestyle attitude data to consumer segmentation, LandScape also segments consumers at smaller levels of geography than other systems — the neighborhood level. While consumers do still tend to "flock together," they do so at smaller increments than ever before. This fact is easy to see by even a short walk through multiple neighborhoods across the U.S. Even two neighborhoods co-existing side-by-side will be home to consumers with vastly different demographics and lifestyle choices.

An example of the power of analyzing consumers at smaller geographic levels was recently revealed in a more refined segmentation of the nation's Democrats and Republicans. For years, the U.S. media has been using political maps of the United States that segment democrats and republicans on a state-by-state basis. As a result, today the ubiquitous "Red State- Blue State" concept pervades our thinking. But new research into the truth of this division reveals a fundamental fallacy: Each state has multiple pockets of both groups, which when identified at a more refined level, show the country to be more "purple." LandScape reaches a similar level of exactitude, due to the its primary source of consumer data — PopStats.

PopStats data offers this capability because its primary source data is from the most current U.S. Postal Service data at the zip-plus-four level, which counts how many people are actually receiving mail at each zip-plus-four zip code across the country. Then PopStats takes these numbers straight up to the block group level. This "bottom-up" approach allows population estimates to be calculated straight up to any geographic region, including a block point, tract, county, and state.

Each trade area's zip-plus-four levels can be as small as specific groups of houses — typically four to 12 — or even just to a single building. As a result, accessing population data from this source allows researchers to literally see structures coming online as they are finished being built and occupied — neighborhood by neighborhood. This allows LandScape to segment consumers by neighborhoods. And this allows businesses to make critical business decisions at this level of precision.

Conclusion

What drives consumers' purchasing decisions? What differentiates one customer from the universe of customers? How do consumers who share similar demographics choose different products and services? The answers to these and other important market research questions cannot be derived from traditional market segmentation products that rely primarily on general consumer demographic data.

While traditional demographic factors are still relevant in market research, traditional consumer segmentation systems rely too heavily on them. These days companies need more probing ways to identify current and potential consumers and their potential buying habits. This is where LandScape excels.

LandScape is the first consumer segmentation system to leverage the power of consumer attitudes and bring a more current and insightful level of neighborhood segmentation to today's market research. The combination of traditional demographics, lifestyle factors, and neighborhood-level segmentation create a powerful system that helps companies find new locations, find new customers, and find new ways to attract more consumers.

LandScape's Health and Lifestyle Attitude Layers

LandScape delivers both the demographic details of consumer groups and the facts that make them unique. The heart and soul of LandScape is its attitudinal indices. Here are the five related to social insight and the five related to health factors.

Here are brief descriptions of LandScape's five social indices:

  1. Social Index: Conservatism. A conservative person might shop at Brooks Brothers and drive a Ford, while a liberal might shop at x and drive a Honda. The "Conservatism" index measures people's support of conservative issues in general elections.
  2. Social Index: Power Brokers. How a person votes could also influence how far they'll drive for everyday purchases to the kinds of magazines they read. "Power Broker" index measures people's financial contributions to political activities or social issues.
  3. Social Index: Technology Pioneers. A person's tech-saviness could indicate if they'll stand in line for the latest iPhone or use an old cellphone until it breaks. The "Technology Pioneers" index measures people's technology adaptiveness.
  4. Social Index: Gay Chic. A person's propensity to define themselves as gay could impact everything from his or her choice of shampoo to their choice of vehicles. The "Gay Chic" index measures the likelihood that a person associates him or herself with a homosexual lifestyle.
  5. Social Index: Urban Views. Whether a person chooses to live in the hustle-and-bustle of downtown or in a sleepy suburb indicates everything from where they'll shop to where they'll eat. The "Urban Views" index represents measurements of the density of people and businesses in specific locations.

Here are brief descriptions of LandScape's five health indices:

  1. Health Index: Health Zone. A person's overall health-mindedness could impact every aspect of their lives, from which grocery store they shop at to the type of technology purchases they make. The "Health Zone" index measures the general health of a population by combining the scores of LandScape's four other health indices.
  2. Health Index: Size Matters. A person's body size impacts many aspects of their lives from where they shop for clothes, to the car they drive, to the kind of furniture they purchase. The "Size Matters" index is centered around the Body Mass Index (BMI), which measures the relationship of height-to-weight.
  3. Health Index: Eat Your Veggies. A person's propensity to eat fruits and vegetables everyday could impact everything from the grocery store he or she will shop at to the drug store they prefer. The "Eat Your Veggies" index defines people by the number of servings of fruits and vegetables they eat each day compared to what is considered adequate by the USDA.
  4. Health Index: Bodies in Motion. People who exercise regularly might spend a lot of money on fitness or they might avoid snack food at convenience stores, or both. This health index measures people's daily activity levels.
  5. Health Index: Smoker Signals. Smoking could be an indication of a person who isn't concerned about their health or of someone who views him or herself as a rebel. The "Smoker Signals" index measures the number of smokers in a neighborhood.

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