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SEGMENTING: HOW MARKET SEGMENTING, SELF-SEGMENTING, AND
DESEGMENTING ARE CHANGING THE MARKETING GAME.
By Dr. Ned Roberto
LifeCycle Press: 2010
www.nedmarketingacademy.com

I’m excited to share with you the highlights of what this book has uncovered about how
market segmentation can grow and continue to grow your business. Let me bring out these
highlights in the form of a series of provocative and compelling Segmenting Prescriptions
(SRxs).
SRx #1. “The ultimate sources of growing your business are market segments.
Products or new products are only secondary sources. Even if you have the most
interesting product from R&D, if there is no market segment in need of it, you will
have zero sales.”
Not too long ago, we used to think that products or new products were the source of
growing a business. That’s because almost any business started with a product. When it
succeeded, we all assumed it’s because we had a good product.
Between that start and the subsequent success, we forget that someone was smart enough
to ask: “Is there a market for this? Where’s the market?” When sales happen, everyone says: “It
was a good product. There’s no stopping a good product.” No one talks about sales as coming
from a stimulated underserved or unserved market.
We say something similar when there are no sales. You hear your friends and sellers
saying: “It wasn’t such a good product after all.” You don’t hear anyone talking about the
absence of sales because there was no market in need of the product.
Now, we know better. If a new product succeeded, it did so because it found a market in
need of it. A product fails because no one had a need for it. So to succeed, even if you start with
a product, you have to go a find a market in need of it. If you have no buyers, then your product
will not sell.
SRx #2. “Profile your identified market segment first before targeting any of them as
your primary, secondary or tertiary target segments. If you don’t, and you target
immediately, the business-growing returns to your targeting will at best be sub-optimal
or at worst, negative.”
Segment profiling sets the necessary for optimal segment targeting. When carried out
with the appropriate market attractiveness indicators, profiling cost-effectively prioritizes the
profiled segments. The four market attractiveness profilers that’s been most useful to both
clients and students have been: (1) segment market size, which should not be confused with

segment population size; (2) segment’s priority product values; (3) the segment’s satisfaction or
dissatisfaction with the available brands with respect to its priority product values; and (4) the
brand’s capability to access the segment.
Mister Donut’s General Manager Jerome Tuguin considered this segment profiling
proposition to be the book’s most important contribution to market segmentation strategy. A
former Masters in Entrepreneurship student of mine at the Ateneo Rockwell Campus, where he
now teaches, Jerome says that segment profiling first before targeting had been most helpful to
him in optimally segmenting his Mister Donut market. This proposition also helped his M.E.
students better understand how to use market segmentation for business-growing.
SRx #3. “Today, it’s no longer enough for growing your business to segment your
market at one level, one layer and to do so in just socio-eco-demographic terms. You
need to go one level more, one layer more, and that’s to segment behaviorally.”
When you are segmenting by socio-eco classes like Class AB, Class C, Class D and Class
E, for example, and these segments’ purchases and/or usage behavioral differences are clear,
then one level segmenting also makes apparent what specific target behavior to go after. But this
kind of socio-eco or socio-demo-cum-behavioral one-level segmenting has become rare. My
Consumer Coping Behavior survey series tells us why: “It makes more marketing sense to stop
thinking that a product/service category is an AB upscale market or a C midscale market or a D
downscale market or an E extreme poor market. These SEC segments have even and uneven
category market participation. But they are all there.”
Today, the major purpose and use for the one-level, socio-eco-demo segmenting is to
define the boundaries of the arena where you will play the marketing game. This allows you to
know where exactly to do battle. But what this segmenting won’t tell you is the way you change
market purchasing and/or usage behavior towards your business-growing objectives. Remember,
marketing is all about changing market behavior, whether purchase or usage.
In PDI’s issue of August 26, 2011, our Marketing Rx column also said the following:
“Segmenting by socio-demographics especially by socio-economic classes is often not enough
for business-growing. Why? Because by going beyond socio-demographic segmentation and
into ‘behavioral’ segmentation you can grow your business much more, and sometimes
exceedingly more. Sure, often going after socio-demo segments can also grow your business,
but targeting a specific socio-demo segment, say, Class Broad C, will give you only sub-optimal
business growth. It’s going after your Broad C segments of, say, non-users and transform them
into users, or occasional users to be motivated to become regular users where the optimal growth
will come.”

It is not you, the marketer, whose behavior will change. That behavior change will come
from the market and the consumers themselves. It’s their self-segmenting behavior. What you
as the marketer can do is to observe and monitor that self-segmenting behavior. It follows then
that your second level or layer segmenting is the market’s purchase segmenting and/or its usage
segmenting. Examples of the market’s self-segmenting by purchase are 2-3 times-a-week
buying segment, the once-a-week buyers, the once-every-2-weeks buying segment, and the like.
Well-known examples of a market’s self-segmenting by usage are non-users versus users, and
among users, the trial user segment, the regular users, and the heavy user segment.
The business-growing character of the market’s self-segmenting by purchase or by usage
is obvious from these examples. The once-a-week buying segment, for instance, when motivated
by a frequent-buying campaign to buy twice-a-week promises to double sales. The trial user
segment when persuaded to convert themselves into regular or even heavy users can lead to a
more than doubling or even tripling of consumer purchases. The next step to realizing the
doubling or tripling of sales is to unlock the driver to the more frequent buying or the motivator
to the conversion from a trial user to a regular user.
The lovely Cris Albert, CEO of Isportlife (FILA) Inc.,takes this idea of the market’s self-
segmenting as her favorite insight of this book: “Dr. Ned makes his research a great adventure to
me, with the most attentive inspiring tour on segmentation in finding my brand’s full potential.
Our company has built 3 brands in a span of 3 years with more than 100% growth, each catering
to different usages.”
SRx #4. “Aside from the market’s self-segmenting behavior by purchase and by usage,
a third and just as powerful if not more powerful business-growing self-segmenting
behavior relates to prices. Identify, measure and exploit the market trends in price
segmentation such as the emergence of sub-economy price segment, the economy, the
premium, and the super-premium price segments.”
In my graduate course and public seminar on Accountable Marketing, we say that to
make a business grow, you must grow revenue. Micro-economics defines revenue as simply the
product of price multiplied by the quantity bought. All marketing mix variables except for price
affect a product’s revenue through the quantity bought. So, self-segmenting in response to the
four Ps except for pricing is captured by self-segmenting by purchase or by usage.
Price is the only variable in the marketing mix that directly affects revenue. So,
consumers self-segment by price, doing so at two, three, or four levels. My Consumer Coping
Behavior Survey series reports that for vitamins, consumers self-segment into the sub-economy,
economy, premium, and the super-premium price segments. In ingredients and milligram

content, the four brands representing the four price segments were all the same, and yet their
prices were shockingly wide apart. For example, the sub-economy unbranded multi-vitamin
generic was selling at 45% of the price of the economy brand, Enervon-C, which was sold at
37% the price of the premium brand, Clusivol. The super-premium brand Pharmaton sold at
51% more than the premium. According to Mercury Drug, all four brands were making money.
The opportunity to grow your business is explained in the Segmenting book:“You will be
left behind by competition in a market that’s segmenting into 3 or 4 market segments with
differing priority product values if you do not participate in those 3 or 4 market segments.”
Having a product that participates in each of the prevailing market segments is a great way to
grow your revenue, and ultimately, your business.
SRx #5. “Be also open to the idea of ‘purpose-driven’ segmenting. It’s a good method
for resolving and reconciling the differences between advertising and Sales. For
example, consider advertising’s dedication to ‘psychographic segmentation’ and how
this segmenting often turns off Sales who are more attached to its simple but practical
and tested territorial, geographic segmentation or to price segmentation because of
their daily re-occupation with pricing.”
Advertising’s job is to inform and persuade consumers that the advertised brand is good
for them and should therefore buy it. The purpose of Sales is to tell consumers the brand they
saw advertised is in the store when they want it and can be bought at the advertised price.
Advertising and Sales serve two different purposes, but have the same end in mind.
One of the best ways to persuade is to target the segment whose lifestyle and attitudes
align with the personality of the advertised brand – that is the essence of psychographic
segmenting. Sales, on the other hand, employs territorial and geographical segmenting, and does
its job well when they place products in stores whose territories are accessible to the product’s
target consumers. Price segmenting is also Sales’ “daily bread”, for almost all sales calls touch
on pricing and price variants.
As long as Advertising is true to this function and respects Sales’ purpose in its territorial
and/or price segmenting, there will be peace. And, as long as Sales sticks to the purpose of its
segmenting and leave alone Advertising’s psychographic segmenting, the common end of these
two teams will come true.
In our Marketing Rx column on August 26, 2011, we tackled the issue of Sales and
Advertising’s function in a slightly different but similar fashion. We said, “For the purpose of
helping Sales, price segmentation is often the appropriate segmentation. But suppose you want

to advertise to, say, Class Broad C non-users of generics and persuade them to try using and
eventually to stay with generics? Is price segmentation still the most relevant segmentation?
“Your ad agency will most probably tell you that it’s not because the more suitable
segmentation is psychographic segmentation. In communicating with consumers and in
persuading them, it’s the serious consideration of their psychographics, namely, their
preferences, perceptions, life-style, interests and values that matter. So for the purpose of using
advertising to help in business-growing, it’s psychographic segmentation that’s more
appropriate.
As you can see, different purposes may require different segmentation. We preach
segmentation as Rick Warren preaches about life. For growing your business, it’s purpose-
driven segmenting that will help in the same way that for saving your soul, it’s leading a
purpose-driven life that’s key.”
SRx #6. “Desegmenting is what Sonnie Co, Senior VP, Professional Health Group,
Unilab, likes most and considers the biggest and most innovative insights in the
Segmenting book. You may find it worthwhile learning and applying this business-
growing lesson.”
Here’s the reason why Sonnie Co values so much the “desegmentation” insight: “In
shifting my attention to commonalities between 2 or more market segments, I can come to
identify a market that seems not to exist but it happens to be there.”
The Segmenting book provides several illustrations of how desegmentation can grow and
multiply a business. The most controversial and provocative of these is the desegmenting
analysis of the four-category user and non-user segments of the feminine wash brand pHCare.
Those four behavioral category user and non-user segments were as follows: (1) the
current femwash category user segment, (2) the soap-using category non-user segment, (3) the
water-using category non-user segment, and (4) the “true” category non-user segment. The 3
non-user segments were identified from their answers to the question asked of the sample of
adult women who were not using commercial femwash: “For feminine hygiene, what is it that
you use?” Those who pointed to soap belonged to the soap-using category non-users. Those
who cited “just water” got counted among the water-using non-users. Those who said “none”
were considered as the “true” non-users.
All consumers from the four behavioral segments were asked what they found were the
limitations or disappointments in the femwash the users were into, and those from using soap

water or “none.” Here were the abbreviated most cited perceived limitations and
disappointments:
1st
. From current category users: “Lactacyd is for infection and so not good at
eliminating odor down there.” “My OB-Gyne said that using Lactacyd daily will lead to
fungal infection down there. And that’s worse.”
2nd
. From the soap-using category non-users: “Soap can’t eliminate odor down there. It
only covers it.” “Soap gets you dry down there.” “Soap makes me itchy down there.”
“Actually the fragrance in the soap worsens the odor down there.”
3rd
. From the water-using category non-users: “It’s the pee when it dries there that gets
the odor down there really bad. But water washes it away although it easily comes back.”
“Water will do to make me feel clean down there although it does not get rid of the
odor.”
4th
. From the “true” category non-users: “I don’t like the odor down there but it’s
covered all day anyway. So I don’t usually bother.” “The worst odor is when my
husband’s semen mixes with the odor down there and I feel it dripping down my thighs at
the office. I just cross my legs so the smell won’t spread.”
So it’s clear that the common concern across the above behavioral segments is the odor
from the external genitalia. So, the needed femwash product was a formulation that will not just
mask the odor, but eliminate it. This was the distinctive femwash quality that the pHCare
product development people succeeded in. It was the unique consumer value that got even the
current Lactacyd users to try and switch to pHCare. It was also what motivated the soap-using
and water-using category non-users to start using pHCare. It also was the driver that persuaded
the “true” category non-users to use pHCare so that they’d stop risking their officemates in
noticing their mid-section odor.
A year after the pHCare market launch, AC Nielsen reported that pHCare attained an
unprecendented entry market share of 52% versus the FMCG industry average for new product
intros of 5-6%. The creation of that combined category user and non-user segments, resulting
into larger demand, came from the business-growing power of desegmenting strategy.
SRx #7. “If you’re in a premium price segment and there’s an emerging and growing
economy price segment, do segment targeting by finding a way to participate via an
economy brand in that economy price segment. Avoid squandering that business-
growing opportunity by falling into the cannibalization trap.”

This is not to say that your brand’s market share in the premium price segment is at risk
of cannibalization – it is a real and true risk. But this risk is only half of that business reality.
The other half has to do with the underlying consumer behavior.
When the economy and sub-economy price segments grow, there will always be a
percentage of premium price consumers who will switch. My Consumer Coping Survey data
places the percentage at 30-40% during good economic times and as much as 50-60% during
recession years. These switchers are not all permanent switchers. A good sub-segment of them
come in and out of the economy and sub-economy price segments.
In either case, those consumers who decided to leave the premium segment to go to the
economy segment will leave, and the cannibalizing of your premium brand’s market share is the
least of their consideration. So, just as important (if not the more important) consideration for
you is this question: “If your premium consumers will leave for the economy segment, wouldn’t
you want to be the one to catch them there than to leave them all for your competitors?”
This is a rhetorical question because the answer is “yes”, and you’d like to be able to
remain as their choice of brand. It’s clear and obvious that this can only happen if you have an
economy brand in that low-end segment.
A companion fear in this entire debate is the “likely damage to your brand equity in the
premium segment.” My brand equity research with FMCG consumers tells us that there will
always be some such “damage”, but they are temporary, minor and manageable. In fact, when
managed well, they are hardly noticeable in both time span and extent.
Just consider how effectively several premium brands had introduced into the market
their economy and even sub-economy brands. For example, Glaxo noticed that their anti-
hypertension brand, which was a favorite among cardiologists and IMs, was in the Rx pads of the
GPs. Glaxo thought it would promote its brand with the GPs, but they could not because of the
brand’s premium image and high price. They thought of coming up with a economy brand, but
BFAD did not allow this since this new economy brand is in the same generic molecule as with
its premium brand. It was Glaxo’s legal minds that found the solution: they put up another
company, Duncan, that will come out with the economy hypertension brand. Since it’s another
legal entity, BFAD won’t have any objection even if the economy brand’s molecule is the same
as Glaxo’s premium brand. In no time at all, Duncan gained its own market share to add to that
of Glaxo’s.
There are other notable successes in this kind of brand extension of premium brands into
the economy price segment. Marketing history tells us that between a premium brand
participating in the economy versus an economy brand going up and entering the premium
segment, it is easier for a premium brand to migrate into the economy segment. It has more
credibility in its claim, and it maintains its quality standards as it enters the economy and even
sub-economy price segments.

SRx #8. “Believe Prahalad’s insight that there’s fortune at the bottom of the pyramid.
Include then in your market segment targeting the low-end market. Study, learn,
reach and thrive in this long-neglected, unserved and underserved market.”
The economy price segment is often equated with the low-end market. These two are not
exactly the same. There’s a whole lot to learn about business-growing in the low-end market and
it’s to this challenge we now turn our attention.
In our May 4, 2012 Marketing Rx column, we apologized to our readers because from the
preceding columns we gave the impression that business growing was only for those in the
“high-end” market segments. This is farthest from the truth. Business-growing segments are
everywhere: you can find it at the high-end segments, the middle segments, and the low-end
market segments, even the lower-end segments with whom NGOs are engaged “to help this
marginalized sector of our society”.
If you have been following the micro-enterprise and micro-finance movements that have
been sweeping the country over the past decade, you can’t help but be impressed by their many
stories of business-growing successes. See for yourself and read the annual reports of Joey
Concepcion’s GoNegosyo, Tony Meloto’s Gawad Kalinga social enterprises, Mark Ruiz’s
Hapinoy Stores, Ruth Callanta’s CCT micro-borrowing micro-enterprises, and many others.
You can’t help but be moved to tears of joy and pride by what you will read.
We’re not saying that reading these success stories will answer your question about how
you as a start-up small entrepreneur and your NGO friends as micro social entrepreneurs “can
also grow your business and sustain that growth”. There’s a need to carefully analyze the
available data in order to obtain the answer you’re after.
For the needed analysis, direct first your attention at the COG (Cost of Goods) item of the
Income Statement of start-up small businesses and micro-enterprises who have done well.
Notice that their COG is much lower versus the average of their industry. Understanding what’s
behind their lower COG will give you the clue to answering your question.
We all know that COG is the largest expense item in your I/S. This is particularly true to
businesses that are small and micro in size. It is usual to see an 85% or even 95% COG. That
means your Gross Profit (= Revenue minus COG) is in the low 5% to 15%. That kind of Gross
Profit margin leaves you very little to adequately cover your marketing and selling costs.
Now, take a look at the buying needs of your low-end and economy market segments.
They are the most price sensitive consumers. For start-up small business or a micro-enterprise,
this is their key business-growing problem.

To grow your business, you have to grow your revenue. To grow your revenue, you can
raise price, but that would be going against your low-end market segment’s priority purchasing
values. You could consider convincing consumers to buy more in quantity or more often, but
they won’t do this unless you lower your price. So, where else can you search for your business-
growing opportunity?
Why not try lowering your COG? Lowering COG can make you lower your price. So,
how then can you lower your COG?
One proven way is through searching and getting more economical sources of raw
materials, supplies and/or goods to sell. This was key to the impressive business-growing
success of Ben Liuson’s The Generics Pharmacy. According to industry sources, Ben searched
and searched and searched. In India, Ben finally found a really cheap but BFAD-approved
source of generics. The source was so cheap, it allowed Generics Pharmacy to retail its generics
to as low as 10% to 20% of the branded counterpart. In contrast, competing generics were
retailing at two times, some even more than twice of The Generics Pharmacy’s retail pricing.
So, there’s the answer you’re after. You can grow your business in the low-end market
by being patiently resourceful in having the lowest cost for your product. This way, you can
lower price. Lower and lowest price is the driver of heightened and more frequent purchasing
behavior of consumers in your low-end market segment.
What if you can’t lower COG anymore because there’s no more really cheap source of
raw materials and supplies to access? What if you’ve already gone down to as low as you can in
your COG? Here’s the sort of case who’s doing business in a sub-economy market segment.
This micro-entrepreneur owns and runs two food stalls. One is along the LRT and the other is
along MRT. They’re just been around for a little over a year trying to be as “successful” as the
Chic-Boy food stalls along MRT and LRT.
On May 11, 2012, our Marketing Rx column diagnosed this case and gave our business-
growing Rx after. Here’s a summary of that column.
The first and most important idea to keep in mind is that there are other ways of growing
your micro-enterprise business aside from lowering COG. All those other ways are based on a
correct reading of the priority needs and product values of the sub-economy market segment or
segments where you’re in.
Always begin by asking yourself for those taking their ride at LRT and MRT: “What are
they looking for in what they buy from food stalls there?” We have some quick research
findings. Because these were quick studies, you may doubt the validity of their data. However,
because the data gathered were answers that repeatedly show in several student research studies
done in different places with different commuters, they give strong and fairly valid insights into
those LRT and MRT commuter priority food values.

What these studies heard from MRT and LRT commuters say about why they keep
buying food from stalls to eat and to bring home as “pasalubong” is this: “kasi masarap naman
siya at tapos mura pa.” (“… because it’s tasty food and it’s also cheap.”) If this is indeed the
sub-economy commuters’ priority food values, then the business-growing success of the likes of
Chic-Boy comes from their continuing to satisfy this singular priority consumer eating value and
need.
Notice then that here, it’s not necessary to give food at the lowest cost. It’s enough to be
low price but offer good tasting food (and therefore, not the best tasting either). This product
innovation idea has come to replace the once popular model of Michael Porter who said that the
successful product innovation must either be “the best quality product” or has “the lowest cost.”
The idea that you can grow your business by coming into any market especially the
economy and sub-economy market segments with just a good (not the best) product and priced
low (not the lowest) came from Professor Clay Christensen of Harvard Business School.
Professor Christensen proved that this strategy succeeded more frequently in entering any market
segment in all countries in the world. He cited the example of the Korean cars and before them,
the Japanese cars as cases in point. In the Philippines, we have many supporting examples such
as Unilab’s leading and billionaire pharma brands, Jollibee’s burger and chicken, and more
recently Mang Inasal. All these businesses produced and marketed good products, but not the
best. In fact, Unilab publicly admits that its products are just parity products, but at the same
time, they point out they are priced low and affordable.
As you can see, the business-growing formula of coming into a market with just a good
product with a low price works also with large multinational companies concerned with serving
the low-end and very low-end market segments. It was the key to the success of India’s Tata
Motors in quickly entering and then owning a large proportion of the unserved and underserved
market segments of motor bikers who often take family members (one, two, or even 3) to ride in
their motor bikes.
The story of Tata Motors tells us that as he looked out his office windows toward the
streets, Chairman Mr. Ratan Tata asked himself and then later his engineers, “How can we make
a car as cheap as the motor bike that those motor bikers are driving?” So there was born the
product concept of the Nano car. It targeted the motor bikers all over India and who bring their
family members to where they had to go to in their motor bikes. This market segment’s
unserved or underserved priority transportation need was for a safer means of transport such as a
car, but which will be as inexpensive as their motor bikes.
We are told that Chairman Tata himself presented to his engineers this specific definition
of the priority unserved need of the car’s target low-end market segment of motor bikers. For a
full year, the engineers worked on the translation of this product value proposition into its

technical car specifications, but all subject to the pricing constraint of selling the car at 100,000
rupees or about US$2,500. Here are the car specs of the “The World’s Cheapest Car”, the Nano:
1st
. Manual steering and no air bag just like the motor bike.
2nd
. No air conditioning (on standard model) as with motor bike.
3rd
. A 4-wheel car comfortably seating a family of 4 (dad, mom, and 2 kids)
unlike a motor bike.
4th
. A 623cc 2-cylinder engine (like a motor bike) giving maximum speed of 70
km/hr.
5th
. Bodywork made of sheet metal plus plastic like a motor bike with plastic and
adhesive replacing welding.
6th
. Unlike a motor bike, there are windows but lowered down by hand.
So there’s the answer to your question. You can also grow your small business in the
economy or even the sub-economy market segment by innovating a product that appeals to this
segment’s product value proposition that favors just a good product but priced cheap. Realize
and validate that there is a large enough sub-segment here whose priority product values are not
for the best quality product and neither are they for the lowest cost.
SRx #9. “It’s a mistake to think that if your brand is in the economy price segment,
you cannot or it would be extremely difficult for you to target participation in the
premium price segment. The difficulty is with yourself. Are you ready and willing to
take the time and to make the needed investment?”
The classic success case here is once again Unilab. In the sixties up to mid-seventies,
Unilab was entirely an economy brand and targeting the economy price segment. The story went
around that one time the late legendary founder and owner, Mr. JY Campos, asked in a
conference of medreps how they would answer competitors who faulted the Unilab products as
“arina lang” (ordinary flour). JY was said to have asked one medrep to volunteer a comment.
According to the story, the medrep stood up and grabbed the microphone to say in jest: “Sabihin
ko po na “Oo nga, arina yan, pero quality arina naman yan.” (“Sir, I’ll say that it may be flour
but it’s quality flour.”) We were told that the next day, that medrep was no longer in the payroll.

The story’s ending is most likely to be untrue and merely said more for effect. What’s
true is that JY knew more than anybody that the Unilab brand was known for its “low quality.”
But toward the second half of the seventies, Mr. Campos wanted a change for the better in
Unilab’s brand and corporate image. Together with his partners, Mr. Campos laid out the long-
term plan and the required budget to earn the quality reputation. We learned that Unilab
contracted the world’s #1 pharmacologist to redesign and supervised the reconstructing of the
company’s manufacturing plant. About half a decade after, the plant was inaugurated, which
was attended by the country’s leading medical practitioners and scientists.
A few years after, the pharma industry started to see Unilab brands in the high-end and
high priced specialist categories of medications. Then the coup de grace came in the late
nineties. Unilab entered the expanding generics market with Rite-Med that carried the tagline:
“Unilab yata yan.” So it was possible for the most economy price brand to gain solid
participation in the premium segment. It just took a little more time and a little more budget.
SRx #10. “In market segment targeting, grow by going after both your existing and
new market segments. Keep in mind though that it’s much more cost-effective to grow
your business from your existing customers than from new customers. Be prepared to
get more creative in product as well as process innovations.”
Here’s a nice illustration of how to resolve the issue in this SRx. It’s in our Marketing
Rx column on PDI’s October 12, 2012 issue and summarized below.
This is a case of a Sales Group of insurance brokers whose sales planning session ended
in a deadlock. For growing their life insurance business, the Sales Group proposed to “just
continue with the strategy” that they’ve gotten used to over the past so many years “but with
more and better incentives.” This strategy was to go after new life insurance policy owners.
Sales argued that according to the Insurance Commission office, the uninsured market was even
3 times as big as the already insured.
However, the company’s marketing consultant, an MBA professor ,had a completely
different idea. He said that for immediately growing the business, sourcing the needed growth
from their existing policy owners and lapsed policyholders would attain their business-growing
objective more cost-effectively. The trouble was that the consultant did not show how this
would happen except to cite the finding of TQM (Total Quality Management) saying that “it
costs 5 times more to get a new customer than to keep an existing one.”

The Marketing Rx readers asked us: “Which is better: to acquire ‘new’ life insurance
policy holders or to source our growth from retaining our existing policy owners?” MRx started
by diagnosing each side of the debate.
On the side of the Sales and insurance brokers, the issue was primarily related to
incentives. Sales got their commission and bonuses from bringing in new customers or new
insurance policy holders, not from keeping existing policyholders. In fact, it won’t surprise
anyone at all if Sales were heard saying: “Our job is done. They’ve been sold. Whether they
want to stay with us or leave us, that’s entirely up to them.” Therefore, Sales had most likely
never been trained to look at existing policyholders as a source of growing the business.
On the other hand, the marketing consultant has to recognize that there are at least two
different but significant considerations to the issue. First, there are no incentives given to Sales
in keeping sold policyholders to stay. But most likely, the consultant is thinking of generating
more sales to those already insured customers. He’s probably asking, “Why not convince the
just insured customer to own another insurance policy and therefore become a multiple policy
instead of just being a single policyholder?” Or why not get one who’s a multiple policyholder
to change his/her insurance policy to a much larger insured value? Or why not go after those
lapsed customers who are still uninsured and get them re-insured?
It is in these alternative tactics of business-growing where the consultant can calibrate in
specific terms the cost-effectiveness of growing sales through existing policy owners, versus a
customer acquisition strategy. For new customers, Sales is thinking of sourcing these from the
larger population of the uninsured as evidenced by the data from the Insurance Commission.
Most or almost all of these uninsured prospects are probably from Class D or Class E homes.
The debate is not about whether they are sizeable or not because in population size they are two
huge market segments.
The cost-effectiveness question is how expensive is the Sales and promo campaign to
successfully penetrate these market segments. Given their known mass market sizes, no less
than an expensive tri-media campaign will be called for. Compare this to selling to single
policyholders, multiple policyholders and even the still uninsured lapsed customers. The sales
and promo campaign for these market segments are all going to be based on the company’s
database of existing and lapsed policyholders. Accessing and reaching these customers will cost
the company practically nothing as compared to accessing and reaching the mass market
segments of the uninsured via the tri-media communication.
So to break the deadlock, why don’t you first cost out the 2 opposing selling strategies as
defined above or as similarly defined in very specific and concrete terms. When you do this,
you’ll be able to show and evidence which of the 2 selling strategies is the truly more cost-
effective option.”

SRx #11. “Study and learn how to do market segment targeting of the non-user
segments that are so many product categories. Today, it is the non-user segments who
are your sources of ‘far-out revenue growth’ in the 100% to 200%.”
In our May 10, 2013 Marketing Rx column, we said that the 2012 nationwide Consumer
Coping Survey asked housewives about their budgeting behavior for 159 products and services
that were “recurring expenditure items.” In NCR, for example, it is the “definitely-dispensable”
categories that made up the largest number of such recurring expenditure items. They were
almost half (or 46% to be exact) of the total 159. To a housewife, a definitely-dispensable
product or service category is one that she regards as something “I certainly and definitely can do
without and live without.”
To most marketers, these are categories they assume to be low revenue productive. And
yet our coping survey from one wave to the next shows that housewives regard one of our own
client’s category of processed food, “canned fish,” as an item that they certainly can do without
and live without. And yet, our client reports that their canned fish continues to grow in revenue
over the past many years. This challenges many marketers’ assumption about definitely-
dispensable products as poor in revenue productivity.
Now, the coping survey revealed that for any definitely-dispensable product or service,
there are three coping segments of housewives: (1) those who have maintained the item in the
budget; (2) those who have removed it, and (3) those who have never included it in the budget.
This third segment is the “non-user segment.” In NCR, 61% of housewives belong to the non-
user segment of the canned fish category, making the user segment only at 39%.
Let’s assume that your canned fish brand has a 30% market share in that user segment.
This means your brand is serving 11.7% of NCR housewives ( = 39% x 30%). To continue,
assume further that you found an effective entry into the 61% non-user segment and targeted a
30% share there. If you succeed in this kind of market entry, your brand will then be in the
budget of 18.3% of NCR housewives ( = 61% x 30%). That’s 1.56 times your brand’s presence
in the user segment or at least a 150% revenue increase! This is the reason why we say that
successful entry in the non-user segment can gain for you “far-out” revenue growth.
And now for the stress test question: “How will your customer acquisition campaign
succeed in entering the non-user segment?” Basically, that depends largely on your uncovering
the “driver” and the “motivator” for getting non-users to become users. The MADI questions
hold the key to revealing these. As we’ve explained in the Segmenting book, MADI is a
convenient shorthand for questions asking current consumers if they find: (1) anything missing,
(2) something annoying, (3) disappointing, or (4) something irritating with a brand or product
category that they now use. Answers to these questions identify specific gaps in consumer

satisfaction and therefore represent opportunities for product redevelopment, next generation
product ideas and even totally new product leads.
So, find out first what the non-user is using to perform the job of your definitely-
dispensable canned fish. If they are asked, suppose those non-user housewives say that they’d
rather resort to “tuyo” (dried fish). Then ask the MADI questions on “tuyo.” What’s missing,
annoying, disappointing, and/or irritating about “tuyo” becomes the target for redeveloping your
canned fish to fill in these unlocked product satisfaction gaps among these non-user housewives.
SRx #12. “Study and learn as well how to do market segment targeting of the lapsed
user segments that are also in so many product categories. Today, it is just as revenue
productive as the non-user segments whom we saw are your sources of ‘far-out
revenue growth’ in the 100% to 200%.”
Our May 17, 2013 Marketing Rx column explained this equally powerful business-
growing market segment target. The data source is still our 2012 nationwide Consumer Coping
Survey of 159 products and services that were “recurring expenditure items” for the housewives.
The “lapsed user segment” is made up of housewives who deleted or removed the
product category from their budget. The most often mentioned reasons (though not the only
ones) for deletion are disappointments. You can glean these from verbatim we received from the
study, such as the following: “Kasi di na siya kasing ganda nung dati” (It’s no longer as good as
before). “Nag-iba na yan. Di na masarap” (It changed. It no longer tastes good). “May
binago sila na di naming gusto” (They changed something that we didn’t like).
From the perspective of the marketer, these housewives’ perceptions mean that the lapsed
user segment can also be regarded as the “underserved segment.” That’s different from the non-
user segment, which again from the side of the marketer can be referred to as the “unserved
segment.”
It is the coping survey’s Mindanao data that clearly demonstrates the still neglected
revenue-growing potential of the lapsed user (or underserved) segments. For the comparison we
wish to make, we retain the product category example for our discussion of the non-user segment
targeting, that is, canned fish.
In Mindanao, housewives partitioned themselves for this definitely dispensable canned
fish category into 57% belonging to the lapser user segment, 34% in the non-user segment, and
9% in the maintainer user segment. It’s the lapsers who were the larger population than the non-
users. The smallest coping segment was the maintainer user segment.

What’s marketing’s revenue-growing task in the larger lapsed user segment in
Mindanao? For the answer, we must first identify the targeted housewife budgeting behavior for
canned fish. On the part of the lapsing housewives, the targeted behavior is to bring the deleted
canned fish back to the budget. On the part of the marketer, this equates to the objective of re-
acquiring the lapsed consumers via a customer re-acquisition campaign. The marketer’s
responsibility sounds similar to what he needed to do in the non-user segment, which is to
acquire new consumers via a customer acquisition campaign. It sounds similar but not really as
you can see below.
Given the target customer behavior change, the next critical step is to uncover the driver
or motivator of the target customer behavior. For customer re-acquisition, this customer
motivator is relatively easier to uncover as compared to unlocking the motivator for new
customer acquisition. Finding the key to persuading a housewife who formerly purchased
canned fish to come back to serving it to her family is clearly a less difficult job compared to
finding the secret to getting a non-user to shift from not serving canned fist to start buying and
serving it to the family. Marketing history has shown that generally speaking, the more difficult
is the uncovering of the driver for behavior change, the larger is the expected returns in revenue
growth when the key motivator is unlocked and exploited.
The returns in terms of revenue gains are also proportionate to the difference in relative
segment population sizes. Continuing with the case of canned fish, let’s compare the population
sizes of the lapsed user segment versus the non-user segment in Mindanao and NCR. Three
paragraphs back, the Mindanao comparative percentages of segment population sizes are 57%
lapsed user housewives versus 34% non-users. In NCR, these percentages are in the reversed
order: 26% lapsed user housewives versus 61% non-users. While the non-users are relatively
larger than the lapsed users as in the case of NCR, we saw earlier how much “far-out revenue
growth” can come from the non-user segment.
Consider now the Mindanao data where the percent lapsed users is larger than the percent
non-users, but the relative difference is not as large as in NCR’s non-users versus lapsed users.
So in Mindanao, we will not expect that much “far-out” revenue growth from the lapsed user
segment as we did with the non-user segment in NCR. This is to correct your impression about
the “far-out” revenue growth promise of the lapsed user segment. Still, this coping segment
makes up a large but often neglected source of revenue growing.
That’s about enough for now. For the rest of the other business-growing insights via
segmenting, please read them in the Segmenting book. Thank you all for blessing me with your
time and attention.

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