Segmentation, Value proposition & Go-to-market approach

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On Friday 22 November 2013 in Stockholm, Implement Consulting Group once again invited the members of the Commercial Excellence Forum to an event of inspiration and discussion with peers. …

On Friday 22 November 2013 in Stockholm, Implement Consulting Group once again invited the members of the Commercial Excellence Forum to an event of inspiration and discussion with peers.

This time focus was on segmentation – and how segmentation and a better understanding of customer needs and behaviour is a foundation for a more clear differentiation and effective sales approach.

Sebastien Leichtnam talked about his experience in managing sales development within Tetra Pak Technical Service and explained how Tetra Pak has grown their business through the development of segment-specific offerings and services. Tetra Pak has developed a customer segmentation model which is built on customers’ operational maturity as well as their willingness to outsource.

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  • 1. ComEx Segmentation, Value Proposition & go-to-market approach The core elements of a company business model 2013 – Commercial Excellence Forum
  • 2. Agenda Friday, 22nd November 2013 09:00 - 09:05 Welcome and introduction 09:05 - 09:20 Strategic market segmentation as the platform for differentiation 09:20 - 10:00 Case: Tetra Pak’s customer segmentation model - Keynote speaker Sebastien Leichtnam, Tetra Pak 10:00 - 10:15 Inspired by the case : How do you ensure an effective use of customer segmentation? 10:15 - 10:30 Short break and networking 10:30 - 11:30 Segmentation as a tool for prioritization – Exercise in groups 11:30 - 11:45 Summing up the ComEx Forum event 11:45 - 12.30 Networking and refreshments 2
  • 3. Commercial Excellence Forum – Events in Stockholm 2013/2014 Facts about Implement Consulting Group Planned events in Stockholm • Established in 1996 • 22nd of November 2013 Segmentation – a strong foundation for improved differentiation • 400 employees, more than 370 consultants • Helps clients in Scandinavia, both private and public, from our offices in Copenhagen, Stockholm and Oslo • 21st of February 2014 • Value proposition – how to increase competitiveness • Leading consultant company in Scandinavia within business transformation • 30th of May 2014 From customer insights to business growth • 20% CAGR since 1996 • More events during Fall 2014 to follow • Turnover +700 million SEK 2012/2013 3
  • 4. Most companies have ambitious growth targets - combined with and increasing complexity in their business model Geography Areas of use • Processing • Residential • Denmark • Northern Europe • Southern Europe Customer size • Large • Medium • Small Products/solutions Sector of use • Solutions – Family houses – Office buildings • Service – Interior design Channels • Retail • Production • • • • • 4 B2B B2C Direct Specifiers Entrepreneurs 4 Service offering Competencies • • • • R&D Procurement Production Sales • Products • Solutions
  • 5. We need to look at the situation from different perspectives… 5 5
  • 6. …but at the same time make sure that we have a common focus 6 6
  • 7. The agenda for the day 1 Market- and Customer Segmentation (CS) 2 Value Proposition (VP) 3 Go-to-Market approach CASE + 7
  • 8. Successful companies have a business model focusing on delivering superior value to selected customers in the most effective way Value proposition Go-to-market approach Segmentation 3. Customer Relationship (CR) Target communication and relation building to chosen focus segments and customers VP 2. Value Proposition (VP) Definition of our unique and defensible differentiators and potential value creation for our segments and customers CS 1. (Market)/Customer Segments (CS) Identify and prioritise relevant market and customer segments and determine needs and offerings CR CH 4. Channels (CH) Efficient delivery of value to chosen focus customers? 8
  • 9. Market- and Customer segmentation should help target the right customers, but it does not always bring the indented value Why Segmentation Common Obstacles • Companies try to use one segmentation model for all purposes Market- and Customer Segments defines a number of different groups of people or organizations, which a company aims to reach and serve • Companies have multiple segmentation models without a clear and consistent link • Companies base the model on data at hand rather than what is necessary to make the insight relevant The intent is to create the foundation for…: • … a relevant value proposition ‒ With products matching customers needs ‒ With adjusting pricing and discount schemes ‒ With service offerings attracting and keeping the relevant customers loyal • • The management is not aligned on what drives and what describes the market • Companies are letting the complexity of a few key clients interfere with a simple market view • The purpose of the segmentation is "lost in translation" when executed on an operational level … an adjust the go-to-market approach in order to: ‒ Utilize the best use of a multichannel approach ‒ Optimize sales efforts across the full customer journey ‒ Align marketing and messaging toward our target customers 10
  • 10. Segmentation has three distinct purposes which needs to be addressed individually but understood coherent within each brand 3 segmentation levels Main questions • Strategic market segmentation Purpose What are we selling and to whom? • Where to grow? • 1. Understand the market landscape of our business 2. Evaluate where we are doing business 3. Identify & prioritize attractive market segments Who is our primary market segments? Tactical customer segmentation Operational customer classification 11
  • 11. The strategic market segmentation will help our clients define who their target segments are thereby where to grow… Game board Prioritisation matrix “How do prioritise our resources?” Operational High Market attractiveness ROI What are we selling? Tactical Strategic “What are we selling to whom?” Med Low To whom or where? Low Med Competitive position 12 High
  • 12. Case: Service Segmentation Sébastien Leichtnam Service Sales Development PBH/2012-10-12
  • 13. Based on numerous projects, ICG has distilled 7 ”key learning” which are critical in developing and implementing a successful segmentation Key Learning's Top management attention is instrumental – take part in the process, take interest in the opportunities by demonstrating passion for winning Focus on describing the strategy for each segment including targets, value proposition, channels, resources, activities etc – and thereby what we need to do differently across segments. Strong focus and measurement of the change in behaviour as well as the business impact is critical to ensure both focus and motivation 1. Make it top management relevant 7. Focus on segment strategies and consequence s 7 key learnings from segmentation projects 6. Measure impact and change on segment level – from day 1 Start using the segmentation model as soon as you have a valid draft in order to start changing behaviour 2. Let commercial management drive 5. Roll-out before you are ready 3. Involve early and broad 4. Keep it simple and operational 14 Sales and Marketing managers are key in making a useful segmentation model - hence, they need to front the process and be active in developing the model Input to the structure and content should be developed as co-creation with both Sales and Marketing as from both corporate and subsidiaries to ensure highest level of innovation power as well as full buy-in Not all issues can be solved by segmentation., To ensure impact the purpose needs to be clear and it needs to be operational useful for both Sales & Marketing
  • 14. Customer segmentation ensures insight about your target customers and how to differentiate within the prioritized market segments 3 segmentation levels Strategic market segmentation Tactical customer segmentation Main questions Purpose • Where to grow? • Who is our primary market segments? • What are the needs of our primary segments • What to offer our target segments? 1. Understand the market landscape of our business 2. Evaluate where we are doing business 3. Identify & prioritize attractive market segments 15 1. What are the needs and drivers for our customers? 2. What are the characteristics of the valuable segments? 3. What are the criteria they make their purchases by? 4. What are their average basket and yearly spend?
  • 15. Insight in customer needs makes it possible for us to identify the right actions and target the execution Tactical segmentation levels Define Actions Needs… • Needs are the customer’s motivation to buy any product or service • Needs based segmentation set the direction of any business development Needs Behaviour $ Behaviour… • Behaviour like buying frequency and size of receipt help us understand the market dynamics and how far we have come Demographics Target Execution Demographics… • Demographics and socio demographics help us describe the target group(s) in general terms Actionable 16
  • 16. There are many customer segmentation methodologies – but we work with four key methodologies Operational End High Line of balance Need based Potential value creation Tactical Strategic Tactical segmentation levels The optimal segmentation level and method strikes a balance between: • Customer insight How much resources do we need in order to get customer insight? Behavioural Start Start • Potential value creation How is our ability and prerequisites for using the customer insight strategically? Value based • Understand needs as the basis for demographics, value and behaviour Demographic End Low Low High Customer insight 17
  • 17. There are many customer segmentation methodologies – but we work with four key methodologies Tactical segmentation Need based segmentation Tactical Behavioural segmentation Value based segmentation Criteria • What are the customers perceived and unknown needs across the customer journey Awareness & Evaluation Usage & rebuy Before • How does the customer act across the customer journey Consideratio n & purchase During After • Turnover • Margins • Loyalty • Age Demographic segmentation • Income • Revenue • Gender • Education • Employees • Sector of business B2B • Geography • Life stage B2C 18
  • 18. Customer insight is the driver for both customer segmentation and building your value proposition Customer buying criteria Value Proposition mapping on needs Strategic Prerequisites - Qualifiers Assortment Delivery Focus drivers & Differentiators • Understand the needs (Key Purchase Criteria’s – KPCs) • Align with Customer Promise (Input to the Cust Value Proposition CVP) Potential gaps in customer promises Importance Coverage Tactical Styles Branding CP1 CP2 CP3 CP5 Determinator Indifferent customer promises Price Operational CP4 Qualifiers Focus & Diff Non competitive Customer drivers (needs) Determinators Customer Promise 19
  • 19. Bringing knowledge from the strategic segmentation about who your target customers are next step is to identify needs and prioritize 3 segmentation levels Main questions Purpose Tactical customer segmentation Operational customer segmentation • Where to grow? • Who is our primary market segments? • Strategic market segmentation How to differentiate within the prioritized market segments? • What to offer our customer segments? • 1. Understand the market landscape of our business 2. Evaluate where we are doing business 3. Identify & prioritize attractive market segments 1. What are the attractive customer segments within the prioritized market segments? 2. What are the characteristics of the valuable segments? 3. What are the criteria they make their purchases by? 1. Which customers are most attractive to our business model? 2. What are the size/value of our customer segments 3. How do we service our different customers? 4. How do we differentiate our products and services Who to call & who to visit? 20
  • 20. Within the prioritized market segments the operational segmentation should help our client prioritize… Operational segmentation Strategic 100 100 20 Operational Tactical 80 • What is Red and what is Grey? • And what does it mean to our clients? 80 20 21
  • 21. The operational segmentation help prioritization of time and resources and understand what to offer to who at what price/discount level Time and value Strategic 100 100 20 Operational Tactical 80 • So how to understand where to use their time and resources? 80 20 Time Value 22
  • 22. What are the relevant element in order to prioritize and understand where to use their time and resources? Exercise # 1 Directions: • In the segmentation tool please consider what could be relevant elements in prioritizing target customers • One note for each criteria • Write a card for the different dimensions you find relevant to prioritize and add to the segmentation tool. 23
  • 23. The operational segmentation help prioritization of time and resources and understand what to offer to who at what price/discount level Time and value Strategic 100 Classification model 100 Customer Profitability Customer Loyalty 20 Bronze A Silver Gold A B C Tactical 80 A B B 80 C A Operational C 20 C Time B Black (Standard) Value 24 C B A Customer Value
  • 24. Tool for creating an overview of customer segments Tool for mapping Customer Segments and Customer Relations V. New criteria IV. Brand Loyalty III. Potential II. Revenue Customer I. Type of customer Segmentation criteria’s Operational consequences and next question 1 Customer rating TOS 12 Business Partner TOS 23 Key Account TOS 34 Gold TOS 45 - What does it require to succeed? Silver 25
  • 25. The agenda for the day 1 Market- and Customer Segmentation (CS) 2 Value Proposition (VP) 3 Go-to-Market approach CASE + 26
  • 26. Value Proposition A Value Propositions describes the bundle of products and services that create value for a specific Customer Segment CH VP CS CR 27
  • 27. The Value Proposition is about bundling the products and services that create value for a specific Customer Segment Value Proposition Rationale • • CH VP The Value Proposition is the reason why customers turn to one company over another. The Value Proposition solves a customer problem or satisfies a customer need. • Each Value Proposition consists of a selected bundle of products and/or services that caters to the requirements of a specific Customer Segment. CS CR Create Value Proposition • Bring together the bundle of benefits that a company offers its customers Benchmark Value Proposition: • Understand competitors main strengths in relation to VP • Understand own differentiations towards customer & consumers 28
  • 28. The foundation for organic growth, is a strong value differentiation which is perceived valuable by the customers The components of strong Value Differentiation ... Valuable “I want” & “I need” + Differentiated “No alternatives are as good” + Substantiated “I trust” & “I believe” …which creates the foundation for ... • • • • • ...is the basis for closing the value perception gap… SELLER Value Proposition DECISION TO SELL Value perception gap CUSTOMER Value Perception DECISION TO BUY 29 Premium pricing Lead generation success Loyalty Sales growth Market Share Growth
  • 29. Unique and defensible differentiators can be identified at different levels … Effect & impact Defensible differentiators Potential Effect High ROI Key defensible differentiators Game changers Value to the customer (fulfil needs) New offerings & services Existing offerings & services Low Change impact Low 30 Uniqueness (differentiate) High
  • 30. How well are you connected to your customers? How loyal are your customers? 31 31
  • 31. How well are you connected to your customers? 32 32
  • 32. You get loyal behaviour, when you deliver better than your competitors on the customers most important needs… ”Loyal behaviour is the consequence of meeting the customer’s needs. Loyalty and satisfaction are both symptoms – not the cause” 33
  • 33. The value curve can be used to design the customer experience Finding the Consumer value Curve … BY REDUCING COST ON BASIC NEEDS INCREASE VALUE ON CORE NEEDS High Customer rating of performance on needs IF RELEVANT INCREASE VALUE ON LESS IMPORTANT NEEDS Low Most important Less important Customer ranking of needs 34
  • 34. Customer insight is the driver for both customer segmentation and building your value proposition Company and competitor performance 1. Understand needs (drivers of the customer purchase) 1. How does this match 2. Understand the market performance (Need fulfilment) 2. Understand the market performance (Need fulfilment) 3. Understand own (company performance) and competitors 3. Understand own (company performance) and competitors Importance Qualifiers Focus & Diff Not fulfilled Customer drivers (needs) Company ranking Fulfilled Non competitive Competitor A 35
  • 35. Tool for creating an overview of customer requirements Tool for mapping Customer Segments and Customer Relations Customer requirement D E F G H via web-shop Sell-out C Sell-in B Sell-out x x x x x x x x (x) x x x x x x x x x x x x x x x x x x B C D E Customer rating TOS 12 Business Partner x x x x x TOS 23 Key Account x x x x TOS 34 Gold x x x TOS 45 Silver x x 36 F 1 A V. New criteria IV. Brand Loyalty III. Potential Company requirement 2 A 2 Sell-in II. Revenue Customer I. Type of customer Segmentation criteria’s (x) (x) x
  • 36. What is the relevant VP? Exercise #2 Directions: • On the segmentation tool, please identify the relevant Value Proposition for your customers • Write a post-it for each relevant element within 1. Customer requirements and 2. Company requirements 37
  • 37. The agenda for the day 1 Market- and Customer Segmentation (CS) 2 Value Proposition (VP) 3 Go-to-Market approach CASE + 38
  • 38. Go-to-market approach The Go-To-Market strategy is the mechanism to deliver your unique value proposition to the target customer segments – It is a component of HOW the firm will make it happen. Customer Relationships describes the interactions a company establishes with specific Customer Segments in order to deliver the Value Proposition Value propositions are delivered to customers through communication, distribution and sales channels. CH VP CH CS VP CS CR CR 39
  • 39. Customer relationship are linked to the segmentation in order to understand the cost and integration with the business model… Tool for mapping Customer Segments and Customer Relations TOS 23 Key Account x x x x TOS 34 Gold x x x x TOS 45 Silver (x) x x TOS 56 Bronze x x 42 F. Co-creation D. Automated service x Customer rating E. Self-service C. Community x V. New criteria x IV. Brand loyalty x III. Potential Business Partner II. Revenue TOS 12 Customer I. Type of customer B. Team assistance Customer relations A. KAM Segmentation criteria’s Aligning the interaction model with the customer segments in order to create as much value as much, while still making sure that this is profitable
  • 40. … and must be aligned with value proposition and channels in order to create the customers go-to-market strategy Tool for mapping Customer Segments and Customer Relations 3 + Customer requirement Sell-in C D E F G H via web-shop Sell-out B Sell-out x x x x x x x x (x) x x x x x x x x x x x x x x x x x x x x x x B C D E Customer rating TOS 12 Business Partner x x x x x TOS 23 Key Account x x x x TOS 34 Gold x x x TOS 45 Silver x x TOS 56 Bronze x 43 F 1 A V. New criteria IV. Brand Loyalty III. Potential Company requirement 2 A 2 Sell-in II. Revenue Customer I. Type of customer Segmentation criteria’s Go-to-market approach 4 (x) (x) x x
  • 41. Challenges can lead to success or failure Success seems to be connected with action. Successful people keep moving. They make mistakes, but they don't quit. Konrad Hilton (Founder of Hilton hotel chain) 44
  • 42. Contacting Implement Consulting Group Learn more about Commercial Excellence Forum Go to Implement Consulting Group's main website