2. 2
“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
“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
3. 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
3
Profitability
Typical decile chart – each is 1/10th
of the total customer base
4. 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
4
5. 5
“No matter what claims are made for a method’s theoretical
validity and statistical sophistication, if it can’t be shown that
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
“No matter what claims are made for a method’s theoretical
validity and statistical sophistication, if it can’t be shown that
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
6. 5
“No matter what claims are made for a method’s theoretical
validity and statistical sophistication, if it can’t be shown that
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
“No matter what claims are made for a method’s theoretical
validity and statistical sophistication, if it can’t be shown that
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
Editor's Notes
Tell story of brown socks…
Doesn’t tell you anything about customer needs or behaviors, or how to build loyalty
Customers much more mobile between deciles than originally thought
Product features, distribution expenses and expense allocation models have a big impact on analysis
While still often believed to be true, not generally seen as useful or helpful from either a strategic or a tactical level as the primary segmentation method
New mantra – “all customers profitable”
Loyalty segments appear to be a much better option
Be cautious about adopting a model that doesn’t directly connect to your product or service.
This model is very broad.
Yes, it can probably help. But the success stories claimed here almost certainly had a lot more research to clearly identify the benefits and how to position the product, the service, the communication.
Another example: In every market, there are value conscious segments, and customers who are less price conscious. You still need to know more about what you can add and what you can take away that will make a difference to results. You can’t just focus on price.
Guess what these guys do for a living? Anybody know them – they both live in Toronto.
This is from Chuck Chakrapani and Ken Deal, authors of the definitive textbook on Market Research in Canada. Both skilled statisticians.