Market Segmentation of Energy Drinks

Market segmentation is a key strategy for better understanding and serving consumers of a product or service. It involves identifying groups with different buying behaviors and personal characteristics that allow for effective communication.

When segmenting the market, we focus on why customers buy, rather than on their personal characteristics. The latter are used to explain differences between segments and to efficiently communicate and serve them.

Among the different segmentation methods, benefit segmentation is the best approach to underpin brand positioning strategy, as it allows for identifying messages useful for establishing an emotional and behavioral connection leading to a strong competitive position.

A brand health study typically includes a section on the reasons why customers choose a particular brand. These reasons are based on the benefits sought by the consumer and are the link that binds them to the product or service.

For example, energy drinks are consumed for reasons related to their dual nature: being beverages and being stimulants. Regarding beverages, they are consumed for benefits such as quenching thirst, refreshing, satisfying a craving, savoring something tasty, and even mixing with alcohol. As stimulants, the benefits they provide are related to obtaining energy, staying awake, and some particularities such as not being tired at work, recovering from staying up late, or curing a hangover.

In our studies, we use procedures such as K Means Cluster and 2 Step Cluster to identify market segments and make discoveries such as:

• A majority segment (45% of the market) seeking energy and hydration, but not necessarily to stay awake or active.
• A smaller segment (30% of the market) seeking to stay awake and/or active, for example, for studying or working.
• Another smaller segment (25% of the market) seeking a beverage for craving, refreshing, quenching thirst, or engaging in sports.

Brand preferences show a clear relationship with their positioning. Some brands appeal to various segments, while others excel in specific segments.

Market Segmentation based on sought Benefits is fundamental to underpin Brand Positioning. It instructs the manufacturer on how to differentiate and promote their brand according to the needs of their target segment.

In your next Brand Health and/or Consumer Habits and Preferences study, be sure to include questions that allow for the application of advanced analytics procedures to support market segmentation and brand positioning decisions.