Market segmentation is a powerful tool for identifying, acquiring, and retaining customers in the most efficient and effective manner possible. Market segmentation research allows you to identify the specific needs of a particular group in your market and speak directly to that need. However, too many segmentation implementations don't work well despite large investments in time and money.
For a segmentation project to be successful, it needs to survive and thrive in operational "windows" being implemented in product development, marketing campaigns, and sales efforts. How do you ensure your segmentation thrives in these operational environments and does not simply gather dust on your desk?
A lot can be done in the planning and design stages to ensure success. Here is a glimpse of some of the most important things to consider:
Defining operational factors is paramount to generating an effective plan. Start by asking yourself - and your team – these questions:
Who will use the resultant segment map?
How will they use it?
What will they need to successfully implement it?
Are your CRM tools are optimized to accommodate segmentation work?
Make data the primary segmentation facilitator with a post-hoc segmentation strategy. Empirically derived data collected from market research surveys will identify naturally forming clusters though multivariate analysis. Data-driven segmentation is useful because it eliminates bias or old patterns of thinking in order to get to the heart of what your customers need.
Take a qualitative approach to research. Adopt an open, exploratory survey process to enable natural clusters to emerge. Successful post-hoc segmentation requires you to resist the temptation to be too structured. Ask enough questions for a conversation to emerge so that the participant feels comfortable voicing opinions, frustrations, and desires.
Ensure you focus on characteristics beyond segment size. The largest customer segments may not be the most interesting. Look for demands that offer the best potential for both category creation and premium product placement.
Last but not least, keep it simple. Segment maps that are complex and using long typing tools (or ‘classification algorithms’) may be impressive to look at, but they’ll lose luster if they are too complicated to implement.
And there you have it! Five tips to drive your market segmentation for the best possible results.
Heather Carpenter is Silicon Valley Research Group's Marketing Manager.
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