Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

Why It May Be Time to Rethink Segmentation

706 views

Published on

As B2B manufacturers become more complex and stakeholders evolve and become more diverse, segmentation becomes more complicated. A segmentation implemented many years ago may no longer be relevant, yet it's too often taken for granted. For myriad reasons, it falls off the corporate strategy radar. As companies’ growth plans become challenged, poor segmentation is likely a key part of the problem. This presentation offers three questions to help business executives better understand if their organizations need to reevaluate their segmentation strategy. It also outlines a unique, four-step methodology to developing a segmentation approach.

Published in: Business
  • Be the first to comment

  • Be the first to like this

Why It May Be Time to Rethink Segmentation

  1. 1. © 2015 Blue Canyon Partners, Inc. All rights reserved. September 2015 Why It May Be Time to Rethink Segmentation
  2. 2. © 2015 Blue Canyon Partners, Inc. All rights reserved. Presenters Axel J. Leichum PRINCIPAL, BLUE CANYON PARTNERS T (847) 967-0253 E ajl@bluecanyonpartners.com 2 Axel Leichum leads numerous business-to-business focused strategy projects that help Blue Canyon’s clients improve their understanding of customer needs, identify and prioritize growth opportunities, effectively segment and target markets, and enhance their major customer relationships  12+ years as a management consultant  Expertise across a wide variety of industries: IT hardware and software, wholesale distribution, electrical equipment, healthcare, personal and commercial vehicles, HVACR equipment, alternative energy, automation, and distributed power equipment among others  Experience executing projects with a focus on both developed markets and emerging markets  Contributed to a number of articles and white papers on topics such as adjacent markets, pricing strategy, and segmentation J. Monte Roach PRESIDENT/CEO AMERICAS, A-GAS T (815) 575-4484 E monte.roach@agas.com Monte spent 25+ years in the Industrial Automation and Electrical products space before moving to CEO of Maysteel, custom sheet metal fabricator, and now A-Gas as President/CEO of its Americas business. His first exposure to segmentation projects occurred with a BCG project while at Rockwell Automation in the early 1990’s. Monte has also held leadership positions with Emerson and Actuant.  A-Gas specializes in the recycling, reclaiming, distributing and destruction of high Global Warming Potential or Ozone Depleting Gases .  Has created market specific product and channel strategies in multiple industries segmented to utilize resources that create the best chance of success  Successfully turned around multiple businesses by engaging the right people, doing the right thing at the right time.
  3. 3. © 2015 Blue Canyon Partners, Inc. All rights reserved.  Why segmentation matters  Is it time to rethink segmentation? Three questions to help provide an answer  An approach to developing robust segmentation  Best practices for effectively implementing segmentation Agenda 3
  4. 4. © 2015 Blue Canyon Partners, Inc. All rights reserved. Why Segmentation Matters 4 Is the foundation of a successful growth strategy…  Opportunities  Where to Target  How to Win Delivers top line and bottom line improvements…  Faster Growth  Higher Margins  Higher Return on Investment  Higher Productivity Effective Segmentation Companies can survive without good segmentation but they rarely thrive
  5. 5. © 2015 Blue Canyon Partners, Inc. All rights reserved. Three questions to help provide an answer… Is it Time to Rethink Segmentation? 5 Is my Segmentation Effective? 1 Am I Segmenting on Customer Needs/ Purchase Behaviors? 2 Does my Segmentation Address Multiple Stakeholders? 3
  6. 6. © 2015 Blue Canyon Partners, Inc. All rights reserved. Three questions to help provide an answer… Is it Time to Rethink Segmentation? 6 Is my Segmentation Effective? Am I Segmenting on Customer Needs/ Purchase Behaviors? Does my Segmentation Address Multiple Stakeholders? 1 2 3
  7. 7. © 2015 Blue Canyon Partners, Inc. All rights reserved. Is My Segmentation Effective? 7 1 Distinct Consistent Identifiable Responsive Enduring Substantial Effective segmentation creates segments that are… Customers across segments behave differently Customers within segments share same key needs/behaviors Readily identifiable, measureable, and reachable Respond differently to difference value propositions Relatively stable in their purchase behaviors/needs over time Big enough to matter now or in the future
  8. 8. © 2015 Blue Canyon Partners, Inc. All rights reserved. Some tell tale signs of ineffective segmentation… 8 Is My Segmentation Effective?1 “We know an efficiency, cost, or accuracy customer when we see them, our sales guys can pick them out after they get to know them.” ‘Sales of our different offerings: Low-Tier, Mid- Tier, High-Tier, and Custom are pretty consistent across our different customer segments.” Responsive Identifiable
  9. 9. © 2015 Blue Canyon Partners, Inc. All rights reserved.  Questions for the room… ▫ How does your organization evaluate segmentation? ▫ Does your segmentation meet all of these criteria? 9 Is My Segmentation Effective?1 Distinct Consistent Identifiable Responsive Enduring Substantial Criteria for Effective Segmentation
  10. 10. © 2015 Blue Canyon Partners, Inc. All rights reserved. Three questions to help provide an answer… Is it Time to Rethink Segmentation? 10 Is my Segmentation Effective? Am I Segmenting on Customer Needs/ Purchase Behaviors? Does my Segmentation Address Multiple Stakeholders? 1 2 3
  11. 11. © 2015 Blue Canyon Partners, Inc. All rights reserved. Am I Segmenting on Customer Needs/Purchase Behaviors? 11 2 Customer Characteristics Customer Type-Based Segmentation Customer Needs and Behaviors Segments defined based on… • Performance • Price • Efficiency • Etc… Assigned… • Industry • Size • Operations • Etc… • Adopter • Non-Adopters • Etc… The traditional way of segmenting in B2B… Example: IT Hardware Access and Control Equipment Provider Segmentation Finance ▫ Large Data Center ▫ Medium Data Center ▫ Small Data Center Government ▫ Large Data Center ▫ Medium Data Center ▫ Small Data Center Retail ▫ Large Data Center ▫ Medium Data Center ▫ Small Data Center Etc…
  12. 12. © 2015 Blue Canyon Partners, Inc. All rights reserved. Am I Segmenting on Customer Needs/Purchase Behaviors? 12 2 Moving to Needs/Purchase Behavior-Based Segmentation… Example: IT Hardware Access and Control Equipment Provider NEW Segmentation Needs/Purchase Behavior-Based Segmentation Customer Needs and Behaviors Segments defined based on… Customer Characteristics Identified by … • Industry • Size • Operations • Etc… • Performance • Price • Efficiency • Etc… • Adopter • Non-Adopters • Etc… New Technology Adopters Cost & Functionality Multi-Tool Users Reliability & Redundancy Alternative Product Advocates Simplicity Core Product Loyalists Compatibility & Ease of Use
  13. 13. © 2015 Blue Canyon Partners, Inc. All rights reserved.  Benefits of Needs/Purchase Behavior-Based Segmentation ▫ Greater clarity on different types of customers in the market ▫ Easier to define value propositions and offerings to effectively serve different customers ▫ Easier to identify who to target given company’s capabilities and strengths ▫ Easier to develop messaging and marketing collateral Am I Segmenting on Customer Needs/Purchase Behaviors? 13 2 “How do we win with Multi-Tool Users” provides much greater clarity to the organization than “how do we win with Medium Sized Finance Data Centers”
  14. 14. © 2015 Blue Canyon Partners, Inc. All rights reserved. Am I Segmenting on Customer Needs/Purchase Behaviors? 14 2  Questions for the room… ▫ How many of your organizations have implemented Needs/Purchase Behavior- Based Segmentation? How has it impacted your organization? ▫ For those of who have not implemented Needs/Purchase Behavior Segmentation, what is the greatest barrier?
  15. 15. © 2015 Blue Canyon Partners, Inc. All rights reserved. Three questions to help provide an answer… Is it Time to Rethink Segmentation 15 Is my Segmentation Effective? Am I Segmenting on Customer Needs/ Purchase Behaviors? Does my Segmentation Address Multiple Stakeholders? 1 2 3
  16. 16. © 2015 Blue Canyon Partners, Inc. All rights reserved. Does my Segmentation Address Multiple Stakeholders? 16 3 “In our proposal we should emphasize the greater quality our technology can provide, focus on features that increase accuracy of testing and reduce human error.” Account Manager, Healthcare Equipment Provider “Reputation as a landmark“Reputation as a landmark hospital is what matter most to this customer. We should concentrate on our R&D capabilities and track record of innovation in introducing new tests.” National Sales Director, Healthcare Equipment Provider Who is right?
  17. 17. © 2015 Blue Canyon Partners, Inc. All rights reserved. Does my Segmentation Address Multiple Stakeholders? 17 3 Growth Fast Growers Efficiency Cost Fighters Recognition Quality Seekers Accuracy Speed Productivity User Needs ManagementNeeds They are both “right!” When there are multiple key stakeholders in a market, your segmentation should reflect the diverse needs of the different parties Intersection of stakeholders’ needs define your needs/purchase behavior- based segments Strategy and value propositions need to be multi-faceted
  18. 18. © 2015 Blue Canyon Partners, Inc. All rights reserved. Does my Segmentation Address Multiple Stakeholders? 18 3 • Stakeholder’s and needs/purchase behaviors will vary across markets • Can be internal within organization or separate organizations CBA 1 2 3 END USER NEEDS CHANNELNEEDS CBA 1 2 3 CONTRACTOR NEEDS OEMNEEDS CBA 1 2 3 OPERATIONS NEEDS BUSINESSNEEDS CBA 1 2 3 USER NEEDS MANAGEMENTNEEDS Examples of Multi-Dimensional Segmentation
  19. 19. © 2015 Blue Canyon Partners, Inc. All rights reserved. Does my Segmentation Address Multiple Stakeholders? 19 3  Questions for the room… ▫ How many of your markets have multiple key stakeholders driving purchase decisions? ▫ How do you incorporate multiple stakeholders in your segmentation? ▫ Do you have distinct value propositions/messaging for different stakeholders?
  20. 20. © 2015 Blue Canyon Partners, Inc. All rights reserved. An Approach to Developing Robust Segmentation 20 Validate in the Market Build New Segmentation Listen to the Customer Take StockInside Outside Outside Inside Internal review Note where segmentation is ineffective Identify potential alternatives In-depth discussions with customers Learn needs and purchase behaviors Test alternative approaches Internally formulate new segmentation Define key elements Perform quantitative validation Finalize segmentation • A third party perspective can often be valuable • Customers’ needs and behaviors are often not readily apparent or directly communicated, requiring a skilled and well thought through approach to fully identify them
  21. 21. © 2015 Blue Canyon Partners, Inc. All rights reserved. Best Practices for Effectively Implementing Segmentation 21 Champion/ Ownership Why do this? This will create work and discomfort in your organization – create the crisis of WHY Without Organizational commitment/ change or alignment it will not succeed Organizational Alignment Communicate and “own” from the top – make it important and the way you do business Long Term Sustainability Change Financial reporting to follow Segments Incentivize based on segments Do the Heavy Lifting of “Change Management” or it will not work long term
  22. 22. © 2015 Blue Canyon Partners, Inc. All rights reserved. Best Practices for Effectively Implementing Segmentation 22  Questions for the room… ▫ How does your organization develop segmentation today? ▫ What are the challenges your organization has in implementing segmentation?
  23. 23. © 2015 Blue Canyon Partners, Inc. All rights reserved.  Effective segmentation is a powerful business driver  Effective segmentation meets certain criteria. Is your segmentation meeting that criteria?  Are you focusing segmentation on needs/purchase behaviors?  Are you considering multiple stakeholders?  Developing a robust segmentation requires an iterative inside- outside approach  Segmentation provides little value if it is not thoroughly implemented. It is not just a one off market research project Why It May Be Time to Rethink Segmentation 23

×