Street level Segmentation: Winning Big by Targeting Small-Boston Consulting Group

In large developing economies such as India targeting small market segmentsdown to a street-by-street levelcan be a highly successful strategy. BCG's new report titled Street Level Segmentation in India: Winning Big by Targeting Small makes the case for street level market segmentation. A street-level marketing and sales strategy involves developing street-by-street insights by getting inside India's countless neighborhoods and determining what types of people live in each one, who visits every day for work or other purposes, what they are likely to buy and why, and how well their needs are being met.

Marketers have historically approached India as a group of four zones that correspond roughly with income level. They have also concentrated their efforts on affluent and highly populated markets in India's major metropolitan centers. These broad approaches have several shortcomings, including the facts that income levels and economic growth patterns vary within each geographic zone, and that people move and income levels and demographics change over time. Conventional measures such as zone-based economic indicators, population size, and citywide income levels have never been that effective at identifying high-potential markets.

By contrast, a market segmented according to the street-level strategy is much more precise: it targets single areas, typically about 2 or 3 square kilometers in size, with a demographically and economically homogeneous population. Street-segmented markets generally fall into three categories:

work-intensive areas that consist primarily of commercial and industrial facilities

residential-intensive areas that contain mostly housing

shopping-intensive areas with a heavy retail presence.

Within each type of market are concentrations of residents, regular visitors, or employees of interest to particular companies. In Delhi, for example, marketers traditionally have considered south and central Delhi the preferred areas to target high-income consumers. Street-level segmentation, however, identifies markets in east and north Delhi that are of equal or greater attractiveness than the south and central zones.

Street-level segmentation has at least four advantages over more traditional approaches:

Companies can identify high-potential markets wherever they exist, rather than approaching each city as one large, homogenous market and, as a result, wasting human and financial resources.

Street-level segmentation facilitates more precise identification of target groups, helping companies determine where potential customers live, shop, and work, which can aid in creating more accurate retail and distribution strategies.

Street-level segmentation allows companies to distinguish highly competitive areas from those where competition is less intense.

Companies can use the approach to scrutinize the changing city landscape and identify promising areas to establish a foothold ahead of competitors.

Street-level segmentation has applications for many different kinds of businesses and business functions, including sales force optimization, demand planning, store planning, merchandizing, and media planning.

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