“Nielsen’s online data shows that about half of the U.S. population visited a social networking website in the last year and that number grows every quarter,” said Wils Corrigan, AVP, Research & Development, Nielsen Claritas. “The rising popularity of these sites and the deep engagement consumers have with them has advertisers and marketers asking for more and more detail as to which lifestyles should be targeted for their online advertising and promotions.”

Facebook vs Myspace

Through Claritas, Nielsen defines U.S. households in terms of 66 demographically and behaviorally distinct segments like “Young Digerati” or “Beltway Boomers.” When those segments are overlaid with the activity of Nielsen’s online panel of more than 200K, we see a marked difference in the demographic makeup of the two largest social networks, Facebook and MySpace.

• Facebook users have a largely upscale profile. The top third of lifestyle segments relative to affluence were 25% more likely to use Facebook than those in the lower third.
• The bottom third segments related to affluence are 37% more likely to use MySpace than those in the top third.
• Users of Facebook were also much more likely to use LinkedIn, a network geared towards business and professional networking, than those who use MySpace.

Bloggers more urban as well

According to Nielsen Claritas, the blogging and tweeting community at large isn’t necessarily more affluent, but bloggers and tweeters do live in more urban areas such as New York, Los Angeles, San Francisco, and Chicago. The penetration rates of the top two most visited blogging platforms (Blogger, Wordpress) and the most popular micro-blogging platform (Twitter) show that Nielsen’s 12 Urban lifestyle segments are more likely to blog and tweet than Nielsen’s 22 Town & Rural segments.

Not surprisingly those lifestyle segments most likely to blog and tweet also tend to use Facebook and LinkedIn more often than those segments that typically don’t blog or tweet. Case in point, the Urban lifestyle segments for Blogger are 18% more likely to be Facebook users and 140% more likely to be LinkedIn users than the below average segments.

About the methodology

Nielsen examined the seven most-visited social networking websites and platforms: Facebook, MySpace, Blogger, Twitter, WordPress, ClassmatesOnline, and LinkedIn. Website penetration by segment was calculated by dividing the number of unique visitors to the website per segment by the total number of households in each segment.

Mike Mancini, Vice President of Data Product Management, Nielsen Claritas

SUMMARY: In a down economy, price sensitivity can trump loyalty. Without loyal customers, however, businesses can lose a substantial revenue stream, higher profit margins and enthusiastic referrals. Innovative companies are staying ahead of the trend by deploying strategies built on consumer segmentation to strengthen the bonds with these high-profit potential customers. These strategies go beyond the classic marketing applications of segmentation to drive customer-facing aspects of a business.

For most businesses, loyal customers are the ultimate quest: consumers who wouldn’t think of buying a car from another dealer, shoppers who are on a first-name basis with a boutique store clerk, coffee shop regulars who don’t even need to place an order to get their half-caf, no-whip soy latte. Loyal customers provide businesses with a steady revenue stream, higher profit margins and confirmed evangelists who virtually—and sometimes virally—do much of their marketing for them.

Twenty-five years after Neiman Marcus introduced the first customer loyalty program, nationwide surveys have reported a decline in corporate allegiance as consumers shift their concerns from patronage to price. To strengthen the bonds with their best customers and retain wallet share, a number of innovative companies are taking a second look at a classic marketing tool—consumer segmentation—and applying its concepts in new and innovative ways.

Customer-centricity as a growth strategy
Electronics giant Best Buy launched a customer-centric program based on segmentation that now is at the heart of its company-wide growth strategy. According to published reports, Best Buy, which has more than 1,000 stores nationwide, classified its best customers into five consumer segments, with names like Buzz (the young tech enthusiast), Jill (the suburban soccer mom) and Barry (the wealthy professional guy).

Using a variety of demographic, lifestyle and marketplace data to flesh out these portraits, Best Buy re-aligned its stores according to the segments. Store clerks received training on how to serve the Barrys or Buzzes in their trade areas, and stores were remodeled to reflect the dominant target groups. As a result of this program, the company invested more than $50 million to renovate 110 stores.

In the year after the makeover, the Best Buy stores that had been converted to the customer-centric model reported same-store sales growth in excess of 9%—more than double that of outlets that had not been overhauled using the segmentation model.

The human connection
Typically, segmentation initiatives like the one used by Best Buy augment a company’s transactional data with syndicated survey research to create detailed profiles of the best customers. Segmentation systems—such as Nielsen’s PRIZM, which was introduced in 1976—enhance customer data by linking consumers to a variety of third-party databases that can reliably predict their lifestyles and media preferences through their demographics.

PRIZM® draws on U.S. Census data and market research conducted by companies like Simmons and Mediamark Research & Intelligence and currently classifies all 114 million U.S. households into one of 66 consumer types putting a human face on every segment’s likes and dislikes.

By appending a segmentation system such as PRIZM to an address file, any company can begin building stronger relationships with customers through tailored contacts that go beyond mass mailing a discount coupon or buying a 30-second spot on the evening news. Stores in different cities—or even different neighborhoods in the same city—can feature product mixes geared specifically to the lifestyles and preferences of the segments in that area. Once a company finds a specific segment with a high-profit potential, the segmentation system can identify areas where more of those kinds of consumers are likely to live and provide insights on what messages will appeal to them.

Loyalty has its privileges
At the Arizona Republic, a Gannett newspaper with the largest circulation in Arizona—486,686 Sunday subscribers—consumer segmentation drives its interdisciplinary approach to maintaining customer loyalty. Reporters attend seminars about the most common PRIZM segments among their readers to better craft their stories with their audience in mind. Circulation managers differentiate customer service policies based on whether a subscriber is a long-time reader or a new customer. And marketers target subscription drives to prospects who, according to segmentation data, are most likely to become loyal readers.

The Arizona Republic classifies loyal readers by PRIZM segments based on their addresses. The resulting list of dominant segments is then sorted into five target groups with nicknames like Gold (older, affluent readers from PRIZM segments like Upper Crust and Blue Blood Estates) and Silver (younger, upscale residents of segments such as Young Influentials and The Cosmopolitans). Analysts then identify Arizona neighborhoods with high concentrations of the target groups and the retail areas they are likely to frequent. Knowing where to find people who share the same demographics and lifestyles as its most loyal readers allows the Arizona Republic to target its introductory direct-mail subscription offers and differentiate its pitch based on the prospects’ specific interests.

This approach to finding “look-alike” customers who matched the characteristics of its most loyal segments yields measurable results. For example, after the paper segmented and targeted subscriber look-alikes, the drop-out rate fell to just 14%—a 39% improvement. Just as important, by targeting only selected households, the newspaper was able to cut printing and postage costs, reducing its acquisition cost per subscriber by 23% and decreasing the number of direct mail pieces sent by 40%.

Developing a competitive edge
Segmentation can also help companies keep existing customers from defecting to competitors. When First Tennessee, a Memphis-based regional bank with about 200 branches, decided to place a greater strategic emphasis on becoming customer centric, it employed an innovative approach to address the lifecycle needs of top prospects. The bank drew on both its customer records and data from Nielsen P$YCLE—a segmentation system that classifies households into 58 types based on demographics and financial behavior. Focusing on a customer’s investable assets and lifestage, First Tennessee identified segments of affluent and mass affluent customers, and divided them further into younger professionals, near retirees and retirees, for a total of six target groups.

After developing lifestyle portraits of the target group members, First Tennessee identified key marketing themes based on the intersection of customer needs and the bank’s competitive advantages. With a multi-channel advertising campaign built around the tagline “Powering Your Dreams,” the bank tailored individual marketing messages to resonate with its top target groups. “We want our bank to resonate with the lifestyle and financial needs of our target audience,” says Dan Marks, Chief Marketing Officer at First Tennessee.

Adopting such strategies across multiple departments has allowed First Tennessee to incorporate consumer segmentation into their overall business plan. For example, to increase customer awareness, First Tennessee deployed an advertising strategy linked to the media patterns of targeted P$YCLE® segments. While the bank used to run TV commercials on network news and sports programs, P$YCLE showed that its targeted customers actually preferred cable channels like CNBC, the Weather Channel and the Food Network. The bank’s media buy changed accordingly, and the number of new deposit accounts and loan applications rose in response. “We’re still surprised by the Food Network,” Marks chuckles. “But it’s worked very well.”

Principles for creating loyal customers
Despite these success stories, applying consumer segmentation across an enterprise is not always an easy sell. Some sales managers resist focusing on the most valuable customers over the long-term, preferring to acquire as many customers in as short a time as possible—especially if their compensation is structured to reward that objective. Others may consider customer loyalty a qualitative attribute that is less important than such quantitative metrics as product sales. For those companies ready to undertake an enterprise-wide segmentation initiative to increase customer loyalty, there are a handful of guiding principles that are important to achieving success:

• Identify key customer segments
• Create target groups of similar segments
• Prospect for look-alikes in target markets and your own customer database
• Deliver differentiated messages and experiences
• Implement the approach throughout the departments within your organization
• Measure the effectiveness and adjust your strategy

Using consumer segmentation to build customer loyalty can help companies prosper even in a difficult economy. By shifting resources away from mass-marketing channels to a focused campaign that puts their best customers front and center, businesses can improve sales and decrease costs, while building a loyal clientele that allows them to weather this challenging market.

To learn more, download the full report, Using Segmentation to Strengthen Customer Loyalty.

With roughly one-third of the total U.S. population and at least three-quarters of the country’s land area, rural America is a diverse and important marketplace for marketers of consumer products, Doug Anderson, EVP, Research & Development, Nielsen, argues in the January issue of Nielsen’s “Consumer Insight” online newsletter.

Marketers intent on reaching rural Americans should pay attention to marked differences in media usage and consumer preferences that distinguish rural and metro America, Anderson advises.

“As rural America continues to transform and diversify, makers and sellers of consumer products need to adapt their strategies in concordance,” Anderson writes.  “Ethnic diversity, together with ongoing economic instability and technology-driven developments, will continue.  Understanding how these changes impact rural life allows marketers to stay ahead of the curve.”

Read the full article.

View the latest issue of “Consumer Insight.”

But despite the evident buying power of boomers, many advertisers — intent of wooing loyal lifetime customers — continue to focus their advertising on younger consumers.

Writing in the January issue of Nielsen’s “Consumer Insight” online newsletter, Howard Shimmel, Senior Vice President, Consumer Insights, Nielsen, and Jess D. Aguirre, Jr., Senior Vice President, Research, Hallmark Channel, urge advertisers to rethink that media strategy.

“Advertisers who fail to recognize the economic value of Boomers, and continue to allocate media dollars to younger audiences, will fail to deliver Boomers and capitalize on their spending power today,” Shimmel and Aguirre argue.
     
Read the full article.

View the latest issue of “Consumer Insight.”

These households also outspent average households by 88% on purchases of ice, and by 75%, 72%, and 64%, respectively, on purchases of baby food, baby needs, and disposable diapers.

Acculturated Hispanic-American households — those that speak at least some English at home – account for 10.8% of all U.S. households.  These households represented 20.5% of dried vegetables and grains product dollar sales and 20.3% of ice product dollar sales.  Hispanic-American households also accounted for 18.9% of baby food product dollar sales, 18.6% of baby needs product dollar sales, and 17.7% of disposable diapers product dollar sales.

Other categories skewing to Hispanic-American households include hair care, family planning, women’s fragrances, grooming aids, and juices and drinks.

Nielsen’s Marketing Tip:
Retailers targeting Hispanic-American households may want to promote these categories (above) with feature ads, displays, and product assortments. Manufacturers should consider cross-promoting and cross-couponing items in these categories.

Nielsen’s Dollar Volume Index identifies demographic groups that account for above or below average dollar volume purchases for a given product category.

Data for the index was collected via Nielsen’s Homescan consumer panel, a nationally representative sample of U.S. households that provides a stratified, proportionate, non-biased representation of the U.S. population. Homescan panelists scan all of their UPC coded purchases after every shopping trip, allowing Nielsen to capture their complete shopping and buying behavior.

Read coverage of Nielsen’s findings in Brandweek and Food Product Design.

For advertisers trying to reach target audiences, understanding which film types attract specific consumers can make or break an advertising campaign.

In response, Nielsen PreView analyzed 400 recent movies to identify 11 key movie consumer segments.

Nielsen’s “Tent Pole” segment, for example, attracts viewers from all demographic segments. Popular family and action films, like “Spider-Man 3,” typify this segment. Advertisers trying to reach a broad audience would benefit from advertising before these films.

In contrast, Nielsen’s ”Low Profile Chick Flick” movie segment, which includes movies like “Gracie,” attracts a predominantly female audience. Advertising during these types of movies will likely reach females under age 25.

Learn more: view Nielsen PreView’s abridged report.

Purchase the complete report.

“Plain Rural Living” households — a Nielsen Spectra lifestyle segment that includes households in small towns and rural areas with the lowest population densities — account for 21% of all American households.  These households represented 43% of canning/freezing supplies product dollar sales, 31% of automotive product dollar sales, and 29% of tobacco and accessories product dollar sales.

Other categories skewing to rural households include insecticides, pesticides, and rodenticides, as well as fresh meat, flour, sugar/sweeteners, pet food, and carbonated beverages.

Nielsen’s Marketing Tip:
Retailers targeting rural households may want to promote these categories (above) with feature ads, displays, and product assortments. Manufacturers should consider cross-promoting and cross-couponing items in these categories.

Nielsen’s Dollar Volume Index identifies demographic groups that account for above or below average dollar volume purchases for a given product category.

Data for the index was collected via Nielsen’s Homescan consumer panel, a nationally representative sample of U.S. households that provides a stratified, proportionate, non-biased representation of the U.S. population. Homescan panelists scan all of their UPC coded purchases after every shopping trip, allowing Nielsen to capture their complete shopping and buying behavior.

Households headed by Americans age 65 and older account for 14.4% of all U.S. households.  These households represented 22.3% of vitamins product dollar sales and 20.8% of medications and remedies product dollar sales.

Other categories skewing to households with older people include pain remedies, canned fruit, and coffee, as well as canning/freezing supplies and floral/gardening supplies.

Nielsen’s Marketing Tip:
Retailers targeting households headed by older Americans may want to promote these categories (above) with feature ads, displays, and product assortments. Manufacturers should consider cross-promoting and cross-couponing items in these categories.

Nielsen’s Dollar Volume Index identifies demographic groups that account for above or below average dollar volume purchases for a given product category.

Data for the index was collected via Nielsen’s Homescan consumer panel, a nationally representative sample of U.S. households that provides a stratified, proportionate, non-biased representation of the U.S. population. Homescan panelists scan all of their UPC coded purchases after every shopping trip, allowing Nielsen to capture their complete shopping and buying behavior.

These households also outspent average households by 90% and 78%, respectively, on purchases of family planning products and photographic supplies.

Asian-American households account for just 2.8% of all U.S. households.  In 2007 and 2008, these households represented 6.7% of dried vegetables and grains product dollar sales, 5.4% of family planning product dollar sales, and 5.1% of photographic supplies product dollar sales.

Other categories skewing to Asian-American households include baby food, baby needs, and disposable diapers, as well as refrigerated juices and oral hygiene.

Nielsen’s Marketing Tip:
Retailers targeting Asian households may want to promote these categories (above) with feature ads, displays, and product assortments. Manufacturers should consider cross-promoting and cross-couponing items in these categories.

Nielsen’s Dollar Volume Index identifies demographic groups that account for above or below average dollar volume purchases for a given product category.

Data for the index was collected via Nielsen’s Homescan consumer panel, a nationally representative sample of U.S. households that provides a stratified, proportionate, non-biased representation of the U.S. population. Homescan panelists scan all of their UPC coded purchases after every shopping trip, allowing Nielsen to capture their complete shopping and buying behavior.

Although households are often assumed to be conventional families with children, most U.S. households do not have children under the age of 18.  In fact, households without children account for roughly 65% of all U.S. households. 

According to Nielsen, these households represent 77.5% of liquor and wine dollar sales, 74% of vitamin dollar sales, and 73.6% of floral/gardening product and tobacco dollar sales.

Other categories skewing to households without children include medications/remedies, pet food, books and magazines, and beer.

Nielsen’s Marketing Tip:
Retailers targeting households without children may want to promote these categories (above) with feature ads, displays, and product assortments. Manufacturers should consider cross-promoting and cross-couponing items in these categories.

Nielsen’s Dollar Volume Index identifies demographic groups that account for above or below average dollar volume purchases for a given product category.

Data for the index was collected via Nielsen’s Homescan consumer panel, a nationally representative sample of U.S. households that provides a stratified, proportionate, non-biased representation of the U.S. population. Homescan panelists scan all of their UPC coded purchases after every shopping trip, allowing Nielsen to capture their complete shopping and buying behavior.