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200 CEOs
200 CEOs surveyed in 2004 59% had conducted a major segmentation exercise within the past two years
59%
14% Valuable
For segmentation to be useful, you must be able to act on it Then you need to coordinate action in the organization. Marketing cant do it alone.
Connects values, attitudes, beliefs specifically related to your product or service category/offerings
Focuses on actual customer behavior You can explain it to your boss. And it makes sense. To both of you Accommodate/anticipate changes in markets and behavior
Response
Shifted focus away from pricing onto other differentiators
Price Sensitive
Price Insensitive
Lowest price of Something besides gasoline at the pump price (Service? Convenience stores?) ? Spend average of USD $700 per year 20% of market ? Spend USD $1200 per year 80% of market
Demographics Behaviour
Size of segment
Ask yourself: can you still buy gas here if you are not in the target segment? Yes, of course. But they are not tailoring their offering to you.
Abbott Research & Consulting 2006,2007
using a multi-format approach to maximize market share over the longer term focusing on food but serving the consumers everyday household needs creating customer loyalty and enhancing price competitiveness through a superior control label program
Source: 2005 annual report
Abbott Research & Consulting 2006,2007
E-roleplay: Two Sided Market Segmentation Actors who need interesting jobs between roles Service companies that need better training experiences
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Reach
A crisp and lively blend for those working toward their dreams Unlimited transactions $7.50 monthly. Includes safety deposit box.
Savor
A rich blend with those who have achieved their goals with room to grow $10 monthly, but accounts earn interest Free notary services Free investment consultation
Cruise
Bright and full bodied to bring out all the flavor of your better years Low or no charges on most services, unlimited transactions Membership in Club Carefree 50+
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Demographic Correlate
Behavioral Correlate
Low balances
Differentiated Communication
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Same product
1. Understand your customers' needs and preferences 2. Group your customers into segments based on their needs and preferences 3. Target segment(s) you can best meet their needs and preferences
This includes targeting and competitive analysis
4. Branding
Not merely awareness but brand positioning
5. Provide superior service or products to meet your targeted customers' needs and preferences.
Happy customers, profitable sustainable growth
Abbott Research & Consulting 2006,2007
Build Model
Deepen Learning
Use
How segmentation strategy fits with overall business strategy How might you act on the learning. Eliminate non-starters right away. Who needs to be involved
Choice of model needs to fit business strategy and options Must fit organizations ability to identify and respond to segments OR start building the needed data
Integrate all marketing activities with the segment strategy Integrate data collection and management Integrate channel strategy, metrics Integrate all other research
Stakeholder identification
Its not just a marketing & research department project!
Abbott Research & Consulting 2006,2007
Existing culture, knowledge, business processes and powerful constituencies will derail your efforts without C-level support Net result: segmentation didnt work for us
Abbott Research & Consulting 2006,2007
Choosing a Model
www.abbottresearch.com 1-888-244-0285
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The basic difficulty is that value-based segments generally don't fit neatly into demographic ones
McKinsey Quarterly, A segmentation you can act on, 1999
Profitability
More actionable
Some examples of new segments for men
Male spas offering manicures, pedicures, etc. Phillips Bodygroom shaver, designed to remove hair below the neck
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No matter what claims are made for a methods theoretical validity and statistical sophistication, if it cant be shown that there is a consistent empirical relationship between product usage and psychographic segments, the method is essentially useless to the marketer.
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To get the most out of segmentation research, it is important to be concerned more with consistent empirical relationships than with elegant theoretical models
Chakrapani & Deal
Can we see different product, promotion, communication, distribution or profit opportunities with this segmentation model?
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Can we measure the segments? Can we obtain realistic data to consider segment potential?
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What are the desires of each segment? What do they want from us? Do they make different tradeoffs? Which attitudes matter for the purchase decision?
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Does senior management understand the segmentation model? Does it fit with their deep knowledge of the business?
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Is this segmentation model responsive to changes in the market and our customers?
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For segmentation to be useful, you must be able to act on it Then you need to coordinate action in the organization. Marketing cant do it alone.
Thank you!
Susan Abbott
Web: www.abbottresearch.com E-mail: susan@abbottresearch.com Blog: www.arc.typepad.com/customercrossroads Phone: 416-481-7409 or 888-244-0285
www.abbottresearch.com 1-888-244-0285