Adapted from the forthcoming (9th edition) of Consumer Behavior (Prentice Hall):
Building loyalty to a brand is a very smart marketing strategy, so sometimes companies define market segments when they identify their most faithful customers or heavy users. As a rule of thumb marketers use the 80/20 rule; 20% of users account for 80% of sales.
How valid is this guideline in today’s micro-fragmented market? A study Catalina Marketing conductd suggests not very.
Today the logic of the 80/20 rule still applies but the proportions are on steroids: Catalina’s study of 54 million shoppers reported that only 2.5% of consumers account for 80% of sales for the average package-goods brand. The 1% of pet owners buy 80% of Iams pet food spend $93 a year on the brand and the 1.2% of beer drinks who account for 80% of Budweiser sales spend $170 on Bud each year. Of the 1,364 brands the researchers studied, only 25 had a consumer base of more than 10% that accounted for 80% of volume.