Identifying Market Segments

For more than 100 years the Campbell Soup Company has been the epitome of mass marketing. The company’s original product derived from the invention of condensed soup by a research chemist. New developments in machinery and manufacturing processes made possible the economies of scale that enabled the company to finance its strategy of geographical expansion using a national brand identity

To accomplish the above, the company had to develop a national market for its product. This, in turn, required a large national sales force and the use of national advertising. Campbell’s first advertising was on streetcars in New York City before the turn of the century. By 1911 its line of red and white label canned soups was being marketed nationally. Since then and until recently, Campbell has used a mass marketing strategy consisting of a standardized line of products sold much the same way throughout the United States. Inevitably this meant the use of strong network radio and TV programs; for example, in the 1950s the company reached half of all US households by sponsoring.

But a homogeneous national market even for basic food products has been crumbling because of a dramatic shift in demographics over the past few decades. The principal changes were an increase in the number of working women (up to over 52 million women versus 23 million in 1960); more single parent households (now 24 percent of all households versus 13 percent in 1966); and a substantial increase in the number of Americans older than 55. One important result of these changes is that “… people don’t want just a can of condensed tomato soup they also demand increased convenience, sophistication and variety”. With more women working no one is taking ownership of the hearth, says Steven A McNeil, vice president and group general manager for frozen foods at Campbell. We see meals becoming less structured with each person in the family preparing his or her own food.

Two other changes are worthy of note. One is the fact that the national TV networks are no longer capable of reaching such a fragmented, market. Since 1979 the networks’ share of prime time TV viewing has dropped from 92 percent to 77 percent and there is every reason to believe the slide will continue. The second change is the growing power of retailers resulting from consolidations and the availability of sales data by individual stock units. Mass marketing used a pull strategy via consumer advertising that forced retailers to carry such brands. But in today’s world, brands that are not selling well or are not being priced or promoted competitively may be quickly replaced by new products.

To accommodate these changes Campbell is “… tailoring its products advertising, promotion, and sales efforts to fit different regions of the country and even individual neighborhoods within a city. Thus, the company has spiced up its nacho cheese soup for Texans and Californians, is experimenting with a creole soup for Southern households and a red bean soup for Hispanic markets, and has developed new L’Orient dinners complete with a tea bag. Such a marketing approach requires a more effective targeting of Campbell’s media dollars. As a result greater use is being made of local TV, radio, and print advertising as well as specially designed promotions. Results of Campbell’s new marketing approach have been impressive – sales in 1986 were up 10 percent and earnings increased by 13 percent.

The segmentation strategy described above is not new to US business. It has long been recognized that markets are rarely homogeneous with respect to benefits wanted, purchases rates, and price and promotion elasticities. As a result, different market segments will vary as to those characteristics pertaining to product feature preferences, size and growth media habits and competitive features. Most sellers recognize the presence and importance of market segments, as witness the product line policies of companies selling such products as automobiles, trucks, airplanes, cigarettes, beers, detergents, appliances, TV sets, computers, shoes, photocopy machines, tires, and watches. What has changed is that in recent years the forces that both drive and facilitate the use of segmentation versus a mass market strategy have intensified to where successful segmentation is a prerequisite to profitability for most companies even those marketing basic food products.