Advice for successful segmentation
Many companies and organisations will use segmentation models – based on either their customer base or the market as a whole. Segmentation is about understanding the diverse attitudes, behaviours and needs of consumers, and tailoring products, services and communications accordingly – on the premise that one solution will not meet the needs of all.
Segmentations often form the bedrock of a customer retention and acquisition strategy. Segmentations are much more than a marketing tool. They should permeate the whole business, and can deliver measurable competitive advantage if used fully and correctly.
In this blog, Bethan Turner raises some of the questions that clients should consider before embarking on a segmentation study.
1. Get the business leaders behind it. Buy in from the top is critical. Involve key people from across the organisation in the planning process. Important with all research but vital for segmentation.
2. Get the wider business behind it. Will everyone be happy to embrace it? Segmentation has to be actionable – and not just informative.
3. Get yourself and others in the team behind it. Prepare to be heavily involved. Segmentation is an iterative process that often explores many different possible solutions. The best way to decide which solution makes the most business sense is to get into a room with those that know the process, the data, and the market and just bash ideas around. Discuss them, debate them, tweak them. And then restart the process.
4. Market or customer segmentation? Understanding the difference is key – the decision should be driven by business strategy and targets. If the focus is on understanding customers then a customer segmentation may be the answer – if the goal is to exploit new opportunities it may be that a market segmentation is required.
5a. Keep the end goal in mind. This ensures the survey design retains focus and avoids interview durations of 30mins plus.
5b. But keep an open mind about what that end goal might look like. You, or others in the business might have some deep rooted ideas of how your segments may look. You might see elements of these ideas peeking through in the final segmentation – you may see some things that surprise you.
6. Ask the right questions. If the research seeks to segment a population based on attitudes and motivations then make sure that the attitudinal questions have a wide enough scope to be able to draw out meaningful and relevant differences. This should be informed by qualitative research.
7. Ensure there is sufficient classification data for profiling. Consider what your colleagues and partner agencies will need data on e.g. media preferences and consumption, shopping behaviour, etc.
8a. Demographic, needs-based, motivations-based or attitudinal? It is useful to discuss up front the factors through which segments could be derived – and exploring the options, advantages, and drawbacks for all.
8b. But once you’ve chosen, stick with it. When conducting needs based or motivation-based segmentations, it is tempting to bring them to life by describing them demographically (their age, lifestage, gender or income). Even if there are statistically significant differences, if a segment has been DERIVED by motivation then DESCRIBE it by its motivation.
9. Clearly define the sample parameters. For example, for a market segmentation, how do you define whether someone is ‘in’ or ‘out’ of the market? Equally, ensure there are robust sub-quotas so that it is representative (or can be weighted to become representative) of the target population.
10. Pick the right methodology. Online interviews, telephone, face to face, or something else? Think about how the context of the survey might impact on answers.
11. Embedding strategy. Before starting, think about how the insights are going to be delivered. Get colleagues involved from the off in helping decide how it should be disseminated – for example, are film summaries needed, or are workshops more appropriate? Set in place plans for ensuring other surveys you undertake can incorporate ‘golden questions’ so you can allocate participants to segments, and plan for matching segments back to the database if you have one.
Bethan Turner is a Research Manager and qualified statistician. She has managed segmentation projects for clients across multiple sectors – including financial services, food & drink, Healthcare & Pharma.
For more information on how segmentation might benefit your business, please call Bethan or Richard on +44(0)161 235 5270.