making customer segments matter

Making Customer Segments Matter:

Essential and Effective Principles for Proactive

Customer Base Management

March 20, 2012

©2012 MarketBridge Corp. – 2 –

MarketBridge Overview

Customers

• 18 of the top 50 global B2B brands

• Global Fortune 1000 corporations and emerging growth companies

• Considered-Purchase Products

• Enterprise, Mid-Market, and SMB Business Customers

• Executive Leadership team clients – CXO, Marketing, Sales

Sample Clients across Technology, Financial and Business Services, and Healthcare

Deep expertise and experience working closely with Fortune 1000 and emerging

growth companies’ senior Marketing and Sales leaders to drive revenue growth

by leveraging technology and strengthening empirical discipline.

Differentiators

• Exclusive focus on revenue growth via new go-to-market strategies and solutions

• View Marketing & Sales as an integrated process

• Leverage emerging technologies – social, digital, CRM – with traditional Marketing capabilities and Sales channels

• Empirical, analytical core competency

• Strategy-to-execution-to-results


Today’s Discussion Topics

Context and Challenge

Five Critical Questions in the Segmentation Process

Case Study: Small Business Segmentation for a Business Services & Supplies

Company


What’s the Challenge?

Challenge 1

• As the marketplace develops, customer needs are becoming more specific and fragmented

Challenge 2

• The gaps between the value of various customer segments is widening as the market becomes more polarized

Challenge 3

• The growth of new distribution channels and marketing vehicles is making it easier for all companies to engage customers with more targeted approaches

Challenge 4

• The availability of company-wide sales and marketing resources continues to diminish

Proactive Customer Base Management through

Segmentation is More Important Now than Ever


Where Does One Start?

Five Critical Questions in the Segmentation Process:

1. What customer characteristics should

we use to profile the market segments?

2. What approach should we take to ensure

that the segments accurately represent

the market but are also actionable?

3. What criteria should we use to prioritize

segments and select targets?

4. How can we ensure that the segmentation

is operational and can be deployed in our

marketing activities?

5. How do we „land‟ the segmentation within

the organization and ensure that it gains

traction?

Segmentation Process

Undifferentiated Customer Base


In our experience, most successful

segmentations incorporate a range of

descriptive, behavioral, and psychographic

dimensions

Divergent forms of information provide insight

into who is buying, what they’re buying, where

and when they are buying, and perhaps most

importantly, why they are buying

Firmographics / Demographics

• Descriptive information about customers such as company size, industry or about the decision-makers themselves, including job role, breadth of responsibility, etc.

Buying Behavior

• ‘Hard’ data on purchase history for specific products and services, average expenditures, frequency of purchase, and other behavioral factors

Attitudes / Preferences

• ‘Soft’ data on preferred product / service features, channel preferences and attitudes or opinions that influence the purchase process

Question 1: What customer characteristics should we use?

Who?

What?

Where?

When?

Why?


Finding the Right Data Sources:

Your company database may not

be adequate if using the

segmentation to guide entry into

new markets or to market new

products/ services

Syndicated data can be used to

augment existing customer records,

but still fall short in terms of

accuracy, coverage and granularity

Custom market research is highly

flexible but you must be willing to

make the investment of time and

money

The best approach leverages all

three data sources

Question 1: What customer characteristics should we use?

(continued)

Prospect Database Customer

Database

Company Databases Syndicated Data Primary Market Research

Be

ne

fits

Li

mit

atio

ns

• Firmographic & behavioral data

• Known data quality • High granularity • Covers current

customers

• Lacks needs & preference data

• Current customers only

• Lacks competitor data

• Lacks data for new product/ service offerings

• Incomplete or poor quality data

• Firmographic & behavioral data

• Augments depth & breadth

• Covers prospects

• Limited psychographic data in B2B

• Poor accuracy • Aggregated data

precludes accurate assessment at customer level

• Psychographic data

• Highly customized • Very granular • Covers entire

market

• Expensive & time-consuming

• Self-report data is subjective

• May not provide accurate data on past/future behavior


Top-Down vs. Bottom-Up Approaches:

Some companies take a “top-down” approach and define

segments based on business experience and expert

knowledge of the marketplace

If a “hypothesized” segmentation is not validated with

empirical data and analysis, the framework may be inaccurate

or misguided and the effort will ultimately fail

Other companies take a “bottom-up” approach and derive

segments through analysis of available data

If a purely “empirical” segmentation is not informed by

business experience and vetted with expert stakeholders, the

framework may not be insightful or actionable

Question 2: What approach should we take to ensure the

customer segments accurately represent the market?

Business Experience Expert Knowledge

Customer Data & Empirical Analysis


Question 2: What approach should we take to ensure the

customer segments accurately represent the market? (continued)

Top-Down vs. Bottom-Up Approaches:

In our experience, it is optimal to use a combined approach to

identify and quantify market segments

Start by conducting in-depth interviews with front-line business

people to leverage their expertise and experience – use these

hypotheses to guide customer research

Conduct primary research with customers and prospects to

get a first hand assessment of their needs and preferences

Test expert hypotheses with the customer research, but also

use statistical techniques (e.g., “cluster analysis”) to explore

the possibility of unanticipated market segments

Refine derived segmentation through qualitative customer

research and vet all findings with customer-facing business

stakeholders

Business Experience Expert Knowledge

Customer Data & Empirical Analysis

BehavioralDa

ta

+

Research Sample

Survey Data


Question 3: What criteria should we use to prioritize segments

and select targets?

To determine which segments to pursue in their marketing

programs, successful companies consider:

Segment Size & Opportunity – How large is the segment? What

financial opportunity does it provide given the segments’ needs and

anticipated buying behaviors?o

„Fit‟ with Brand & Value Proposition – Do the needs and preferences of

the segment provide a good match to what you can offer them? Will the

segment be receptive to your value proposition? Will they really buy from

you?

Engagement Strategy & Delivery – What is required to reach the

segment and appeal to their needs? Is your organization able to deliver

it?

Competitor Positions – Understand competitor positions, market shares,

and marketing strategies. Do you want to face the competition head-on or

carve out your own niche?

In short, don’t just target the obvious segments with the greatest

financial appeal. Carefully weigh all considerations and develop a

balanced approach to selecting targets.


One of the greatest challenges of deploying a segmentation framework is

ensuring that customers can be assigned to a segment at the database

level.

Accurate database assignment can be achieved through a combination of

methods:

Predictive models can be developed to assign customers into segments

based on available descriptive and behavioral data

Short lists of critical classification questions can be given to

customers at key touch-points, such as sales or service calls

Question 4: How can we ensure that the segmentation is

operational?

Customer Database

Assignment Modeling Touch-Point Questions

Segment Assignment Scores

Validation Refinement


Based on our experience, we recommend clients do the following:

Be Inclusive – Get buy-in from all key stakeholders

Be Realistic – Ensure that you have the ability to implement the segmentation at the

operational level

Be Prepared – Have a solid change management plan and build formal mechanisms

within planning, measurement, and performance-management processes to manage

customer segments effectively

Be Patient – Rolling out the segmentation takes time, set expectations accordingly

Start Small – Execute pilot campaigns before full deployment

Be Flexible – Modify the segmentation and/or targeting strategy if necessary – update to

stay abreast of market changes

Be Accountable – Create accountability for segment-specific results and empower

segment "owners" with the authority to make key decisions

Question 5: How do we ‘land’ the segmentation within the

organization?


Case Study | Small-Business Segmentation for a North American

Business Services and Supplies Company

Business Profile

This large business services company provides various personalized products and services to small businesses, financial institutions, and consumers. Industry Business Services

Client was experiencing declining revenues due to digital product substitution. The company needed to reignite revenue growth through product line expansion and/ or acquisitions, in addition to creating a broader product portfolio to keep customers and channels engaged and profitable. The company needed to understand the “right” SMB segmentation to ID both product needs and target marketing and sales activities. Client Approach Develop a growth re-ignition program through small business segmentation and value strategy.

Challenges


Leveraged secondary research, customer databases, and in-

depth stakeholder interviews to develop an initial “straw man”

segmentation

Evaluated and refined the segmentation model thru primary

market research with over 1500 small businesses,

assessing small business dynamics, attitudes, buying

behaviors and channel preferences

Identified priority segments based on size, revenue

opportunity and alignment of customer needs with client

service offerings

Deployed segmentation across client databases, applying

advanced predictive modeling to assign customers and

prospects to their most probable segments

Developed integrated marketing strategies for targeting high-

priority segments with optimal product and service offers



MarketBridge Solution

Segmentation Model

Customer Database

Assignment Modeling

Campaign Execution

Inbound Tele Direct Mail

Email


Created a unified, cross-portfolio market

segmentation strategy and execution plan with

estimated $5-8% annual revenue lift

Identified specific product/service market “gaps” to

be filled through line extensions

Launched programs to validate and refine

segmentation model in-market

Developed ongoing management system &

readiness plan to facilitate roll-out of the

segmentation throughout the organization



Business Impact


Leslie Wilson

Principal, Analytics

415-577-6313

[email protected]

Thank You

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