Consumer segmentation in the food industry

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Consumer segmentation is a hot topic in the food industry today. Rapid technological developments have created the "push" factor of vastly improved data provision, collection and analysis techniques. Meanwhile the increasingly demanding, unpredictable and fragmenting consumer base provides the "pull" factor.

Segmentation along largely socio-demographic lines (income, age, gender) is no longer sufficient to understand, nor yet to target, the groups and sub-groups which make up today's and tomorrow's food market. At the same time new, more refined segmentation strategies could provide food companies with an edge in their aggressive pursuit of differentiation, and defensible margins, in a highly mature marketplace.

Generational segmentation is one such strategy. Dividing consumers according to their birth years provides insight into their common experiences and underlying values, and ultimately into their preferences and buying behaviour. Superficially similar to lifestage marketing, it takes an evolutionary rather than static view, incorporating the impact of changing societal conditions and individual experiences over time.

Segmenting by generation has plenty of appeal for marketers interested in becoming more consumer-centric, with its combination of demographic, behavioural and attitudinal factors. The generation most marketers talk about is "Generation Y" - the media-saturated, marketing-savvy, technology-literate, independent-spirited kids and teenagers of today. Today aged roughly 5-24, the children of the Baby Boomers, they are considered important not only as tomorrow's consumers but also because they already exercise considerable clout in the marketplace, through pocket money, earned income and purchasing influence.

Furthermore, this is the generation which will integrate the Net and interactive communication technologies into everyday life, reinforcing the fragmentation of media, marketing and consumer identity-building. Capturing them now thus becomes essential. As one marketing professional from the US puts it:

"Gen Y are used to choosing and manipulating their experiences. You can't just take a snapshot of them every six months. If you aren't inviting them in and including them as collaborators, you are missing the boat" (Dick Nye, U30 marketing group).

Companies as diverse as Nestlé, Nabisco (now owned by Kraft) and Kellogg's have attempted to reach out to Generation Y in their communication and product development strategies. Before European manufacturers rush to develop a "Gen Y strategy", however, it is as well to put this generation's importance in perspective, as well as to ask a few more fundamental questions about consumer segmentation in general.

For a start, Gen Y is not as proportionately important in Europe as it is in the US, where much of the fuss is being made. Far from being the result of a second baby bulge, European Gen Ys were born in a time of rapid decline in birth rates - which is only now being arrested. Though they number some 70-90 million (depending on the cut-off points used), this pales in comparison with the Baby Boomers' 110 million across Western Europe. Only by 2030, when Gen Y will be aged 35-54, will they represent the largest generational grouping in Western Europe.

At the same time, the experience of European young people has been very different from that of their American counterparts. While US Gen Ys have grown up in a time of unprecedented prosperity, and have enjoyed rapidly rising disposable income themselves, the economic picture in Europe has been more mixed. Western European youth are not as uniformly self-confident and optimistic as those across the Atlantic, and do not even share the latter's facility with new technologies in any uniform way across Europe - in several countries, access to the Internet is far higher among Baby Boomers than it is among members of Generation Y.

One might even whisper the question whether "Generation Y" exists at all in Europe. Certainly, the boundaries between Gen Y and their cynical older cousins, Generation X, appear less clearly drawn than in the States. At the same time, do today's young people across Europe have shared experiences, shared expectations, shared behaviours and shared values - and more importantly, will they tomorrow?

In a sense, the answer to this does not really matter. One of the principal problems of generational segmentation, or indeed many segmentation techniques, is that broad, generalised groupings require much finer sub-segmentation to be useful. Though manufacturers' need (and increasingly so) is to reach out to the individual, it is very difficult to separate that individual from the "whole" of the defined generational group or even sub-group (or other externally-defined consumer segment, for that matter).

So even if generalisations about a particular generation's attitudes, needs and behaviour are valid, and more importantly, useful for product development and marketing purposes, the urgency about Generation Y rests mainly in their commercial awareness and their receptiveness to technologies that allow for the establishment and maintenance of dialogue. They surely are important not so much for their membership of a unified generation but as individuals.

That alone means that it is worth identifying them as a (heterogeneous, but connected) group, and tracking them, talking to them, and responding to them over time.

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