Web Exclusive | Market Research: why good segmentations fail

Web Exclusive | Market Research: why good segmentations fail
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First Published: Wed, Jun 18 2008. 12 21 PM IST

Brad Bortner, principal analyst, Forrester Research
Brad Bortner, principal analyst, Forrester Research
Updated: Wed, Jun 18 2008. 12 21 PM IST
Brad Bortner, principal analyst, Forrester Research
Segmentations are the crown jewels of market research. They can provide organizations with a deep understanding of customers’ needs and wants, allowing the firms to align themselves to maximize success in the marketplace. A well-crafted segmentation analysis becomes a strategic blueprint for the entire organization, including product development, marketing, corporate strategy and sales.
However, market researchers tell Forrester most segmentations do not fulfill this promise. Why? Not because of lack of brilliant analytical insight, but due to a lack of lockstep alignment to execute on them across the organization.
Why many segmentations end up on a shelf
Segmentation holds the key to marketing and strategy success: If you know what your potential market wants, you can reach and sell to them specifically.
But the dirty secret of market research is that most segmentations are never fully implemented to deliver business results. This is not because they are lacking in brilliance. Many of them are very sophisticated and analytically rigorous. The failure, actually, is in not taking this insight and driving it through the organization, including product development, strategy, marketing, and sales, to get return on the segmentation investment.
Why does this happen? Because market researchers have historically been rewarded on knowledge of research approaches, deep industry expertise, and rigorous analytical techniques, not on the business skills needed to ensure that the segmentation is used in all parts of the organization.
Why many fail
1. There is no upfront cross-functional buy-in. Segmentations are only useful if all the players who will use it in sales, marketing, and product development use them. You fail when you don’t sign up these groups in advance. The end result is an analytically correct segmentation with no skin in the game from key constituencies. When faced with a brilliant analysis with no input from them, key constituencies will ignore it.
2. The firm pursues all segments rather than the most attractive. The end result of segmentation should be specific segments that your organization agrees to focus on. Many companies refuse to make hard choices based on the results of a segmentation analysis and end up going after all segments because they fear missing a niche somewhere. The result is often averaged product and marketing campaigns that do not succeed in appealing to any one segment.
3. There is no organizational alignment to dominate the chosen segments. Even when they’ve chosen specific segments as the most attractive, the market researcher can’t do it alone. Success is driven by aligning your organization around the segments that you have decided to target. Sales, marketing, product development, support, and even channel groups must all have their respective jobs in driving the segmentation to business success.
Segmentation adoption session
Host a segmentation adoption session and follow five key steps to avoid failures
The market research professional must facilitate choice, alignment, and planning with the segmentation and be more than the analytical and expert engine of the methodology of the segmentation. After completing the segmentation, best practice is to initiate a one- to two-day segmentation adoption meeting to get a jump start on this process. Sure, you can’t finalize everything in this one session, but five key areas will help you ensure long-term success. This means reassembling the firm’s cross-functional team of all stakeholders to ensures that the correct attributes are designed into the segmentation plan from the beginning.
What steps should you focus on in that session?
Step 1: Work together to create a segmentation choice. The first order of business once the team gets together is to make choices about which segments to focus on. The most straightforward way to drive segmentation choice is to first share all the relevant profile data on a segment-by-segment basis and then array the segments on a grid that arranges them in terms of agreed-upon attractiveness and how reachable they are. Attractiveness is usually determined by potential margin, revenue, and defensibility. Reachability is assessed based on how easily your current marketing capabilities can target the newly identified segments. The size of the bubble on the segment analysis figure is generally related to overall potential size of the segment.
Step 2: Make the segment choices come alive. Once you’ve selected segment targets, it is time to make them come alive so that your organizational partners can relate to them. A fast way to do this is to subdivide your team into breakout groups aligned by segment. Have the subteams create evocative descriptions of the personalities of each segment. For example, a segment in the wireless home phone market may consist of big spending consumers who are conservative in their technology adoption pace. A pencil sketch of segment members might consist of an elderly person with lots of cash who is still using a phone from the 1980s. Using the data at hand, make as evocative a description as possible within each segment, which you can — if necessary — later flesh out into full-scale personas after conducting additional ethnographic research.
Step 3: Create a client touchpoint analysis. With a successful segmentation, the messaging and products for the segment are consistent each time a customer or potential one from that segment interacts with your company. Create a process map of every touchpoint that customers have with you. This means doing prep work before the meeting to ensure that you know these touchpoints. These should include everything from initial sales contact to call center support people to your Web site. Each contact should reinforce the benefits that you are delivering to your target segment. How to do this? Start by having each internal team—sales, service, and marketing—break out and process map every point of contact a customer has with their function. Detail when the contact occurs and what form it takes. Once this mapping exercise is complete, brainstorm about what you can do to reinforce your positioning to your target segment within each touchpoint—such as supplying scripts to customer service representatives to appeal to the target segment descriptions that you had created earlier.
Step 4: Define optimal products, channels, messaging, and support to dominate. In addition to the touchpoint analysis, members of product, channels, marketing, sales, and support should form separate breakout teams and brainstorm how to align their specific function with the target segment. What product features and benefits are appropriate for the segment? What sales support do they require? What channels do they prefer? What messaging will result in their feeling that your organization is speaking to their needs? Everything needs to be aligned and assessed to target the agreed upon segment targets. This may seem obvious, but failure to craft these details causes organizations to continue offering averaged products and messages that fail to appeal to specific target segments.
Step 5: Make a plan and measure against it. One of the core functions of your cross-functional group is to have a plan with steps to perform and a framework of how to measure success. The end result of this segmentation implementation kickoff meeting should be a list of tasks by department, time frames, and identified key resources to implement against them. Set up checkpoint meetings, and obtain executive sign-off. The ultimate goal is to align your organization to maximize success within the segments that you are focused on.
The momentum established at the session should not stop once the session is over. Ensure that you set up regular checkpoint meetings — usually every six weeks — and send emails about progress across the tasks identified and these five steps.
At Forrester, Brad’s research covers the intersection of technology and market research — both primary and secondary — best practices in managing market research vendors, optimal approaches for B2B and B2C primary research, effective internal communications to enhance market research buyers’ effectiveness within their organizations, and the optimal research life cycle of bringing products to market.
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First Published: Wed, Jun 18 2008. 12 21 PM IST