How to segment for marketing success

All brands and services need a group of customers that they are going to satisfy, since it is impossible to appeal to everyone most of the time. This means that you will need to make a choice about who you are going to target, which also implies that you must accept that you will also ignore some other category users.

This is not an easy thing to accept, but is essential for successful marketing. It may even sound counter-intuitive, but segmentation is the only way to ensure you have the best possible chance of satisfying the needs of your target audience. 

 

Where to start

When deciding who to target, most companies will start by conducting some sort of analysis. This could be as simple as identifying your users by what you observe, such as young men or large families, or as complex as looking to appeal to those who value freedom and are looking for brands that can provide or suggest this dream, which would come from a values and motivational segmentation. As mentioned last week in the post entitled “Are you targeting the right customers?“, the deeper the understanding of your target customer is, the more likely it is to provide you with a competitive advantage.

 

The MIDAS touch

Whatever method you use for segmenting and choosing your target customers, the results of your exercise of customer grouping needs to meet the following five conditions, known collectively as the MIDAS touch:

• Measurable: The individual groups need to be clearly defined and quantifiable using KPI’s such as size, market share, value share
• Identifiable: Each segment must have a distinct profile and each customer must be attributed to only one segment
• Definable: Every cluster must be easy to describe and share with others, so that you have mutual understanding of each of them
• Actionable: The groups must be easy to identify, in order to be able to target your actions and communications to them
• Substantial: The chosen segment must be financially viable to target, which means that it should in general be stable or growing, and durable over the long term

All good segmentations or clusterings will fulfil these five key conditions, so it is easy for you to evaluate the segmentation you are currently using to see if it is valid and robust enough. If it does not meet these conditions, then you will struggle to activate it and target your actions to your chosen group of customers.

Since understanding your target as completely as possible is vital to the success of the business, I would suggest you review your own segmentation and decide how it can be improved. This may mean simply completing the information you have on each group, or may mean having to run a whole new segmentation exercise. However, it is definitely worth getting your segmentation and target customer choice right, as this forms the foundation for your brands’ customer centricity.

 

A solution if you don’t have the resources for this

If you do not have the time, money, or expertise to run a detailed segmentation study, you can still make an informed decision based on simple criteria, and then using an analysis similar to the Boston Matrix, first developed in the 70′s by the Boston Consulting Group. At the time it was created to help corporations analyse their business units and was based on market growth and relative market share. Today this scatter plot is used with various elements combined to make up the two axes. Whilst the criteria you use for each axis can vary, this simple method has the advantage of being able to be completed over time, as you get more information. Examples of the criteria that can be used are:

• Attractiveness: Segment size, segment growth, segment value, competitive environment, fit to the company or brand
• Ability to win: Product attractiveness to your customer, your distribution channels, your media mix, your reputation

Once you have positioned the different segments or groups of customers on the axes, you can easily see what needs to be done for each:

1. Maintain: these are your core users as they are both attractive to the business and easy for the company’s product or service to attract them, so they need to be protected from competitors’ attacks
2. Convert: these users can be attracted to your product or service but your ability to win them is currently low; you probably need to consider improving one of the elements of the mix to attract them
3. Grow: your product or service can easily win these groups but perhaps they are not as profitable as you would like; review them from time-to-time or develop a different strategy to attract them
4. Ignore: many organisations struggle to make the decision NOT to go after a group of category users, but if you have neither the product / service nor the segment size that would be profitable to you, why spend time, money and energy going after them?

Choosing the right group of customers to satisfy with your product or service is essential for business success, as is doing everything you can to understand them as deeply as possible. Truly customer centric organisations excel at doing this; do you? Why not share your own succcess story on segmentation?

If you would like to  know more about targeting, check out our website: http://www.c3centricity.com/c3c-solution/customer/target/choose/

Need help in segmenting your current category customers or defining which group to target? Let us help catalyze your customer centricity; contact us here

This post is an adaptation of one that was publised on C3Centricity Dimensions on December 8th 2011