Segmentation and a Total Market Approach Steven ... - CiteSeerX

Segmentation and a Total Market Approach

Steven Chapman1 Martine Collumbien2 Andrew Karlyn3 PSI Research Division Working Paper No. XX 2006

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Population Services International London School of Hygiene and Tropical Medicine 3 Center for Disease Control/Botswana 2

Acknowledgments This paper was funded by Population Services International and the Department for International Development through a Knowledge Programme grant for sexual and reproductive health.

Segmentation and a Total Market Approach

Abstract Objective:. This paper proposes and demonstrates a method for segmenting populations as part of a Total Market Approach to designing, managing, and evaluating reproductive and sexual health interventions in developing countries. It applies the “Making Market Systems Work Better for the Poor”, or “M4P”, concept to address the general problem of situations where one or more merit goods or services are perceived to be sub-optimally supplied and consumed under existing marketing conditions. Five bases of segmentation are proposed to increase health system performance: 1) vulnerability, 2) consumption, 3) access and psycho-social determinants of consumption, including willingness to pay, 4) equity-based measures, and 5) source of supply preference. Data and Methods: Data are representative of males aged 16-35 years old in 2004 in six South Africa provinces (Eastern Cape, Free State, Gauteng, KwaZulu Natal, Mpumalanga, Western Cape). The market is defined in terms of vulnerability to HIV infection and consumption in terms of consistent condom use. Multi-item scales are tested for reliability and then used to measure access and psycho-social determinants. Standard equity-based measures of ability to pay are used. Multiple logistic regression is used to analyse barriers to and drivers of optimal consumption among currently inconsistent users and to determine whether commercial, social marketing and public sector actors are serving discrete market segments. Differences among groups are interpreted in terms of policy decisions for improving the effectiveness, efficiency and equity of the total market. Results: Among males vulnerable to HIV infection in South Africa, more than 80 percent have sex with non-marital, non-cohabitating partners and nearly half have had two or more partners in the past year. Approximately half use condoms consistently, demonstrating sub-optimal consumption of condoms in this market. Approximately half of condom users most frequently use public sector brands, 21 percent use social marketing brands, and just over three percent use commercial sector brands. There is no difference in ability to pay among consistent and inconsistent condom users, or among users of commercial, social marketing and public sector brands. Willingness to pay differs among these five segments as do a range of access and psycho-social determinants. Conclusions: Segmentation analyses conducted to date rely heavily on analyses of users ability to pay and do not analyze other bases segmentation reflecting consumer preferences due to data limitations in Demographic and Health surveys. The segmentation method and approach proposed and demonstrated here applies M4P concepts to data containing information about access, psycho-social and equity based determinants and in doing so demonstrates that Total Market Approach analyses based solely on ability to pay may not produce policy guidance helpful in developing markets or designing offerings that appeal to different market segments. The segmentation method and approach proposed requires additional data collection to conduct. The cost of such data collection varies by setting, but is likely in the range of $25,000 to $75,000 per country. To conduct segmentation surveys periodically throughout the developing world would therefore require a significant commitment of resources for both data collection and analyses. This cost needs to be evaluated in terms of the value of the information produced.

Introduction This paper proposes and demonstrates a method for segmenting populations as part of a Total Market Approach to designing, managing, and evaluating reproductive and sexual health interventions in developing countries. To date, funding decisions for these interventions have been made largely in terms of the potential contribution of a single source of supply, public, nongovernmental or commercial, to improve the performance of the health system in terms of effectiveness, equity and or efficiency. For example, a donor may fund a social marketing or community-based intervention managed by a non-governmental organization to increase the use of condoms or contraceptives, an effectiveness objective, as part of an HIV/AIDS or reproductive health program. Meanwhile, that or another donor may fund free distribution of condoms or contraceptives in an effort to serve poor populations, an equity objective. Lastly, these same donors may fund a commercial sector supplier to increase the proportion of users who pay the full cost of the condom or contraceptives, an efficiency objective. An unintended consequence of making funding decisions by source of supply and with often different performance objectives in mind can be that the interventions conflict. Social marketing and public sector interventions may dissuade higher income consumers from using commercial sector products, undermining efficiency. Commercial and social marketing interventions are often assumed to create inequities in use rates across socio-economic strata. Lastly, commercial only interventions may be ineffective in converting non-users into users. The aim of a Total Market Approach is to improve all three health systems performance objectives, effectiveness, equity and efficiency, in a developing country by designing and coordinating interventions across these sources of supply. The United Kingdom’s Department for International Development defines a Total Market Approach as a process to “assess the characteristics of existing and likely future markets, and to define the comparative advantage of commercial, social marketing, non-governmental organization, and public sector actors in terms of competence and value for money in delivering a range of products or services to different market segments, including the poorest. It can enable closer and more structured linkages with commercial, public and non-governmental organizational sectors and aid the gradual shifting of consumers with sufficient purchasing power out of the public sector.” [Need citation from Claire Stokes]. Segmentation is a central concept in commercial and social marketing theory and practice (Kotler, et al., 2002). It was originally defined as “viewing a heterogeneous market as a number

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of smaller homogenous markets, in response to differing preferences, attributable to the desires of consumers for more precise satisfaction of their varying wants” (Smith, 1956). The aim of this paper is to demonstrate how segmentation can be used to divide a heterogeneous market into smaller, homogenous markets based on public and private preferences, and to design interventions based on the results of this division. In marketing, the identification of segments results in a decision whether to create a specific product or service for each segment, depending upon the capability of the marketing organization to satisfy the specific wants or preferences of that segment. Reproductive and sexual health programs in developing countries must make a similar decision, whether to fund the public, non-governmental and or commercial sectors to satisfy the specific preferences of one or more segments in order to meet the program’s health system performance objectives. A market in its simplest form requires a single seller offering a product or service at a given price, and a single buyer willing to pay that price. A homogenous market is one in which sellers offer a single or similar product or service to buyers willing to pay the same amount. Heterogeneous markets develop when sellers offer differing products or services to groups of buyers who have differing preferences. The aim of a segmentation analysis is to determine the extent to which different preferences exist and the extent to which differing sellers meet those wants. Heterogeneous markets are divided into homogenous markets by identifying what are known as the appropriate bases of segmentation. An appropriate segmentation base might be age in a market where young people prefer a different product or service than old people. Sex, socioeconomic status, and residence are common segmentation bases due to assumptions about differing preferences between males and females, the rich and the poor, and the urban and rural. Many other segmentation bases exist, including psycho-graphics and lifestyle. In marketing, the appropriateness of one or more segmentation bases is evaluated in terms of whether each basis is identifiable (able to be measured), actionable (theoretically able to be changed through an intervention), accessible (defines populations able to be reached), responsive (empirically are changed by an intervention), substantial (large in size), and stable (do not change for a period long enough to design, monitor and evaluate an intervention) (Frank, et al., 1972). This paper applies the “Making Market Systems Work Better for the Poor”, or “M4P”, concept, espoused by the Department for International Development and the Asian Development Bank to reproductive and sexual health programs in developing countries. The M4P concept addresses the general problem of situations where one or more merit goods or services are perceived to be

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sub-optimally supplied and consumed under existing marketing conditions (DFID, 2005). In this paper, condoms and contraceptives are deemed to be merit goods that may be sub-optimally consumed or supplied. Sub-optimal consumption for condoms in HIV programs would be where use is inconsistent in risky sexual partnerships. For contraceptives, sub-optimal consumption is defined in terms of unmet need for contraception. Sub-optimal supply is where publicly financed sources of supply crowd out available or potential commercial sources of supply and where inequity in access exists across socio-economic strata. As in M4P, the general solution is to create and develop markets such that an “access frontier” is shifted outwards. The access frontier is the proportion of the market that presently has access to the product or service (Porteous, 2005). Non users are then segmented into groups in terms of their likelihood of adopting use, either through market solutions or public sector supply, through a five step method: 1) define the market, 2) determine the current usage level and trend, 3) segment non-usage to determine the current access frontier and natural limit of the market, 4) assess future possible positions of the access frontier in the medium term, and 5) identify those in a “supra-market group” who are beyond the reach of the market and require publicly financed sources of supply. This paper goes beyond current segmentation analyses in reproductive health programs based on Demographic and Health Surveys and conducted by the POLICY project.1 These analyses do not explicitly account for consumer preferences due to data limitations relating to determinants of behavior, including willingness to pay for products and services, which are necessary to understand the M4P access frontier in the medium term. As a result, POLICY project analysis are exclusively based on ability to pay criteria and result in recommendations that consumers may not prefer and for which suppliers may lack competence and value for money in delivering.. The method proposed here requires new data collection both within the scope of the POLICY project analysis and including determinants of behavior in a manner that permits the production of segmentation, monitoring and evaluation information specific to a Total Market Approach analysis based on consumer preferences.

Such data collection would require additional

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POLICY is a five-year project funding by the United States Agency for International Development that began in July 2000 and is implemented by The Futures Group International in collaboration with Research Triangle Institute and The Center for Development and Population Activities. See for example S. Sharma and I. Almasarweh (2004) Family Planning Market Segmentation in Jordan: An Analysis of the Family Planning Market in Jordan to Develop and Effective and Evidence-Based Strategic Plan for Attaining Contraceptive Security.

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resources, and the value of the segmentation approach proposed here should be evaluated relative to that cost. Segmentation Bases for a Total Market Approach This paper proposes that five bases of segmentation, applied in order, are appropriate for a Total Market Approach analysis based on health system performance objectives of effectiveness, equity and efficiency and the segmentation criteria set forth above. The bases mirror those of M4P, but are adapted to fit reproductive and sexual health program contexts in developing countries. The bases are 1) vulnerability, 2) consumption, 3) access and psycho-social determinants of consumption, including willingness to pay, 4) equity-based measures, and 5) source of supply preference. Vulnerability The first segmentation basis is to define the existing and likely future market in terms of a population’s vulnerability to undesired health or quality of life outcomes, including unintended births. In simplest terms, the market for condoms in a HIV/AIDS program could be broadly defined in terms of the sexually active population who may be vulnerable to HIV infection or transmission, or more narrowly defined on the basis of risk factors found in epidemiological studies to be highly correlated with HIV infection and transmission, such as being a commercial sex worker or a mobile population that has multiple sexual partners.

The market for

contraception could be broadly defined as the sexually active population, or more narrowly as women with met and unmet need for contraception. M4P advises defining markets in functional, rather than product-specific terms to be able to account for the possibility of substitution (Porteous, 2005). For example, if a market is defined in terms of a population with multiple sexual partners, the market size could decrease through increases in fidelity. For reproductive health programs, market sizes may change as age of sexual debut or fertility intentions change.

Defining a market based on vulnerability requires

stakeholders to reproductive and sexual health programs to conduct secondary analyses of available epidemiological and behavioral studies, such as the Demographic and Health Surveys or Behavioral Surveillance Surveys and to agree a definition of the population at risk that is appropriate to the program and context prior to data collection for a Total Market Approach analysis.

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Consumption The second segmentation basis is to define consumption among the vulnerable population or market in terms relevant to the program objective and to monitor consumption levels and trends over time. For example, condom use in a HIV/AIDS program could be defined as use at last sex with a casual partner in non-generalized epidemics or consistent use in non-marital, noncohabiting relationships in generalized epidemics. Contraceptive use in a low prevalence setting where the program aims to encourage trial might be defined in terms of ever-use of contraception, whereas in high prevalence settings the program more likely would define consumption in terms of current use of contraception.

Stakeholder agreement to the consumption definition prior to

data collection increases the efficiency of a Total Market Approach analysis and decision making by limiting the scope and number of tables to be produced and used. Monitoring consumption levels and trends over time permits evaluation of the competency and value for money of suppliers. Access and Psycho-Social Determinants of Consumption, including Willingness to Pay The third segmentation basis is access and psycho-social determinants of consumption, including willingness to pay.

Differences between consumers and non-consumers in terms of these

theoretically derived determinants create a profile of non-consumers relative to reasons for nonuse and a listing of actionable barriers to and drivers of consumption.

As in M4P, this

segmentation basis is aimed first at understanding the proportion of non-consumers who have access to products or services, but lack the skills or motivation to use them, and second those who may have the skills or motivation, but lack access.

These two segments require different

interventions. Those with access do not require new products or services; they do require information and persuasive communications. The second group requires new product and service offerings in terms of price, products/services, place of delivery and or promotion. Equity Based Measures The fourth segmentation basis is measures related to equity, including socio-economic status indicators used to segment markets in terms of ability to pay.

This basis identifies what M4P

describes as the “supra market” group who may be beyond the reach of market solutions even in settings where they have access, skills and motivation to consume. Source of Supply Preferences

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The fifth and final segmentation basis is an analysis of source of supply preferences by the determinants and equity-based measures. This basis identifies whether current offerings by source of supply compete in ways that undermine efficiency, and where there may be opportunities for new product and service offerings that will shift consumers from subsidized sources of supply to commercial ones. Case Study: A Total Market Approach Analysis for HIV/AIDS in South Africa. The above segmentation approach and bases are applied to data from the Condom User Segmentation Study commissioned by the Society for Family Health in South Africa, a social marketing organization affiliated with Population Services International, to demonstrate its utility in a Total Market Approach analysis. Data Data were collected between June and July 2004 and the sample (N=3360) is representative of South African males aged 16-35 years old in six selected provinces (Eastern Cape, Free State, Gauteng, KwaZulu Natal, Mpumalanga, Western Cape). A multistage random cluster sample was generated with enumeration areas as the primary sample unit. The sample was stratified by program intensity with 75 clusters in areas where social marketing promotional activities took place and 51 clusters in areas where such activities did not based on the assumption that doing so would guarantee a sufficient number of social marketing users needed for detailed analysis. The representativeness of the sample was maintained by applying sample weights in the analyses. Households were randomly selected in each cluster and a screening questionnaire identified all males between the ages of 16-35 years old and one was selected at random. Sample weights were calculated to reflect the actual population size and distribution of men living in the two areas in each of the six provinces using 2001 census data. Compared to the census distribution, Afrikaans speakers were under-represented in the sample (eight percent versus 13.6 percent) while other African language speakers were over-represented (81.6 percent versus 76.4 percent). The sample slightly over-represents 20-23 years olds while under-representing 24-29 year olds. A more detailed description of the data is in the study’s descriptive report (PSI, 2004) The standardized questionnaire was based on a behavioural framework to investigate the determinants of condom use (Patel & Chapman, 2004). It included multi-item scales for access

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and psycho-social determinants of condom use as well as a sequence of willingness-to-pay questions to illicit the highest price a respondent would be willing to pay (Foreit & Foreit, 2003). The questionnaire was translated and back translated into the predominant languages spoken in the study areas and pre-tested before implementation. Face to face interviews were conducted by male interviewers. Interviews were considered to be null and void if after three attempts, the interviewer failed to complete the interview with the selected men. Data entry was done using EPI-Info with double entry of all data to capture errors. Data analysis was done with STATA 9, using SVY commands to fit statistical models for complex survey data and simultaneously adjust for weighting, clustering and stratification. Variables Potential indicators of vulnerability included having had sex in the last year, a non-cohabitating or non-marital partner in the last year, or two or more sexual partners in the past year. Potential consumption indicators included ever use of condom, condom use at last sex with any partner, and consistent use defined as always using condoms with all partners. Source of supply preferences were based on self reports of the most frequently used brand in the last year. Brands were then categorized as commercial sector, social marketing and public sector. Methods Scores were computed for access and psycho-social determinants of condom consumption identified in the behavioural framework as being correlated with condom use and include perceived availability, brand appeal and social norm (grouped in the framework under the term “opportunity”), social support and self-efficacy (“ability”), and trust, outcome expectation, risk perception, intentions, and willingness to pay (“motivation”) (Rothschild, 1999). For each of these concepts the respondents were posed a series of statements with four response categories: strongly agree, agree, disagree, or strongly disagree. In the analysis these were coded on a 0 to 3 scale; non-responses were recoded at 1.5. Reverse coding was used for items to which disagreement was assumed to be correlated with condom use. Cronbach’s Alpha was calculated to assess reliability and items were dropped following standard procedures to maximize this statistic. The mean score was then calculated based on the remaining items. Together with the mean willingness to pay score from a question relating to the highest price the respondent would pay for a condom, these variables were treated as determinants that were actionable for supply side actors (Chapman, 2004).

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Equity based measures include age and marital status, income and socio-economic status based on an index of assets and possessions, occupation, education, residence and primary language spoken at home. The socio-economic status variable was constructed using principal components analysis with a tetrachoric correlation matrix to produce an empirical summary measure from 21 binary survey questions on assets and possessions. Quintiles were then defined with E as poorest and A the most wealthy quintile. Multivariate analysis Logistic regression was used to derive the most parsimonious model of behaviour change, using consistent condom use as a dichotomous outcome. The full model started with all potential behavioural determinants of use. The post estimation Adjusted Wald-test with the Bonferroni correction was used to determine whether each variable improved the fit of the model. Variables with the highest p-values on the Bonferroni test were removed first and this step-wise elimination process was followed until all remaining variables were significantly contributing to the fit of the model (p