Successful Segmentation Starts with the End in Mind

“We did a segmentation study a couple of years ago, but it didn’t tell us anything.” 

It is not uncommon to hear this comment from clients. As a market research consultant, I believe there is an obligation to dig in further. Why did the past attempt(s) at segmentation not produce actionable insights? What is the end goal for this segmentation? How can this segmentation build upon and be integrated with existing data?

As advisors to our clients, our role in a segmentation engagement involves more than simply providing a new framework. We must begin with the recognition that all our clients currently have a segmentation scheme in place, even if the sales force only uses it implicitly. Understanding current and past segmentations, as well as how and by whom the segmentation will be used, is essential to the success of a new segmentation framework.

If the current segmentation isn’t telling clients what they need to know, it is usually because the segmentation framework lacks two things: (a) clarity around specific goals among stakeholders and (b) an ability to create a tangible link to the segments for the end-users of the research.

Following are three tips you can use to ensure that your next segmentation study is actionable, integrated and goal-driven:

1. Listen to All Stakeholders
Segmentation research often begins by talking to members of the client’s team and possibly conducting focus groups with consumers of the client’s product or service. This is an essential first step, but stopping here misses key stakeholders who have unique knowledge about the consumer and who are crucial to the successful implementation of the segmentation.

I recommend speaking with those who are customer-facing or responsible for delivering the desired customer experience. After all, these are the people who actively use segmentation to understand and target customers with the proper offering. Talking to them can uncover key dimensions for exploration in the research that may be overlooked by senior management. Additionally, this step will lead to greater buy-in from these stakeholders when you rollout your solution.

2. Connect the Data Dots
As more and more clients begin to hear about and adopt a Big Data approach to their research, it will become increasingly necessary for your segmentation solution to leverage or link to your existing customer data. At Market Strategies International, we assume that this is a requirement for clients, and we work to understand their existing information about customers and prospects.

Often this information is limited and needs to be enriched by additional third-party data. Development of a database-scoring algorithm will take more time than creating one based on survey questions, but this is offset by the increased adoption it will produce across the client’s organization.

Whether you link to a database or not, you may still need a survey-based scoring algorithm for other research that might involve non-customers. The benefit of having segment prediction as one of your key criteria is the ability to produce much shorter scoring algorithms.

Ultimately, the success of a new segmentation study rests on its ability to make it easier to use by the end client either through linking it to existing customer data, which will more successfully support efforts such as direct marketing, or producing a reasonably short scoring algorithm.

3. Start with the End
The key questions you should always ask are: “Who is the ultimate implementer of the segmentation solution, and how will they use it?” Recognizing that it usually isn’t your immediate client should lead to casting a wider net of investigation and a focus on creating that tangible link. Doing so will increase the likelihood of success for your client.

If you’d like to learn more about executing and implementing a successful segmentation study, please contact me at ray.reno@marketstrategies.com.

This entry was posted in Research Trends, Segmentation and tagged , , by Ray Reno, Ph.D.. Bookmark the permalink.
Ray Reno, Ph.D.

About Ray Reno, Ph.D.

Ray Reno is a senior vice president and senior marketing scientist in Market Strategies International's Marketing Sciences Group. He is recognized as a creative problem-solver with extensive training in analytics and methodology, as well as a keen understanding of the consumer and brand issues businesses face. Ray specializes in the design of consumer segmentations and market frameworks, assessment of the differentiation of brand equities and the identification and quantification of potential brand value propositions. Prior to joining Market Strategies, Ray served the Chicago-based consulting firms of McKinsey & Company and Envision as a marketing/branding expert within the pharmaceutical, insurance and service industries. He also served the University of Notre Dame as an assistant professor of social psychology for seven years. Ray earned a Ph.D. and master's degree in social psychology from Arizona State University as well as a bachelor's degree in psychology and English from Adrian College.

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