Segmentation and Customer LoyaltyUsing Segmentation to Strengthen Customer Loyalty

May 2009

Executive SummaryLoyal customers are important to businessesbecause they offer a steady revenue stream,higher profit margins and enthusiasticreferrals. But in a down economy, pricesensitivity can trump loyalty. To strengthenthe bonds with these high-profit potentialcustomers, innovative companies aredeploying enterprise-wide strategies builton consumer segmentation. These strategiesgo beyond the classic marketing applicationsof segmentation to drive customer-facingaspects of a business. Among the strategies:• Real estate departments select sites

based on surrounding population profiles• Stores are remodeled to meet the needs

of specific target groups• Customer service departments differentiate

their response scripts according to howlong a caller has been a patron

• Merchandise is fine-tuned to meet thelifestyle preferences of the most loyalcustomers and those with highestprofit potential

At Nielsen, analysts have developed aframework for achieving customer loyalty:• Identify the best consumer segments• Create the top target groups and develop

detailed lifestyle and behavior profiles• Deploy enterprise-wide strategies that

take into account these profiles• Measure effectiveness and adjust strategy

to maximize ROI

Because this framework crosses functionalboundaries, managers may face resistanceto their deployment. But a well-executedenterprise-wide segmentation effort can

strengthen customer loyalty and positiona company for even better performancewhen a healthier economy returns.

IntroductionCustomer loyalty comes in many forms:consumers who wouldn’t think of buying acar from another dealer, shoppers who areon a first-name basis with a boutique storeclerk, coffee shop regulars who don’t evenneed to place an order to get their half-caf,no-whip soy latte. Loyal customers, builtone positive experience at a time, providebusinesses with a steady revenue stream,higher profit margins and confirmed evan-gelists who virtually—and sometimes virally—do much of their marketing for them.

But with the U.S. economy undergoing awrenching recession, maintaining customerloyalty is more critical—and challenging—than ever. Industries ranging from bankingto telecommunications are scrambling toremain profitable amid dampened consumerspending, high unemployment and financialuncertainty. At the same time, companiesare cutting back their marketing budgetsand preferred customer rewards programsas cost-saving measures. Twenty-five yearsafter Neiman Marcus introduced the firstcustomer loyalty program, nationwide surveyshave reported a decline in corporate allegianceas consumers shift their concerns frompatronage to price.

An example of this is when the NielsenConvergence Audit surveyed 38,000Americans about their technology purchases,24 percent said they had switched their cell

phone, cable TV and Internet serviceproviders in the last six months of 2008.But one upside to the economic downturn isthat companies are becoming more customercentric to build long-term value. To makesure they hold on to their most valuablecustomers, many companies are taking asecond look at a classic marketing tool—consumer segmentation—and applying itsconcepts in new and innovative ways. Withconsumer segmentation, businesses classifytheir customers according to shared demo-graphic, lifestyle and behavioral traits. Thenthey focus their marketing and merchandis-ing efforts on the segments that offer thehighest profit potential. The results—increased brand loyalty, higher directmarketing response rates and improvedcustomer acquisition and retention—helpexplain why consumer segmentation in theU.S. market research industry is a multi-million dollar business.

The strategy has also become more valuablein the current recession as companies facegreater competition in a down market,according to Morris Holbrook, Ph.D., a pro-fessor of marketing at Columbia University.“Consumer segmentation doesn’t justprovide companies with more data to betterserve more customers,” says Holbrook.

© 2009 The Nielsen Company. All rights reserved

By Mike Mancini, Vice President of Data Product ManagementNielsen Claritas

Segmentation and Customer LoyaltyUsing Segmentation to Strengthen Customer Loyalty

Page 2

“They don’t have to go after customers thatare more loyal to competitors. They canconcentrate on segments that are strongwhile shedding segments that are weak.”

While segmentation was initially developedas a tool for market research, the latestapplications are taking root as a sophisticated,enterprise-wide strategy. Multiple departmentswithin a company now use segmentationinitiatives for customer acquisition, productdevelopment, cross-selling, up-selling,customer relationship management, mediaplanning, site location analysis and merchan-dising. But to reap such gains, the organizationhas to embrace a segmentation frameworkas a way to build customer loyalty andincrease revenue. Only by deepening therelationship with its best customers frommultiple touch-points will a company beable to compete more effectively duringthe recession and grow its loyal customerbase when a healthier economy returns.

Realigning Operationsthrough SegmentationConsumer segmentation has been aroundfor nearly four decades, and it’s been proveneffective in solving a variety of marketingchallenges. According to Nielsen, whichoffers a number of segmentation systems,the response rate of a direct mail campaignthat employs lifestyle-based customer seg-ments can be double that of a scattershot

S e g m e n t a t i o n a n d C u s t o m e r L oy a l t y

© 2009 The Nielsen Company. All rights reserved

or broad-based mailing. Using consumersegments based on investable assets andlifestage, a financial services companyconverted 30 percent more prospects tocustomers than with prior mass mailings.And when Ace Hardware turned to lifestylesegmentation for a customer retentionprogram, revenues rose 5.4 percent aslapsed customers were enticed by discountsto return to their local Ace stores.

Segmentation has always sought to answerfour fundamental questions: Who are mycustomers? What are they like? Where canI find more of them? What channels andmessages should I use to connect withthem? Segmentation solutions traditionallyanswer those questions by analyzing acompany’s current customer database orsyndicated research to identify groups ofcustomers with similar traits and behaviors,such as single women living in urbanapartments or married men with collegedegrees living in exurbia. Companies thentarget the best-performing customersegments with special product offerings,personalized service, sales incentives andmerchandising designed with their lifestylepreferences in mind.

But for companies seeking to become trulycustomer centric, a segmentation initiativecan go well beyond focused marketingpitches to shape virtually every functionthat touches the customer. Best Buylaunched a customer-centric programbased on segmentation that now is at theheart of its company-wide growth strategy.According to published reports, the consumerelectronics giant, which has more than1,000 stores nationwide, classified its bestcustomers into five consumer segments,conferring names on them like Buzz (theyoung tech enthusiast), Jill (the suburbansoccer mom) and Barry (the wealthyprofessional guy). Using a variety ofdemographic, lifestyle and marketplace

data to flesh out these portraits, Best Buyre-aligned its stores according to thesegments. Store clerks received training onhow to serve the Barrys or Buzzes in theirtrade areas, and stores were remodeled toreflect the dominant target groups. As a resultof this program, the company invested morethan $50 million to renovate 110 stores.

A store with a strong Jill clientele, forinstance, received brightly colored signage,play areas for children, lots of educationaltoys and personal shopping assistantstrained in ways to ease technology angst.The store’s design, merchandise and staffingall combined to enhance a Jill’s shoppingexperience—and, of course, maximizecompany profits. In the year after themakeover, the Best Buy stores that hadbeen converted to the customer-centricmodel reported same-store sales growth inexcess of nine percent—more than doublethat of outlets that had not been overhauledusing the segmentation model.

Typically, segmentation initiatives like theone used by Best Buy augment a company’stransactional data with syndicated surveyresearch to create detailed profiles of thecustomers who account for the most profit.Segmentation systems enhance customerdata by linking consumers to a variety ofthird-party databases that can reliably predicttheir lifestyles and media preferences throughtheir demographics. Nielsen PRIZM, intro-duced in 1976, currently classifies all 114million U.S. households into one of 66consumer types—with names like UpperCrust, New Empty Nests and Shotguns &Pickups. Drawing on U.S. Census data andmarket research conducted by companieslike Simmons and Mediamark Research &Intelligence, the system puts a human faceon every segment’s likes and dislikes.Households classified Money & Brains, asegment of white-collar professionals livingin high-priced urban enclaves, share a

Page 3

fondness for the arts, international travel,luxury imports, wireless technology andbusiness magazines—whether they live inPrinceton, New Jersey or Palo Alto, California.

By appending a PRIZM® code to an addressfile, any company can begin buildingstronger relationships with customersthrough tailored contacts that go beyondmass mailing a discount coupon or buyinga 30-second spot on the evening news.Stores in different cities—or even differentneighborhoods in the same city—can featureproduct mixes geared specifically to thelifestyles and preferences of the segmentsin that area. And once a company finds aspecific segment with a high profit potential,the segmentation system can identify areaswhere more of those kinds of consumersare likely to live and provide insights onwhat messages will appeal to them.

Loyalty Has Its PrivilegesAt the Arizona Republic, a Gannett newspaperwith the largest circulation in Arizona—486,686 Sunday subscribers—consumersegmentation drives its interdisciplinaryapproach to maintaining customer loyalty.Reporters attend seminars about the mostcommon PRIZM segments among theirreaders to better craft their stories with theiraudience in mind. Circulation managersdifferentiate customer service policiesbased on whether a subscriber is a long-timereader or a new customer. And marketerstarget subscription drives to prospectswho, according to segmentation data, aremost likely to become loyal readers.

To execute this customer-centric approach,the company analyzes its subscriber list toidentify longtime readers and then classifiesthose loyal readers by PRIZM segmentsbased on their addresses. The resulting listof dominant segments is then sorted intofive target groups with nicknames like Gold(older, affluent readers from PRIZM segments

S e g m e n t a t i o n a n d C u s t o m e r L oy a l t y

like Upper Crust and Blue Blood Estates)and Silver (younger, upscale residents ofsegments such as Young Influentials andThe Cosmopolitans). Using a software toolthat evaluates customers and markets,analysts identify Arizona neighborhoodswith high concentrations of the targetgroups and the retail areas they are likelyto frequent. Knowing where to find peoplewho share the same demographics andlifestyles as its most loyal readers allowsthe Arizona Republic to target its introductorydirect mail subscription offers and differentiateits pitch based on the prospects’ specificinterests. And by setting up kiosks outsidethe grocery and department stores favoredby the various target groups, the papermakes sure it’s seen by the people mostlikely to subscribe.

This approach to finding “look-alike” customerswho matched the characteristics of its mostloyal segments yields measurable results.Before 2005, when the Arizona Republicsought new customers with mass mailingsof generic direct mail pieces, 23 percent ofrespondents canceled their subscriptionsafter the introductory offer. But in 2007,after the paper segmented and targetedGold subscriber look-alikes, the drop-outrate fell to just 14 percent—a 39 percentimprovement. Just as important, by targetingonly selected households, the newspaper

was able to cut printing and postage costs,reducing its acquisition cost per subscriberby 23 percent.

“Segmentation has really cut down on ourmailing pieces and costs,” says Greg Bright,Director of IT Data Management, whonotes the paper now sends out 40 percentfewer direct mail pieces. “We’ve learned whowe’re most likely to attract as subscribersand concentrated our efforts with them.Anyone still doing a mass mailing withouttarget group selection is wasting their timeand money.”

Once the Arizona Republic has landed newsubscribers, the focus of its segmentationefforts shifts to retaining them. The papersent longtime Gold readers a thank younote for their loyalty, along with a $20 giftcard to Nordstrom, one of the Gold group’sfavorite retailers. Silver readers received$20 gift cards to Target. The segmentationstrategy has even guided circulation stafferswith a counterintuitive approach to managingcustomer service problems. If a paper isdelivered late to a Gold subscriber, forinstance, a simple apology and servicecredit may be sufficient to assuage a loyalreader. The less loyal readers in the Bronzegroup, however, receive a longer chat andservice credit. “Just by looking at a PRIZMcode, we know if someone is going to staya subscriber no matter what happens,” saysBright. “That lets us divert some of ourretention dollars to subscribers on the fringes.”But he’s quick to add that the paper doesn’ttake its most loyal customers for granted.

Increasing Customer StickinessBuilding customer loyalty through segmen-tation is not limited to finding new customerlook-alikes. It can also help companieskeep existing customers from defectingto competitors. When First Tennessee, aMemphis-based regional bank with about200 branches, decided in 2008 to place a

© 2009 The Nielsen Company. All rights reservedPage 4

greater strategic emphasis on becomingcustomer centric, it employed an innovativeapproach to address the lifecycle needs oftop prospects. The bank drew on both itscustomer records and data from NielsenP$YCLE, a segmentation system thatclassifies households into 58 types basedon demographics and financial behavior.Focusing on a customer’s investable assetsand lifestage, First Tennessee identifiedsegments of affluent and mass affluentcustomers, and divided them further intoyounger professionals, near retirees andretirees, for a total of six target groups.

After developing lifestyle portraits of thetarget group members, First Tennesseeidentified key marketing themes based onthe intersection of customer needs and thebank’s competitive advantages. With amulti-channel advertising campaign builtaround the tagline “Powering Your Dreams,”the bank tailored individual marketingmessages to resonate with its top targetgroups. For instance, to satisfy the busyprofessionals who place a high value onconvenience, the bank highlighted itsextended hours—open until 6 p.m. onweekdays and until 1 p.m. every Saturday—that were 30 percent longer than thecompetition. Meanwhile, promotions to thenear-retirement target group trumpeted itsretirement planning services, including thesafety of its FDIC-insured savings and CD

products. In a commercial designed topromote how First Tennessee offerings helpyounger professionals save for a bright future,an African-American couple is shownproudly sending their son off to elementaryschool. For the near retirees, another spotfeatures a middle-aged couple helping theirdaughter prepare for her wedding.

“We want our bank to resonate with thelifestyle and financial needs of our targetaudience,” says Dan Marks, Chief MarketingOfficer at First Tennessee, “so we emphasizethe competitive advantages that we knowresonate with our customers and use ourproducts as the call to action.”

Marks notes that P$YCLE® is especially usefulin understanding the lifestyle context andfull wallet opportunity of a customer inorder to anticipate their financial needs.For example, when a customer opens a$5,000 checking account, most banksdon’t know whether the balance representsmost or only a small portion of the individual’swealth. But by linking its customers to aP$YCLE segment, a bank can determinewhether the individual is a member ofWorking-Class USA (with investable assetslikely less than $25,000) or Domestic Bliss(with assets typically above $100,000). Forbanks like First Tennessee, such insights areinvaluable when representatives talk tocustomers. “Segmentation lets us knowmore about customers and their potentialeven before we talk to them,” says Marks.“Based on the customer code, we’ll send anupscale customer’s name to our privatebanking service and a more consultativechannel. Once you move customers over toa private banking channel, the attrition rategets cut in half.”

Adopting such strategies across multipledepartments has allowed First Tennesseeto unlock the true power of consumersegmentation. And to increase awareness,

First Tennessee has deployed a successfuladvertising strategy linked to the mediapatterns of targeted P$YCLE segments.While the bank used to run TV commercialson network news and sports programs,P$YCLE showed that its targeted customersactually preferred cable channels like CNBC,the Weather Channel and the Food Network.The bank’s media buy changed accordingly,and the number of new deposit accountsand loan applications rose in response.“We’re still surprised by the Food Network,”Marks chuckles. “But it’s worked very well.”

Pitfalls and Principles forCreating Loyal CustomersDespite these success stories, applyingconsumer segmentation across an enterpriseis not always an easy sell. Some salesmanagers resist focusing on the mostvaluable customers over the long-term,preferring to acquire as many customersin as short a time as possible—especially iftheir compensation is structured to rewardthat objective. Others may consider customerloyalty a qualitative attribute that is lessimportant than such quantitative metricsas product sales. And some ad agenciesdiscredit lifestyle-based segmentation datain favor of their own creative team’s intuition,traditional demographics or psychographicsto classify customers. At one telecommuni-cations company, agency media buyerspersisted in selecting TV shows based onage and gender even after a segmentationanalysis revealed that the lifestyles andpurchase behavior of the company’s mostvaluable segments were inconsistent withthose programs. Only after the targetgroups were profiled with detailed portraitsof their lifestyles and leisure activities—including media preferences—did the adagency modify its messages, images andmedia buy for each target group.

S e g m e n t a t i o n a n d C u s t o m e r L oy a l t y

© 2009 The Nielsen Company. All rights reservedPage 5

For those companies ready to undertakean enterprise-wide segmentation initiativeto increase customer loyalty, there area handful of guiding principles that areimportant to achieving success:

1. Identify key customer segments.Using a consumer segmentation systemlike PRIZM, P$YCLE or the technology-focused Nielsen ConneXions, append asegment code to each customer address, oruse syndicated data if you lack an addressfile. Identify your best segments by comparingthe customers or sales in each segment tothe average in your market or nationwideusing syndicated data. But keep in mindthat determining who your best customersare requires analyzing not just transaction-level profitability, but the cost of maintainingthem. Do they use a lot of discount coupons,rain checks or rebates? Do they return a lotof items? These factors play an importantrole in developing the optimal model.

2. Create target groups of similarsegments. After merging similar segmentsof your best customers into four to eighttarget groups, analyze each group by whothey are (demographics), what they’re like(lifestyle activities and product preferences),where they live (geographic concentration)and how to reach them (media consumption).If possible, identify their psychographics tohelp determine whether they’re early adopters,price sensitive or green consumers.

3. Prospect for look-alikes in targetmarkets and your own customerdatabase. Perform a market analysis thatprojects the concentration of your targetgroups to potential trade areas, and thenrank promising areas by profitability andlong-term value. After determining eachtarget group’s preferences, develop a mediaand marketing strategy for each market.Would TV sports programs and countryradio make the right connection or are

online job sites and social networks a bet-ter choice? One bank based in the Souththat sponsored NASCAR events was sur-prised to learn that 70 percent of its coretarget preferred the opera; it promptlychanged its sponsorships.

4. Deliver differentiated messages andexperiences. Develop different productpositioning or messages for your top targetgroups to keep current customers fromdefecting. Also, customize merchandisingstrategies to the target groups to wingreater share of wallet. Each approachshould reflect their backgrounds, lifestylesand preferences. And your sales staffshould be thoroughly briefed on your topcustomer groups.

5. Keep it simple. One automaker spenthundreds of thousands of dollars developingits own consumer segmentation systembased on a survey of new car buyers andcreated a model with more than 100 buyersegments. While the system worked well infocus groups, it proved unwieldy in themarketplace, and the manufacturer eventuallypulled the plug. Off-the-shelf segmentationsystems that provide comprehensive dataand actionable strategies let you easilyconnect with customers on the ground.They’re also usually less expensive thanmore sophisticated, custom models.

6. Get everyone involved in theconsumer segmentation approach.Advanced segmentation initiatives requiremultiple departments to adopt the strategies.That means that the real estate departmentno longer selects new store sites based onthe lowest lease offered by a mall developerbut on the customer segment compositionof the area. And it means that a company’smerchandising department presents productsthat appeal to the target audience.

7. Measure the effectiveness and adjustyour strategy. Use ROI analytics to ensureyour strategy is gaining traction anddelivering on goals. By measuring howyour customers respond to your efforts,you can better predict their future behaviorand refine your segmentation strategiesaccordingly.

Using consumer segmentation to buildcustomer loyalty can help companiesprosper even in a difficult economy withcomprehensive data and a willingness tomodify practices throughout the enterprise.By shifting resources away from massmarketing channels to a focused campaignthat puts their best customers front andcenter, businesses can improve sales anddecrease costs, while building a loyalclientele that allows them to weather thischallenging market. And when the economydoes turn around, a loyal customer baseprovides the best platform for future growth.

S e g m e n t a t i o n a n d C u s t o m e r L oy a l t y

© 2009 The Nielsen Company. All rights reservedPage 6

S e g m e n t a t i o n a n d C u s t o m e r L oy a l t y

Page 7

Segm

ent0

1

Segm

ent2

5

260240220200180160140120100

80604020

Segm

ent6

6

Segm

ent5

0

Call center scripting

Product development

Site location analysis

Second City Society10 Second City Elite

12 Brite Lites, Li’l City

13 Upward Bound

Size = 8% of purchasersIndex = 196

Affluent couples with children

College degrees

Management jobs

Digital technology

Casual dining restaurants

Upscale malls

Conservative media

Museum websites

Turner Classic movies

Architectural Digest

Dow Jones Radio

Cruise ship tie-ins

Elite Suburbs01 Upper Crust

02 Blue Blood Estates

03 Movers & Shakers

06 Winner’s Circle

Size = 13% of purchasersIndex = 256

Wealthiest suburbanites

Post-graduate degrees

Executive jobs

Large homes

Expensive clothes

Arts fans

Business media

Publisher websites

NPR

PBS

Theater playbills

Subway tie-ins

Town & Country05 Country Squires

09 Big Fish, Small Pond

11 God’s Country

20 Fast-Track Families

23 Greenbelt Sports

25 Country Casuals

Size = 20% of purchasersIndex: 188

Prosperous boomers

College degrees

Telecommuting pros

Exercise equipment

SUVs and boats

Consumer electronics

Family media

Stock trading websites

Search engine sites

Meet the Press

New Age radio stations

Consumer elec. tie-ins

Urban Upscale04 Young Digerati

07 Money & Brains

16 Bohemian Mix

24 Up-and-Comers

29 American Dreams

Size = 12% of purchasersIndex: 166

Upscale citydwellers

Ethnically diverse

Early tech adopters

Enjoy the arts

Shop exclusive retailers

Drive luxury imports

Travel abroad

Product placement in films

MTV

Vanity Fair

Foreign language radio

Wireless phone tie-ins

The Affluentials08 Executive Suites

15 Pools & Patios

17 Beltway Boomers

18 Kids & Cul-de-Sacs

19 Home Sweet Home

Size = 11% of purchasersIndex: 143

Comfortable suburbanites

Mostly couples

College degrees

White-collar jobs

Computer equipment

Health foods

Big-box retailers

Travel websites

Movie advertisements

Smithsonian

Computer store tie-ins

Flyers at health clubs

Index of 100 = U.S. average (11.6%)

Amazon.com Purchasers by PRIZM Segment260240220200180160140120100

80604020

Segm

ent3

3

260240220200180160140120100

80604020

260240220200180160140120100

80604020In

dex

Targeted marketing

Customer insights

Customer service offers

Second City Society

10 Second City Elite

12 Brite Lites, Li’l City

13 Upward Bound

Index = 196

Affluent couples with children

College degrees

Management jobs

Digital technology

Casual dining restaurants

Upscale malls

Conservative media

Museum websites

Dow Jones Radio

Cruise ship tie-ins

Elite Suburbs

01 Upper Crust

02 Blue Blood Estates

03 Movers & Shakers

06 Winner’s Circle

Index = 256

Wealthiest suburbanites

Post-graduate degrees

Executive jobs

Large homes

Expensive clothes

Arts fans

Business media

Publisher websites

NPR

PBS

Theater playbills

Subway tie-ins

Town & Country

05 Country Squires

09 Big Fish, Small Pond

11 God’s Country

20 Fast-Track Families

23 Greenbelt Sports

25 Country Casuals

Index: 188

Prosperous boomers

College degrees

Telecommuting pros

Exercise equipment

SUVs and boats

Consumer electronics

Family media

Stock trading websites

Search engine sites

New Age radio stations

Consumer elec. tie-ins

Urban Upscale

04 Young Digerati

07 Money & Brains

16 Bohemian Mix

24 Up-and-Comers

29 American Dreams

Index: 166

Upscale citydwellers

Ethnically diverse

Early tech adopters

Enjoy the arts

Shop exclusive retailers

Drive luxury imports

Travel abroad

Product placement in films

MTV

Foreign language radio

Wireless phone tie-ins

The Affluentials

08 Executive Suites

15 Pools & Patios

17 Beltway Boomers

18 Kids & Cul-de-Sacs

19 Home Sweet Home

Index: 143

Comfortable suburbanites

Mostly couples

College degrees

White-collar jobs

Computer equipment

Health foods

Big-box retailers

Travel websites

Movie advertisements

Smithsonian

Computer store tie-ins

Flyers at health clubs

ROIROI

Index of 100 = U.S. average (11.6%)

Identify the BestConsumer Segments

Create the TopTarget Groups

Deploy Enterprise-Wide Strategies

Measure Effectivenessand Adjust Strategy

3

4

2

1

Lifestyle TypesWho They Are

Consumer InsightsWhat They’re Like

Marketing StrategyHow to Reach Them

Messaging, tone and positioning

Customer relationship management

Media strategy and buying

A

Dev

elop

test campaigns•

Measure

results•Adjuststra

tegy

•

Figure 1: A Framework for Segmentation

In this case study, researchers analyzed Amazon.com’s top customers using PRIZM lifestyle-based segments. Analysts grouped high-indexing segmentsinto five target groups, profiled them using media and marketplace surveys and developed differentiated marketing strategies to reach them. The graybars in the top chart represent low-indexing segments that aren’t among Amazon.com’s best target groups. The results can be used for strategic andtactical applications across the company. Sources: Nielsen PRIZM, Mediamark Research & Intelligence.

© 2009 The Nielsen Company. All rights reserved

S e g m e n t a t i o n a n d C u s t o m e r L oy a l t y

For more information call (800) 234-5973 or visit us at www.nielsen.com

Nielsen Claritas© 2009 The Nielsen Company. All rights reserved.

Figure 2: Segmenting Customers by Channel Yields Different Areas of Opportunity

Consumer segmentation shows that the best customers for a retailer's brick-and-mortar stores may be very different from its best online shoppers.According to the bar chart displaying Nielsen PRIZM segments, Wal-Mart's most loyal fans are found in midscale and working-class exurban segmentslike New Homesteaders (32) and Big Sky Families (33), and the company should prospect for new customers in the dark blue areas in the map on theleft. To expand the customer base for walmart.com, however, the company should focus on younger, metro segments like Young Digerati (04) andFast-Track Families (20) in the dark orange markets in the right map. And to increase the most loyal customers—who shop at bothWal-Mart andwalmart.com—the company should design cross-channel marketing and merchandising initiatives to segments like Mayberry-ville (37) andShotguns & Pickups (51). Sources: Nielsen PRIZM, Mediamark Research & Intelligence.

Shop at Wal-Mart Versus Order from walmart.com, by PRIZM Segment

Shop at Wal-Mart Order from walmart.com

Index of 100 = U.S. average(65.1% for Wal-Mart 2.7% for walmart.com)

PRIZM Segments

Shop at Wal-Mart, 3 mo Order from walmart.com, 1 yr