market Segmentation

McKinsey & Co. conducts a bi-annual survey among top CEOs to determine which strategic management tools they plan to use over the next two years. Segmentation research is always one of the most powerful and frequently mentioned tools. Unfortunately, history makes clear that roughly 70% of segmentation initiatives fail to deliver on management expectations. More often than not the cause of failure is not that the research was done incorrectly, but rather that the segmentation was too narrowly focused on new product development, targeting of alternative promotions or identification of new customer and prospect groups. But when the time came for implementing the segmentation the sales force was not aware of the new company targets, or the fulfillment group was not aware that a new incentive program was coming online, or that customer service was uncertain how to respond to callers questions, and so forth.


Market segmentation is not just a marketing strategy but an enterprise wide business strategy that affects every touch-point that a company has with its customers and prospects. Our first recommendation to a client when asked to conduct segmentation research is to assign a cross-functional team including marketing, CRM, finance, customer service, sales, manufacturing, advertising, etc. to ensure that each functional group

  • Understands the objectives of the segmentation
  • Gives voice to the information that would benefit each group
  • Identifies alternative ways in which each group might develop and implement targeted programs
  • Buys-in to the segmentation strategy


We never nor do we allow clients to start discussions on any segmentation initiative with any a-priori segmentation solution in mind. The type of segmentation must be consistent with the company’s business strategy and objectives. ResearchLink Partners has significant experience in the various forms of segmentation including:











 



Some key deliverables clients should expect from segmentation research are:

  • The percent of the total population each segment represents
  • The financial value of each segment
  • The homogeneous characteristics of each segment which differentiates it from the other segments
  • How to reach each segment through media (traditional and new), direct selling efforts, promotions, etc.
  • The perception each segment has of your brand and competitive brands
  • What motivates each segment to purchase
  • Your brand and competitive brands penetration by segment
  • A general structure of the market
  1. Size of the total market (customers and financial value)
  2. Brand map of the market indicating which space each brand occupies and where open opportunities exist
  3. How buyer segments align on the brand map (which brands are most aligned with which segments)
  4. Where brand vulnerabilities exist



Matching Strategies to Customer Need

Regardless of which form a segmentation is selected, it is extremely important to match segmentation to Customer Needs.


















The Many Benefits of Segmentation

  • A way to specifically identify those who most need your product or service
  • A strategy for allocating available resources to achieve maximum ROI
  • A yardstick against which to measure progress
  • A way to assign customers and prospect on the company database to each segment
  • A way to prospect for the right new customer acquisitions
  • A way to begin to understand customer loyalty and at-risk customers