Precision in Practice: The Art of Optimizing Market Segmentation
Segmentation studies are a large investment, which makes it critical to ensure that your organization will utilize the results to their fullest to justify the ROI. Here are several actions you can take to use your segmentation results:
1. Develop & Implement A Bridging Model
This process will apply the segmentation solution to your database to classify your customers (or even prospects) into one of the new segments. Once applied, you will have an overall picture of where your current customers over- and under-index on the segments and can identify where opportunities for greater penetration exist. You may also wish to take a look at how your current customers differ from your total addressable market to understand gaps, such as whether the customer base is younger or older.
Importantly, segment assignment allows you to identify which of your current customers fall into your target segments and which are of lower priority to your business. In turn, you know where and how to focus your direct marketing efforts to maximize ROI.
In addition, segmentation assignment can help with customer service and retention strategy. Knowing a customer’s segment can guide how your organization treats them. With the knowledge of customers’ key motivation factors, you can keep them satisfied and retain them.
This information can help your organization create a dashboard to monitor KPIs and shifts in segments over time.
2. Conduct An Activation Workshop
An activation workshop allows you to bring internal stakeholders or department leaders together to socialize the learnings and bring the segments to life across the organization. The workshop is similar to an innovation session, with guided, moderated creative exercises used to brainstorm about the segments.
If not already done, one goal of the session might be to select target segments. Typically, an organization will focus their efforts and strategy on 2-3 key segments—the segments that best represent their current customer base or the segments that will benefit the most from their future strategy. This activity will help team members evaluate the segments on attractiveness and ability to win and generate reasons for or against targeting the segments.
After target segments are identified, a common goal of these sessions is to determine a strategic action plan. The activities will focus the team on developing or modifying how the organization will appeal to the key segments with messaging, marketing, products, and services. The goal is for each stakeholder to leave with next steps of how to focus efforts to appeal to the key segments from the perspective of their role in the organization.
3. Craft Training For Employees:
Not only is an activation workshop important for your leading stakeholders to buy into, but implementing the use of the segment information throughout the organization is also critical. As referenced above, segmentation can help guide your customer service efforts. A better understanding of the needs and motivations of your target segments can help develop standards for how to approach them both during a sales process and ongoing customer service. Training manuals or sales techniques should be modified to appeal to key segments and disseminated to sales and customer service associates.
For example, if these segments are ‘quiet shoppers,’ training manuals should be altered to advise sales associates to approach shoppers less frequently. However, if your key segments are ‘information shoppers,’ advise sales associates to carry product information sheets or QR codes that display additional information available on the product to ensure the shopper has what they need to make an informed shopping decision.
4. Utilize A Typing Tool In Other Research:
In both qualitative and quantitative research, a typing tool can be used to classify future respondents into your segments. When your organization wishes to test new messaging, packaging, or develop new products, the typing tool can be programmed directly into the survey instrument to classify all respondents into your segment groups. This allows you to not only have the general reaction of respondents to your new messaging, packaging, or products, but it also allows you to analyze reactions by segment to ensure you are appealing to (or at least not alienating) your target segments.
For example, if you wish to test two new snack food package designs, the typing tool will allow you to analyze research results by segment group. If one package is significantly more likely to increase the purchase intent among your key segments, you can now easily identify the winning package.
Changes to your organization over the years may also change how segments look over time. If the segment size has changed, if there are mergers or acquisitions of your organization or industry, if buyers change the way they shop, or if the segmentation has been conducted more than 5 years ago—it is time for new segmentation models to be developed. In addition, it would be time to re-educate your team and likely some new team members as well about the segments.
Date: August 12, 2023
Authors: Ellen Williams and Stephanie Trevino
Source: Decision Analyst