The value of segmentation – many companies experience that segmentation does not bring the value it should The purpose of segmentation – where to grow, what to offer, whom to call Strategic segmentation – a seven-step process Self-assessment – is segmentation a solid and value creating management tool in our organisation? Quartz+Co references– extensive experience with segmentation in global markets
Inspirational perspective on segmentation
Most companies have worked with segmentation since birth, but many experience that segmentation does not bring the value it should
The six most common obstacles to value creating segmentation
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Companies try to use one segmentation model for all purposes
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Companies have multiple segmentation models without a clear and consistent link
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Companies base the model on data at hand rather than what is necessary to make the insight relevant
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The management is not aligned on what drives and what describes the market
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Companies are letting the complexity of a few key clients interfere with a simple market view
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The purpose of the segmentation is "lost in translation" when executed on an operational level
Segmentation has three distinct purposes that should be addressed individually but coherently Theme and typical segmentation models
Key questions
Subquestions
Where to grow? Understand the overall market landscape in order to identify attractive market opportunities and prioritise segments
• What is the primary dimension to capture the value in our market? • How should the primary dimension be classified? • How should the primary dimension be structured? • How do we translate the segmentation model into clear and logical priorities?
2. Tactical segmentation
What to offer? Understand customer needs, buying criteria and behaviour for prioritised segments in order to develop attractive segment offerings
• What distinct need profiles can be identified in the market? • What profiles are key to the company's priorities? • What are the key differentiators to capturing those profiles? • Where and how do we need to improve/ change our offering?
3. Operational targeting and initiatives
Drive and manage operations and projects in order to realise value where the customer meets the business
1. Strategic market model Relevant model for numerous mass market companies
Market • • • • •
60+
Number of customers Value Churn Growth Competitor share
45-59
Internal
Age 30-44
• • • •
18-29 <300
300-500
500-700
>700
Market share Growth Churn Earnings, including cost to serve
Personal gross income (or assets)
Targeting model "Work horse"
"Race horse"
DKK xx thousand
Customer profitability
DKK xx thousand
"Pony"
"Youngster"
DKK xx thousand Low
Medium
Growth potential
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High
Whom to call?
• What are the relevant focus areas on a local level? • What customers exist within those areas? • With whom do we not have a "fair" share of wallet?
Seven-step process to strategic segmentation
Stakeholder alignment
Key activities
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Proof of concept
Pilot
Process alignment
Roll-out
Dimensions and drivers
Data mapping and transparency
Applicability in operational environment
Small-scale execution
Supporting business processes
Full-scale execution
• Stakeholder mapping
• Alignment on primary and secondary dimensions
• Alignment on data definitions
• Testimplementation process and education
• Reducing data complexity
• Design and implement supporting business processes
• Define optimal implementation sequence and timing
• One-on-one stakeholder interviews
• Alignment on exogenous and endogenous drivers
• Testing whether the concept makes sense in the line organisation
• Number of stakeholders
• Business size and complexity
• Data availability • Data quality
• Organisational resistance
• Magnitude of local differences
• Business complexity
• Size of organisation
• Stakeholder alignment is crucial to succeed
• Market dynamics
• Number of data sources
• Business complexity
• Geographical coverage
• Process efficiency
• Geographical coverage
• Access to previous material Typical involvement split
Building contents
Purpose and expectations
• Establish baseline on previous segmentation work
Complexity drivers
Defining the model
• Mapping data sources
• Populating grid
• Aligning where and how the concept can be applied and what value it creates
• Predefined opinions
Client
• Map necessary changes in supporting business processes
• Apply supporting resources
• Execute implementation
Is segmentation a solid and value creating management tool in our organisation? Focus areas â&#x20AC;&#x201C; self-assessment
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Do we have a clear understanding of value drivers and dynamics in the market?
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Do we have a clear and aligned definition of how to cut the market and how to define attractiveness of the segments?
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Do we have a clear and aligned view on what market segments have high and low priority respectively?
4
Do we have a clear picture of how we are positioned in each of the market segments and whether the current market position is optimal?
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Do we have a clear process for capturing changes in market data and updating the segmentation model?
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Do we have a clear process for translating corporate market priorities into operational actions in sales, marketing and customer service?
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Do we have a clear understanding of what value propositions that capture the majority of our prioritised segments?
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Do we have a clear understanding of our key differentiators and which segments are most prone to act on them?
Yes
No
?
Quartz+Co has extensive experience with segmentation in global markets Client
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CASE EXAMPLES
Company profile
Key challenge
Market characteristics
World leading supplier of equipment to the health care industry, Turning over DKK 20 bill.
Develop a segmentation model to design f the G2Mmodel/sales force structure as well as managing the sales efforts on the most attractive customers
Two markets; Acute Care and Long Term Care with a wide range of decision makers dependant on product category
The worlds largest container carrier, present in 125 countries, turning over DKK 146 bill. In 2010
Defining a global market model that make sense on a regional and local level to support a corporate differentiation strategy
Global customers, global suppliers and large regional differences in market dynamics based on geoeconomic development
Global shoe brand with production in five countries and flagship stores in more than 50 countries, turning over DKK 6 bill. In 2010
Defining a global segmentation model, capable of driving internal efficiency, customer service offering/differentiation and sales growth
Regional and local customers. Large regional differences in market maturity, retail maturity and growth rate, based upon geoeconomic development
The worlds leading producer of wind turbines, with more than 30.000 turbines installed in 63 countries, turning over DKK 53 bill. In 2010
Defining a global segmentation model to drive efficient long term growth
Regional customers, global suppliers, and large regional differences in market dynamics based on political regimes and subsidies