Finding New Ideas, Knowledge Bank Blog, Category Strategy

Lost in Differentiation

Are you focused on what is most common?

Read the following description;

“Linda is 31 years old, single, outspoken and very bright.  She majored in philosophy.  As a student, she was deeply concerned with issues of discrimination and social justice, and also participated in anti-nuclear demonstrations”.

Which is more probable?

Linda is a bank teller

Linda is a bank teller and is active in the feminist movement

Tests show that more than 80% of people choose option 2.  That Linda is a bank teller and is active in the feminist movement.  Yet the laws of probability say that option 1 has to be more likely than option 2.  It can’t be more likely that Linda is a bank teller and active in the feminist movement than just being a bank teller.

This is an example of something called ‘The Conjunction Fallacy’.  It occurs when certain pieces of information – e.g. “she is outspoken, deeply concerned with social justice” etc – build a distinct picture of an individual.  This leads us to think that option 2 is more representative of the Linda description even though option 1 is mathematically more likely.

This has such an effect that a lot of you will rationally understand why option 1 is the more probable answer, but part of your brain is still shouting “but she can’t just be a bank teller, read the description”.

Why are we talking about this?  Well, we think a version of the conjunction fallacy exists in our industry.  Think about segmentation.  Consumers get divided into segments – often as many as 6-8 different ones.  Then they are given names like ‘Practical Pauline’ or ‘Social Sophie’ or ‘Ambitious Alice’.  Then they are profiled to the nth degree.  What car are they more likely to drive?  What TV shows are they more likely to watch?  Each of the segments ends up with a vivid description.  Like the one that described Linda.

However, the descriptions are based on how each segment differs from the others.  So, you see that ‘Ambitious Alices’ are twice as likely to watch Channel 4 News.  But this forgets that the TV programme that ‘Ambitious Alices’ are most likely to watch is I’m a Celebrity – just like every other segment.   Often, when it comes to targeting, the focus is on what is different about each segment not what is the same.  Yet what is the same is usually more common – Linda is more likely to be a bank teller than a feminist bank teller.

So, how can you resist the temptation to focus on differences and instead focus on what is the same?

Beware of Indices.  Always look at two pieces of information.  First, the absolute numbers – what do the most number of people think and do?  Second, look at the indices – what are particular groups more or less likely to think and do?  The combination of these 2 things gives you the best picture.  Think about a product that has 60% of sales coming from households without kids and 40% coming from households with kids.  The product is most likely to be bought by households without kids.  But households with kids are more likely to buy the product than average (40% of sales come from households with kids vs 30% of households with kids in the UK population).  Bear this in mind when you think you have a ‘family product’.

Don’t over segment.  We regularly see consumer segmentations with at least 6 different segments.  That is a lot of different types of consumer to target.  We see the same with shopping mission segmentations.  There are often 6 or 7 different missions, even though 3 of these missions may only account for 2% of trips each.  The more segments that you have, the less likely people are to remember what they are and what they mean.  And if people can’t remember them, how are they supposed to target them? Have a maximum of 3 segments (four at a push).

Don’t get distracted by differences.  Focus on what is the same.  Think about Aldi for a minute.  Do you think they have a big shopper segmentation?  One that identifies which shoppers want low prices and which are less bothered about low prices?  Which segments want a limited range and which want a larger range?  Unlikely.  They focus on what the majority of shoppers want.  Do they want low prices?  Yes.  Do they want good product quality?  Yes.  Do they want a simple shopping experience?  Yes.  Shall we just give everyone that then?  Err…yes.  And keep giving them that?  Err…yes.

Don’t forget who your core shoppers are.  It’s easy to get sidetracked by the latest new shopper group.  Millennials are the classic example at the moment.  Brands are scrambling around trying to develop their ‘millennials’ strategy – irrespective of whether this group is important to their business.  Think about what your growth strategy is, not what your millennial strategy is.  Think about how an activity is going to play to all shoppers, not how it will play to a sub group of them.  Think, particularly, about how an activity is going to play with your core shoppers – the ones who really matter.

We are not saying just do stuff that appeals to everyone.  There is obviously a role for targeting.  But, we are saying, don’t overdo it.

‘Ambitious Alices’ and ‘Practical Paulines’ have more in common than you think.

Feel free to forward.  Have a great weekend and speak to you next week.