What is the 'just-right' product or service and who has a need for it?

Q: We're in the coffee shop business and we're now at the fringe of a small-sized enterprise that's threatening to become medium size with our fifth outlet. We opened our fifth last April.

As with other coffee shops, we carry tea, soft drinks and juices plus some pastries and sandwiches. For our coffee, we've noticed in all our 4 outlets (not counting our fifth because it's so new), there are customers who asked for a lot of milk or coffee creamer and those who don't want milk at all. There are also those who liked a lot of sugar on their coffee and those who don't put any sugar at all. Over some time now, our branches (that are all run by our children) have been reporting that they also have a good number of customers who were right in the middle: asking not too much milk nor none at all, or not too much sugar nor none at all. They say these customers tell them to put in "the just-right" amount of milk or "the just-right" amount of sugar. When we started observing more closely our customers in our original outlet that my wife and I manage, we also noted a group of "just-right-minded" customers

Is this an emerging trend in consumer taste preference? What does the data from the consumer coping survey series that the senior MRx-er conducts every so often say? We attended your 2006 coping survey presentation but we don't remember any reference to this consumer coffee drinking practice. Is there a 2008 version of the survey? Does it have any data to tell us if this "just-right" consumer mindset about coffee drinking is an emerging trend or what?

We're sure you can appreciate how significant getting the correct and timely information on these questions can be for the cost-effective management of our supply purchases and inventory. They will also be strategic and critical to our new product and new menu item development efforts.

A: Answering your questions will help not only your coffee shop business but all other businesses as well. The "just-right" concept applies and is an issue in all businesses who are marketing products or services.

So let's start with your coffee shop products. In all your 5 coffee shops, there will always be those 3 segments of coffee drinkers in relation to each of the 2 complementary coffee "additives" of milk and sugar. One segment of coffee drinkers likes their coffee "black," i.e., no milk and no sugar. Another segment of consumers want lots of milk and/or lots of sugar in their coffee. And a third segment is made up of middle-of-the-road consumers who prefer not too much nor too little milk and/or sugar in their coffee. They want "the just-right" amount of milk and/or sugar. This is your first kind of just-right issue. We'll tackle the second kind afterwards.

Among your tea drinkers, you'll find the same 3 segments with regard to putting sugar on their tea drink. There's going to be one segment who just like plain tea without sugar, another segment who seem to "want tea on their sugar" (i.e., lots and lots of sugar on their tea), and a third segment who prefer "the just-right" amount of sugar, neither too much nor too little.

Even your chocolate drinkers will self-segment themselves 3-ways with respect to chocolate density: (1) those who like their chocolate really dark; (2) those who prefer their chocolate rather light; and (3) those who want it "just right."

This is true not only for your drinks but also for your pastries and sandwiches with respect to, say and again, sugar content. So for your oatmeal cookies or carrot cake slices, for example, you'll have customers who want them really sweet, those who prefer no or almost no sugar, and those who like the sugar "just right."

If we jump from your coffee shop products to the larger categories of FMCGs (fast moving consumer goods), you will find this same 3-way consumer segmentation with respect to the product's complementary ingredients. A classic and evolving case is Coca-Cola in the U.S.

The Coca-Cola market segmentation case

There are American cola drinkers who have found the standard Coca-Cola too heavy in its sugar, calorie and carbohydrate contents. In its consumer research of cola drinkers, the company found a large segment that said they would be happy to drink a Coke with the taste of the standard coke but is "just right" in its sugar, carbohydrate and calorie contents.

So in 2004, Coca-Cola U.S. launched "Coke C2," "C2 Cola," or simple "C2." It positioned C2 as giving the very same standard Coke taste but with only "half the sugar, half the carbohydrates, and half the calories." The supporting features to these claims were its "aspartame, acesulfame potassium, and sucralose, and high fructose corn syrup" contents.

Two years later, the Coca-Cola consumer research found another segment who wanted no sugar at all in their Coke even if the standard Coke taste won't be in it. So in response to what this cola drinking segment wanted, the company developed and launched Coke Zero.

Coke C2 and Coke Zero each had its own devoted segment of drinkers. In introducing C2 and Coke Zero into the market, Coca-Cola was smart enough to follow the long proven market segmentation strategy for business growing. That strategy says: "To successfully participate in 2 market segments each with its own distinct priority product value, you cannot serve those 2 segments with one single brand variant. Successful entry into the 2 segments requires 2 brand variants each specifically formulated to satisfy each segment's distinct priority." That Coca-Cola decided later to withdraw Coke C2 from the market is beside the point and is another matter altogether.

Think customer self-segmentation

The principal marketing lesson and implication from the market introduction of Coke C2 and Coke Zero are about the first step that you must take when confronted with the kind of "just-right" issue you raised. What that first step is not should be clear. Do not generalize that what you notice with a few or even with a good number of your customers is a trend that will eventually become true of the rest of your customers. Resist this common but misguided thinking habit. Instead, first think customer segments, especially customer self-segmentation.

In your particular case, your coffee shop customers have obviously self-segmented themselves into 3 clusters, namely, the black (no-sugar/no-milk) coffee drinking segment, the with-lots-of-sugar/lots-of-milk segment, and the with-just-right sugar/milk segment. Which of these 3 should be your PTM (primary target market) segment depends upon which one has the largest segment market size. That's of course not necessarily the segment with the largest population size. Remember that segment market size has 2 multipliers to its population size, i.e., "segment's usage frequency," and "segment's average amount spent." So a segment with the smallest population size can be a larger market size segment if its usage frequency and/or average amount spent is a multiple of the segment with the largest population size.

You probably noticed that two paragraphs back and earlier, we referred to your "kind of just-right" issue. That means that there's another kind.

This second kind is about a consumer's choice between competing options. It's an issue of trade-off, say, between higher quality and lower price. Let's say, for example, that you're offering a high quality orange juice and an ordinary low-priced orange juice. Your high quality orange juice is profiled in your menu board as "with most pulp, not from concentrate, free of preservatives, and reinforced with Vitamin C and minerals." The same menu board characterized your low-priced orange juice as still "natural" but "from concentrate." There's no mention about most pulp, freedom from preservatives, and Vitamin C and mineral enhancements.

What's the "just-right" orange juice in this case? It's one that is intermediate in its quality as well as intermediate in its pricing. It's what Professor Barbara Kahn of the Wharton School called "the compromise brand" in her best selling book, "The Grocery Revolution."

Our qualitative research studies have shown that introducing a compromise product will not make marketing sense when consumers know the worth of "the most pulp, not from concentrate, free of preservatives, and reinforced with Vitamin C and minerals" qualities in your high-end orange juice. In other words, consumer choice will still favor high quality over low price because consumers know all those "extras" are worth more than the savings from the low-priced variant. Of course, they will favor the low-priced orange juice if the savings from the cheaper variant exceeds what they perceive to gain from the orange juice variant with all those extras.

But when consumers cannot tell just how much added values those extra qualities are worth, then the introduction of a compromise variant relieves them from their felt uncertainty. The risk of buying a high-end orange juice that's not worth more than what can be saved from buying the low-priced variant is minimized. So is the likely loss of values minimized from buying the low-priced orange juice whose savings turned out to fall below the worth of the high-end variant's added values. In such uncertain circumstances, you can hasten consumer choice and purchase to favor the compromise variant.

In summary then, you may want to go back to your team members and reanalyze your just-right issue in light of the 2 kinds we've diagnosed in the foregoing. You're your reanalysis, make the correct categorization of your case and then proceed as recommended in each kind.

Inquirer Books will be launching The Best of MarketingRx for Entrepreneurs this coming July 4, Friday at the PowerBooks in Greenbelt 4, Makati. To get an invitation to the launch please email Nicole@saltandlight.ph

Keep your questions coming. Send them to us at MarketingRx@pldtDSL.net .God bless!