Making Customer Segmentation Deliver

Companies that have implemented segmentation successfully tend to use it as a strategic context in designing their business models, as a touchstone for branding and value proposition development and to guide processes such as customer acquisition and retention. Crucially, they know how to manage the complexity that segmentation inevitably introduces to an organization and how to capitalize on the insights it provides.

The author advises companies to take a four-step approach to segmentation, these are:

• Define the objectives clearly. The most important question for each company to ask: What is the purpose of segmentation? Understanding the purpose will enable decision makers to determine whether the segmentation effort is strategic, tactical or both.

• Design around the objectives. The key effective design is working back from the business decisions that need to be made. Once the objectives have been determined, the segmentation research itself must be rigorously designed to reflect them and to ensure that the results will be insightful, actionable and identifiable.

• Prepare a blueprint to operationalize the segmentation. As soon as the outline of the segmentation permits, begin to define these process changes, share them with affected business partners and formulate and discuss revised metrics that reflect the new capabilities.

• Manage the implementation process. Making segmentation deliver is ultimately more of a change management challenge than a technical or marketing challenge, but this point tends to be overlooked. The tools for managing change – targeted and tailored communications, sequenced to engender understanding, engagement and acceptance – need to be deployed fully.

Segmentation will be essential to the process of managing the complexity of continually evolving and fragmenting customer groups and their different demands. Companies that achieve this will have a substantial advantage in making customer-centricity more than a slogan.

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