Knowing precisely who you are building your business and product offers for is the foundation for a successful growth strategy. Everything flows from this critical foundation; from what your offers do and don't include, to how they are positioned, where they are sold, how they are promoted and how they are priced. Yet, in our experience, too many managers rely on incomplete or even misleading segmentation approaches and outdated "conventional wisdom" to develop insights into their most profitable customers. And, given today's economic pressures, your target customers are probably in the process of re-evaluating their spending patterns right now.

As you can see, identifying and truly understanding your most profitable target consumers in a differentiated manner is not as simple or straight-forward as it may initially appear. Such was the lesson learned by a recent Cambridge Group client.

For a key strategic brand at a major food manufacturer, developing a more precise understanding of demand led to a dramatic turnaround in sales, a return to profitable growth and a complete re-alignment of their business strategy with the consumer segment that truly represented their most profitable demand opportunity. At the time the management team engaged The Cambridge Group, the brand had experienced several years of flat to declining sales and was becoming increasingly dependent on trade spend to move volume. The management team thought there was little growth potential in the core category and that their brand could only grow by expanding into other product categories. They asked The Cambridge Group to either confirm or refute this conclusion. We began by developing a comprehensive quantitative factbase on consumer demand in the category. The new insights gleaned were not at all what the management team expected.

As the team quickly realized, the root cause of the brand's stagnating volume and profits was that the brand's prior strategy centered on a consumer target which accounted for only 10% of the category volume. Further, the majority of this target's volume was consumed during the summer "barbeque season" and was more highly trade spend/promotion dependent. In addition, advertising/messaging and product innovation designed for this target was polarizing, or at best irrelevant to the true profitable consumer target. The revised consumer target, by comparison, had powerful, targetable motivations in the category and consumed a more significant share of total category volume consistently throughout the year. The team also learned that the target skewed heavily to households with teens – who have notoriously ravenous hungers, particularly during the after-school/before dinner hours. Given these insights the brand's strategy was shifted to focus on the new target of households with teens, which accounted for 26% of households and 51% of category volume as opposed to the previous target with only 10% of category volume.

To develop a deeper understanding of the new consumer target, the team conducted Demand Discovery Groups^TM focused on the segment's category usage and motivations. The team uncovered a range of powerful insights not only about the target purchasers (Moms), but also the target consumers (Teens), which made them far better equipped to anticipate their new targets' needs, wants and motivating messaging/innovations.

As the team's understanding of the target deepened, their strategy became clear. Moving forward the brand needed to address the problematic after-school snack need state, and communicate and deliver against better hunger satiation to address the priority needs and wants of both moms and teens. Further, the brand could reduce its reliance on promotion/trade spend as the target's year round category consumption is less likely to be promoted/price sensitive. As an added benefit, this revised strategy was more competitively insulated as it exploited the brand's existing quality advantages with the target and represented a territory the key competitor could not go given their heritage.

Since the execution of the revised strategy, the brand has enjoyed unprecedented volume, revenue and profit growth, even in the current recession. For several years running this brand has enjoyed +20% sales growth CAGRs and has recently surpassed a very strong, entrenched competitor to achieve the #1 share position. The management team – a team of very seasoned marketing professionals – recognizes that while their previous strategy seemed solid, it actually lacked precision. Had they continued to follow their previous strategy, with little precision around target segments, need states and brand strategy, the brand would certainly not have realized the record-breaking growth it has achieved recently.