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Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
Making Customer Segments Matter
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Making Customer Segments Matter

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Few customer segmentation models deliver on their promise. We have all seen those glossy market segmentation studies - pages and pages of detail - sitting on a shelf because the work could not be …

Few customer segmentation models deliver on their promise. We have all seen those glossy market segmentation studies - pages and pages of detail - sitting on a shelf because the work could not be converted into an actionable strategy.

Sound familiar?

As marketing and business intelligence professionals strive to make data more productive, investments in customer segmentation need to work harder and become even more actionable than before.

In our latest webinar, Making Customer Segments Matter, Leslie Wilson, Principal in our Analytics practice discusses:

- 5 critical questions to answer when implementing a customer segmentation scheme
- Leading best practices from our experience completing actionable segmentations with clients
- A detailed case study of one of our most successful programs

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  • 1. Making Customer Segments Matter:Essential and Effective Principles for ProactiveCustomer Base ManagementMarch 20, 2012
  • 2. MarketBridge Overview Deep expertise and experience working closely with Fortune 1000 and emerging growth companies’ senior Marketing and Sales leaders to drive revenue growth by leveraging technology and strengthening empirical discipline. Customers Differentiators • 18 of the top 50 global B2B brands • Exclusive focus on revenue growth via new go- • Global Fortune 1000 corporations and to-market strategies and solutions emerging growth companies • View Marketing & Sales as an integrated • Considered-Purchase Products process • Enterprise, Mid-Market, and SMB Business • Leverage emerging technologies – social, Customers digital, CRM – with traditional Marketing • Executive Leadership team clients – CXO, capabilities and Sales channels Marketing, Sales • Empirical, analytical core competency • Strategy-to-execution-to-resultsSample Clients across Technology, Financial and Business Services, and Healthcare –2– ©2012 MarketBridge Corp.
  • 3. Today’s Discussion Topics Context and Challenge Five Critical Questions in the Segmentation Process Case Study: Small Business Segmentation for a Business Services & Supplies Company –3– ©2012 MarketBridge Corp.
  • 4. What’s the Challenge? • As the marketplace develops, customer needs are becoming more specific andChallenge 1 fragmented • The gaps between the value of various customer segments is widening as theChallenge 2 market becomes more polarized • The growth of new distribution channels and marketing vehicles is making itChallenge 3 easier for all companies to engage customers with more targeted approaches • The availability of company-wide sales and marketing resources continues toChallenge 4 diminishProactive Customer Base Management throughSegmentation is More Important Now than Ever –4– ©2012 MarketBridge Corp.
  • 5. Where Does One Start?Five Critical Questions in the Segmentation Process: Undifferentiated Customer Base1. What customer characteristics should we use to profile the market segments?2. What approach should we take to ensure that the segments accurately represent the market but are also actionable?3. What criteria should we use to prioritize segments and select targets? Segmentation Process4. How can we ensure that the segmentation is operational and can be deployed in our marketing activities?5. How do we „land‟ the segmentation within the organization and ensure that it gains traction? –5– ©2012 MarketBridge Corp.
  • 6. Question 1: What customer characteristics should we use? Firmographics / Demographics Buying Behavior Attitudes / Preferences• Descriptive information about • ‘Hard’ data on purchase • ‘Soft’ data on preferred customers such as company history for specific products product / service features, size, industry or about the and services, average channel preferences and decision-makers themselves, expenditures, frequency of attitudes or opinions that including job role, breadth of purchase, and other influence the purchase responsibility, etc. behavioral factors process In our experience, most successful Who? segmentations incorporate a range of What? descriptive, behavioral, and psychographic Where? dimensions When? Why? Divergent forms of information provide insight into who is buying, what they’re buying, where and when they are buying, and perhaps most importantly, why they are buying –6– ©2012 MarketBridge Corp.
  • 7. Question 1: What customer characteristics should we use?(continued)Finding the Right Data Sources: Prospect Your company database may not Database Customer Database be adequate if using the segmentation to guide entry into Company Databases Syndicated Data Primary Market Research new markets or to market new • Firmographic & • Firmographic & • Psychographic products/ services behavioral data data behavioral data Benefits • Known data quality • Augments depth & • Highly customized Syndicated data can be used to • High granularity breadth • Very granular augment existing customer records, • Covers current • Covers prospects • Covers entire but still fall short in terms of customers market accuracy, coverage and granularity • Lacks needs & • Limited • Expensive & preference data psychographic data time-consuming Custom market research is highly • Current customers in B2B • Self-report data is Limitations flexible but you must be willing to only • Poor accuracy subjective • Lacks competitor • Aggregated data • May not provide make the investment of time and data precludes accurate accurate data on money • Lacks data for new assessment at past/future product/ service customer level behavior The best approach leverages all offerings three data sources • Incomplete or poor quality data –7– ©2012 MarketBridge Corp.
  • 8. Question 2: What approach should we take to ensure thecustomer segments accurately represent the market?Business Experience Expert Knowledge Top-Down vs. Bottom-Up Approaches: Some companies take a “top-down” approach and define segments based on business experience and expert knowledge of the marketplace If a “hypothesized” segmentation is not validated with empirical data and analysis, the framework may be inaccurate or misguided and the effort will ultimately fail Other companies take a “bottom-up” approach and derive segments through analysis of available data If a purely “empirical” segmentation is not informed by Customer Data & business experience and vetted with expert stakeholders, the Empirical Analysis framework may not be insightful or actionable –8– ©2012 MarketBridge Corp.
  • 9. Question 2: What approach should we take to ensure the customer segments accurately represent the market? (continued) Top-Down vs. Bottom-Up Approaches: Business Experience In our experience, it is optimal to use a combined approach to Expert Knowledge identify and quantify market segments Start by conducting in-depth interviews with front-line business Customer Data & people to leverage their expertise and experience – use these Empirical Analysis hypotheses to guide customer research Research Sample Conduct primary research with customers and prospects toBehavioralDa ta + Survey Data get a first hand assessment of their needs and preferences Test expert hypotheses with the customer research, but also use statistical techniques (e.g., “cluster analysis”) to explore the possibility of unanticipated market segments Refine derived segmentation through qualitative customer research and vet all findings with customer-facing business stakeholders –9– ©2012 MarketBridge Corp.
  • 10. Question 3: What criteria should we use to prioritize segmentsand select targets?To determine which segments to pursue in their marketingprograms, successful companies consider: Segment Size & Opportunity – How large is the segment? What financial opportunity does it provide given the segments’ needs and anticipated buying behaviors?o „Fit‟ with Brand & Value Proposition – Do the needs and preferences of the segment provide a good match to what you can offer them? Will the segment be receptive to your value proposition? Will they really buy from you? Engagement Strategy & Delivery – What is required to reach the segment and appeal to their needs? Is your organization able to deliver it? Competitor Positions – Understand competitor positions, market shares, and marketing strategies. Do you want to face the competition head-on or carve out your own niche?In short, don’t just target the obvious segments with the greatestfinancial appeal. Carefully weigh all considerations and develop abalanced approach to selecting targets. – 10 – ©2012 MarketBridge Corp.
  • 11. Question 4: How can we ensure that the segmentation isoperational? One of the greatest challenges of deploying a segmentation framework is ensuring that customers can be assigned to a segment at the database level. Accurate database assignment can be achieved through a combination of methods: Predictive models can be developed to assign customers into segments based on available descriptive and behavioral data Short lists of critical classification questions can be given to customers at key touch-points, such as sales or service calls Assignment Modeling Touch-Point Questions Customer Database Segment Assignment Scores Refinement Validation – 11 – ©2012 MarketBridge Corp.
  • 12. Question 5: How do we ‘land’ the segmentation within theorganization?Based on our experience, we recommend clients do the following: Be Inclusive – Get buy-in from all key stakeholders Be Realistic – Ensure that you have the ability to implement the segmentation at the operational level Be Prepared – Have a solid change management plan and build formal mechanisms within planning, measurement, and performance-management processes to manage customer segments effectively Be Patient – Rolling out the segmentation takes time, set expectations accordingly Start Small – Execute pilot campaigns before full deployment Be Flexible – Modify the segmentation and/or targeting strategy if necessary – update to stay abreast of market changes Be Accountable – Create accountability for segment-specific results and empower segment "owners" with the authority to make key decisions – 12 – ©2012 MarketBridge Corp.
  • 13. Case Study | Small-Business Segmentation for a North American Business Services and Supplies CompanyBusiness Profile ChallengesThis large business services Client was experiencing declining revenuescompany provides various due to digital product substitution. Thepersonalized products and company needed to reignite revenue growthservices to small businesses, through product line expansion and/ orfinancial institutions, and acquisitions, in addition to creating a broaderconsumers. product portfolio to keep customers and channels engaged and profitable. TheIndustry company needed to understand the “right”Business Services SMB segmentation to ID both product needs and target marketing and sales activities. Client Approach Develop a growth re-ignition program through small business segmentation and value strategy. – 13 – ©2012 MarketBridge Corp.
  • 14. Case Study | Small-Business Segmentation for a North American Business Services and Supplies CompanyMarketBridge Solution Leveraged secondary research, customer databases, and in- depth stakeholder interviews to develop an initial “straw man” segmentation Segmentation Model Evaluated and refined the segmentation model thru primary market research with over 1500 small businesses, assessing small business dynamics, attitudes, buying behaviors and channel preferences Assignment Modeling Identified priority segments based on size, revenue opportunity and alignment of customer needs with client service offerings Deployed segmentation across client databases, applying Customer Database advanced predictive modeling to assign customers and prospects to their most probable segments Campaign Execution Developed integrated marketing strategies for targeting high- priority segments with optimal product and service offers Direct Mail Inbound Tele Email – 14 – ©2012 MarketBridge Corp.
  • 15. Case Study | Small-Business Segmentation for a North AmericanBusiness Services and Supplies CompanyBusiness Impact Created a unified, cross-portfolio market segmentation strategy and execution plan with estimated $5-8% annual revenue lift Identified specific product/service market “gaps” to be filled through line extensions Launched programs to validate and refine segmentation model in-market Developed ongoing management system & readiness plan to facilitate roll-out of the segmentation throughout the organization – 15 – ©2012 MarketBridge Corp.
  • 16. Thank YouLeslie WilsonPrincipal, Analytics415-577-6313lwilson@market-bridge.comLearn more:Web: http://www.market-bridge.com/en/reporting-and-analytics/Twitter: www.twitter.com/marketbridge – 16 – ©2012 MarketBridge Corp.

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