Implementing a Segmentation Strategy 1204653860293754 3

8/3/2019 Implementing a Segmentation Strategy 1204653860293754 3

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www.abbottresearch.com 1-888-244-0285

Segmenting forSuccess

Designing an implementation plan

Presented by: Susan Abbott

http://www.abbottresearch.com/




Abbott Research & Consulting 2006,2007

2

Valid and reliable doesn’t always mean useful …

200 CEOs surveyed in 200459% had conducted a major

segmentation exercise within the pasttwo years

14% said they derived value from it

Yankelovich and Meer, Harvard Business Review, 2006,reporting on study by Marakon Associates and Economist

Intelligence Unit

59%

Paid forsegmentation

project

200 CEOs

14%

“Valuable”




3

The most critical point of this presentation …

For segmentation to be useful,

you must be able to act on it… Then you need to coordinate

action in the organization.

Marketing can’t do it alone.




4

Consider all operational levers…




5

What’s a useful segmentation strategy?

Aligns with strategy

Points you to opportunities

Connects values, attitudes, beliefs – specifically related to

your product or service category/offerings

Focuses on actual customer behavior

You can explain it to your boss. And it makes sense. To

both of you

Accommodate/anticipate changes in markets and

behavior

Adapted from : Yankelovich and Meer




6

Differentiated Product/Service: Mobil Oil

Early 1990’s gasoline price wars

2 price / volume segments Price sensitive customers, USD $700 annual, 20% of market

Not price sensitive, USD $1200 annual, 80% of market

Response

Shifted focus away from pricing onto other differentiators

Added 2¢ per gallon, annual value USD $118 million

1




7

Mobil Oil Example Benefit Matrix

Basis for Segment Price Sensitive Price Insensitive

Principal Benefit

sought

Lowest price of

gasoline at the pump

Something besides

price (Service?

Convenience

stores?)Demographics ? ?

Behaviour Spend average of

USD $700 per year

Spend USD $1200

per year

Size of segment 20% of market 80% of market

Ask yourself: can you still buy gas here if you are not in the targetsegment? Yes, of course. But they are not tailoring their offeringto you.




8

Price and Benefits Differentiation: Loblaw

using a multi-format approach to

maximize market share over thelonger term

focusing on food but serving the

consumer’s everyday householdneeds

creating customer loyalty and

enhancing price competitivenessthrough a superior control label

programSource: 2005 annual report

3




9

Segment Focus Strategy: Whole Foods4

“We Sell the Highest Quality Natural and Organic Products

Available”




10

Dell: Differentiated Products & Services

New Vostro line of small business computers

No freeware or demonstration software loaded in

Different software offers for Windows and Officesuites

More reliable than consumer models

Support services

5




11

Competing with Starbucks6




12

E-roleplay: Two Sided Market Segmentation

Actors who need

interesting jobs betweenroles

Service companies that

need better training

experiences

7




13

Life stage Segmentation: Umpqua Bank8




14

Umpqua’s Day-to-Day Banking Segments

Label Go Reach Savor Cruise

Description Specially blended

to give a quick liftto those just

starting out

A crisp and lively

blend for thoseworking toward their

dreams

A rich blend with

those who haveachieved their

goals with room to

grow

Bright and full

bodied to bringout all the flavor of

your better years

Principle

Benefit

Sought

Low service

charges

Low minimumrequired balance

Unlimited

transactions

$7.50 monthly.Includes safety

deposit box.

$10 monthly, but

accounts earn

interest

Free notary

services

Free investment

consultation

Low or no charges

on most services,

unlimited

transactions

Membership in

Club Carefree

Demographic

Correlate

Students and

young adults

Young Families in

asset acquisition

stage

Well-established,

mid-life. Building

investments

50+

Behavioral

Correlate

Low balances High spending, low

balances, no

investments yet

Have savings and

investments

Moving into

retirement, or

semi-retirement




15

Differentiated Communication9

Same product




16

The Marketing Concept

1. Understand your customers' needs and preferences

2. Group your customers into segments based on theirneeds and preferences

3. Target segment(s) you can best meet their needs and

preferences

This includes targeting and competitive analysis

4. Branding

Not merely awareness but brand positioning

5. Provide superior service or products to meet yourtargeted customers' needs and preferences.

Happy customers, profitablesustainable growth




17

It sounds just like a change management project!

Get organizedto build model

DeepenLearning

BuildModel

Use

How segmentationstrategy fits with overallbusiness strategy

How might you act onthe learning. Eliminatenon-starters right away.

Who needs to be

involved

Stakeholderidentification

It’s not just a marketing

& research departmentproject!

Choice of model needsto fit business strategyand options

Must fit organization’s

ability to identify andrespond to segments

OR – start building the

needed data

Spread thelearningthroughout theorganization

Integrate allmarketingactivities with thesegment strategy

Integrate datacollection andmanagement

Integrate channelstrategy, metrics

Integrate all otherresearch




18

Why do you need executive sponsorship?

To make operational changes, you need to touch all parts of the

business

Sales efforts, even the structure of the sales force may change

Infrastructure may change

All marketing efforts will have to change to match the segment

structure

Existing culture, knowledge,business processes and powerfulconstituencies will derail your efforts

without C-level supportNet result: “segmentation didn’t work

for us”



www.abbottresearch.com 1-888-244-0285

Choosing a Model






20

“The basic difficulty is that value-based

segments generally don't fit neatly into

demographic ones”

McKinsey Quarterly, A segmentation you can act on, 1999




21

Profit Based Segments … may not be actionable

Became famous through the work of First Manhattan Consulting Group

Showed banks that 20% of their customers were profitable, 80%unprofitable

Dominated thinking for a decade

P r o f i t a b

i l i t y

Typical decile chart – each is 1/10th of the total customer base




22

More actionable …

Some examples of new segments for men

Male spas offering manicures, pedicures, etc. Phillips Bodygroom shaver, designed to remove hair below the neck




23

“No matter what claims are made for a method’s theoretical

validity and statistical sophistication, if it can’t be shownthat there is a consistent empirical relationship between

product usage and psychographic segments, the method

is essentially useless to the marketer….

To get the most out of segmentation research, it is important

to be concerned more with consistent empirical

relationships than with elegant theoretical models”

Chakrapani & Deal




24

The critical questions you need to ask

Can we see different product, promotion,

communication, distribution or profitopportunities with this segmentation model?

1




25

Can we measure the segments? Can we

obtain realistic data to considersegment potential?

2




26

What are the desires of each segment? What

do they want from us?

Do they make different tradeoffs?

Which attitudes matter for the purchase

decision?

3




27

Does senior management understand the

segmentation model? Does it fit with their

deep knowledge of the business?

4




28

Is this segmentation model responsive to

changes in the market and our customers?

5




29

Can we differentiate competitor offerings with

this segmentation model?

6




30

Can we reach segment(s)?

7




31

3 Major Segment Strategies

One product to all segments

Example, discount airlines – one

price,

one level of service

One product for one segment

Niche markets

Luxury goods typically handled thisway e.g. adventure travel

Multiple products designed for

and targeted at multiple

segments

Typical strategy in financial

services and broad based

consumer products

Example: how many kinds of

toothpaste can you buy?




32

The most critical point of this presentation …

For segmentation to be useful,you must be able to act on it…

Then you need to coordinateaction in the organization.

Marketing can’t do it alone.



bb h 1 888 244 0285

Thank you!

Susan Abbott Web: www.abbottresearch.com

E-mail: [email protected] Blog: www.arc.typepad.com/customercrossroads Phone: 416-481-7409 or 888-244-0285


mailto:[email protected]

http://www.arc.typepad.com/customercrossroads

http://www.arc.typepad.com/customercrossroads

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Implementing a Segmentation Strategy 1204653860293754 3