Usage based segmentation and its application in Marketing

About 3 decades back, the tetra pack as well as sachets were difficult to come by. However, now when you go to a retail store, you will find both – Milk & soft drinks being sold in tetra packs, and shampoo as well as hair oil being sold in sachets. Before the customer concept, these were packaging sizes were unheard of.

Once marketing was customer oriented, it was important to understand the consumption pattern of customers and thereby come out with unique ways to meet these usage patterns. And hence, usage based segmentation was established.

The concept of usage based segmentation is simple. For any product, the need and consumption level of customers will be different. Its like comparing the diesel consumed by a car vs the diesel consumer by a truck or a bus.

Some people like biscuits a lot and their consumption of biscuits is higher, whereas others might like cookies equally. Hence the biscuit guy is unlikely to buy cookies and vice versa. For the company, it becomes important to segment the guy who buys biscuits in large volume, otherwise they will land up targeting a person who likes cookies instead of biscuits.

I started with the example of Sachets because they are a clear indication of the customization that marketers are doing as per demand by customers. You will find Pepsi and Coke being sold in large bottles of 2-3 liters also. Whereas Shampoos, which are used only a handful at a time are being sold in small sachets so that people can carry them while traveling. The reason for such packaging is also usage based segmentation.

Why did Ola cabs and Uber cabs become so popular? They realized that there are many people who use taxi’s and at the same time, majority of these people have to hustle to catch a cab. Voila! “Call a taxi to your doorstep” was born for people who frequently use taxi’s but dont have it available at doorstep. Whenever you analyze usage based segmentation, you can find a particular usage type demanded by the market but which is not being provided by your brand.

Here are some excellent examples of usage based segmentation in action

• Ultrabooks (Macbook air) launched by Intel and Apple looking at the long sitting hours of some of their customers.
• Robust packaging of oil and other such day to day items which are used heavily by customers.
• Maggi being packed in increasing sizes like 8 packs, 12 packs because of increasing consumption / usage by customers.
• Production planning happening on the basis of usage by customers. The higher used items being produced more then the lesser used ones.

Pareto Analysis and Usage based segmentation

Usage based segmentation works on the Pareto Principle. It says, that a marketer should concentrate on the top 20% of their customers who are giving them the most turnover and using the product in the largest quantity. Similarly, with this type of segmentation, the marketer may also find segments which are untapped by anyone else.

So ideally, Pepsi should take a number of its total customers (Let us assume 100). Now out of this 100, 80% of consumption is happening by 20 people. So by the Pareto principle, Pepsi will make its marketing strategy such that these 20 people as well as like minded customers are targeted. Consequentially, more such people will be attracted and these 20 people will remain with the company, thereby giving the company a tremendous boost.

Seasonal sale and Usage based segmentation

Seasonal sale can be an excellent example of usage based segmentation also. As the season of a product hits, the demand for the product rises manifold. Thus marketers can also target seasonal products based on usage segmentation.

An example can be a company which is selling home appliances. Such a company can sell its fans during the summers, water purifiers during rainy seasons and finally geysers during winters. Thus, the usage patterns of each product will be different, and with the help of usage based segmentation, different customers can be targeted at different times.