ILoveGay.NET

by Alfred Verhoeven

In the battle to find more customers and make more profit, companies have defined new market segments that they believe deserve special attention. One of those segments seems to be the LGBT consumer. But is that a target group that falls within the rules?

According to the marketing booklet, there are 6 conditions to make target group segmentation ‘feasible’. Does the LGBT consumer comply with this?

In recent decades, the mass marketing techniques of the 1970s have evolved worldwide towards (almost) one-to-one communications. Step by step, companies have changed the approach to their customers from one or two different ways to a whole range of segments, methods and media.

In the “neoliberal economic process,” successful audience segmentation requires:

1. Homogeneity within the segment (common needs: very practical to be able to use “homo” here)
2. Heterogeneity between segments (different segments have different needs)
3. Segments are measurable (such as prevalence)
4. Segments are accessible (communication)
5. Target segment is large enough to be profitable
6. It responds the same way to a market stimulus

I made a few lines bold in the article: these are essentially interesting conclusions that belong to the theorems in my thesis.

1. Homogeneity within the segment

The most obvious factor connecting gay consumers is their sexual identity. Marketing – or at least much of it – doesn’t look at that aspect of a consumer. Leaving aside the casual lure of a misplaced near-nude model to grab the prospect’s attention, a classic example is the lady in bikini, sitting on the hood of a car. The image has no relation to the product, but it does serve its purpose. Get attention.

The adage goes: “Sex sells”, so just like in regular marketing, sex is also used in advertisements for the LGBT consumer. However, then I have to start ‘discriminating’ right away, because that community is quite diverse. The theme of ‘sex’ is also very different for many groups. So now I’m mainly talking about gay men.

The seduction of (half) naked models
A good example are the fashion brands (Ginch Gonch, Dolce & Gabbana, Abercrombie & Fitch, Calvin Klein) that can use hunky models functionally – after all, they have to show how good their underwear looks. But many other industries and brands have also used the temptation of (half) naked models to draw attention to their brand. The travel industry, pharma, fmcg, interior design, telecom: you will find it everywhere.

British marketing consultant Gray Matter released the report ‘In The Pink?’. The report warns: “Gay consumers have different characteristics. Being gay can influence their purchasing decisions, but it doesn’t mean that every gay consumer is the same.” They added a very important condition:

They may not all buy the same products, but they can and will boycott a company they perceive as exploitative, hypocritical, or insensitive.

So – while their spending may not be the same, their NON spending may be.

2. Heterogeneity between segments

To put it philosophically: in order to justify a different approach, the other approach must be justifiable.

One wise blogger noted, “marketing {wine} to the gay community is not rocket science. You do it the same way you would market {wine} specifically to the Hispanic community, or the baseball-loving community, or the middle-aged snake charmer community: you just address them directly in one voice, with an attitude and with language they will recognize it. It is largely about paying attention to them and their specific world view.”

But is this true? Do the same rules apply? Kotler wrote: “Salt buyers can be divided into blond and dark hair, but the color of the hair does not influence the decision to buy.” In other words: WHY would you approach the gay consumer differently – or at least separately?

Because:

• They are different people you wouldn’t reach otherwise?
• They live in different places, just read different magazines and watch separate TV shows?
• They have a different spending pattern?

In my consumer survey among more than 3,000 participants, this appears to be true for certain expenditures. I asked: Do you consider yourself “a gay consumer”? and How could a “gay consumer” be different from other consumers?

The biggest differences were about “needs and wishes” and “other products and services”. These are both abstracts – more concretely: LGBT people consider it much more likely than straights that they have a higher disposable income (42% against 27%) and a different spending pattern (32%-21%). They also say that they have a different holiday pattern, which is less recognized by heterosexuals (26% against 21%). Finally, LGBT people think they are more trendsetters than heterosexuals.

3. Segments are measurable

How many LGBT consumers are there then? We’ve often heard “10%” – a number of companies even use this as a “code” in their name to represent their target market, such as:

• 10percent.com, “shopping for the gay community since 1995”
• Comcast Home Network: Ten Percent, A Weekly Interview Series Focusing On LGBT Issues

Based on that 10% and an incorrectly assumed higher average income, figures are then quoted as a purchasing power of USD 987 billion in the US. But where does that 10% come from and is it correct?

Measurable segments
For starters, sexual orientation is not easy to measure. Data is relatively rare and the LGBT population may be reluctant to identify themselves as such in surveys or a census. The best-known basis for the estimates comes from Alfred Kinsey’s infamous report, the groundbreaking Sexual Behavior in the Human Male, which dates back to 1948 (!). He estimated the target audience for gay men to be between 2.3% and 10% – a fairly wide range.

It should be noted that his research methods were not very scientific, which was not very strange in 1948 (and what is defined as sex? “I did not have sex with that woman” – right?). He sought out respondents in prisons and the gay ‘underworld’, made friends with them and wrote down their behavior with an obscure code over a cigarette.

Since then, many studies have been done to show that many different numbers can be established, depending on how the answers are (desired and) interpreted.

The PFLAG effect
Based on various studies, approximately 5% of the population could be the measurable target group – but there is a more important factor. The audience reached is exponentially larger if “the gay-friendly market, the parents-of-, the friends-of-” are included. Expert Bob Witeck says: “When you promote gay people, you also reach their family, neighbors, colleagues, friends… I call this the PFLAG effect”, referring to the advocacy group that used to be called Parents, Families and Friends of Lesbians and Gays and now simply operates under the abbreviation PFLAG.

Millennials, as the most free-thinking generation ever, play an important role in this. This effect is perhaps the most important economic reason for targeting the LGBT target group as an organization.

4. Segments are accessible (in communication)

Accessibility is about communicating with your customers and being able to get things to their attention, know how to reach them. How can you find them (LGBT or maybe just gay) if those characteristics are not directly observable or centrally registered? Do you rely on self-reported behavior or identity, for example via survey or census?

That means, if some don’t answer the questions honestly, the data will be unreliable. This could happen if the interviewee fears being ‘discovered’ by a boss or family member.

The lack of children is actually the main (economic) reason for targeting this group. Straight people without children are (almost) equally interesting, but they are all but impossible to find. With LGBT people there are more or less physical places where you can find them relatively easily, such as bars, associations, sport clubs and furthermore the readers or visitors of certain media, magazines, websites, events.

5. Segment is big enough to be profitable

The size of the market in terms of purchasing power is directly dependent on the established number of consumers and their (disposable) income. Some sources talk about a worldwide purchasing power of $3,700,000,000,000. And of course that’s quite a sum, who wouldn’t want a part of that?

But is that the LGBT+ community or is that the gays? And then ALL members of those groups or only affluent sub-segments? That 3.7 trillion spread over 5% of 7 billion people (371 million individuals over the age of 15) means an average of $10,000 per capita, distributed around the world… there you have it. But it is clear that this concerns billions.

6. The members of the group react in the same way to a market stimulus

As we saw under “Homogeneity”, there is not 1 type of gay customer. In fact there is at least the same number of different varieties as in the ‘regular’ market, if not more! It is therefore highly unlikely that the entire market segment of LGBT consumers will react in the same way to a communication, offer or advertisement.

However, studies show, among other things, that LGBT are strongly influenced whether or not (!) to do their best to find a product or to purchase services, depending on the image projected and the representation given in the brand’s advertisements or communications.

With the ongoing inequality (from pink ceiling to street violence), LGBT people pay almost daily attention to brands that seem to be allies. More than two-thirds of these consumers said they were more likely to buy from a company they consider an ally. Often seen not only in corporate HR policies and advertisements, but also in social behavior, recognition by agencies such as Workplace Pride or GLAAD and an LGBT-inclusive diversity policy.

Marketing can play a role in confirming that image, but much is also gained from PR and social media – both paid and earned – and through recommendations or rejections from the community and surrounding circles.

Conclusion successful market segmentation

Looking at the 6 theoretical conditions for successful market segmentation, we can conclude the following:

1. Homogeneity within the segment does not exist.
2. Heterogeneity between segments may exist, but not automatically for all products and services.
3. The size of the segments is measurable, but many estimates are just that: estimates. However, we can limit the options to acceptable numbers.
4. Segments are accessible if approached in a smart and credible way.
5. The target segment is large enough to be profitable. There is a lot of noise here, but even with conservative estimates it can be concluded that there is plenty of money to be made here due to the high discretionary purchasing power.
6. Does it respond to a market stimulus in the same way? No, it doesn’t, but there are ways to fix that (up a level, so a more general approach, or a level down, so a more segmented approach).

Conclusion: not all six theoretical conditions are met, so a ‘standard’ target group segmentation will certainly not work. However, with thorough market research and a feeling for this market, success can be achieved. What is not included in these 6 characteristics either is the fact that the target group is a minority with a chip on their shoulder, which requires a careful, consistent and sympathetic approach.