Recently, we hosted another knowledge session with our colleagues at our office in Bussum. This time, Ilse Marsman and Mark Hakhof discussed a new and innovative segmentation method that does not solely focus on company characteristics, but on business behaviour that implicitly indicates certain company needs.
Necessity of segmentation
Market segmentation is as old as the first human spaceflight. Where companies first tried to market their products or services to the masses with one proposition (a combination of marketing elements), in the 1960's companies started to develop specific propositions for separate target groups.
A market segment is a subgroup of people or organisations that have one or more characteristics in common that cause them to have the same product needs. These subgroups are identifiable on homogenous factors, but are diverse enough on product or service needs to be approached with different propositions. Right segmentation will lead to a better fit between product or service and customer, and hence in the long run benefit the company not only with increased sales, but also by using corporate resources more effectively.
The root cause of a need
The key factor in segmenting the right way is understanding the customers' needs. These needs are constructed twofold. On one hand, needs are formed by fundamental customer features, like age and gender or company size and sector. On the other hand, needs are formed by a certain expectations pattern. Innovative companies are creating new expectation patterns (e.g. 'Uber effect': no more waiting time or Coolblue: fading office hours) causing customers to expect different things in other product and service categories as well.
However, what B2B companies (and sometimes also B2C companies) often struggle with, is realising what the root cause of a need is. Often a need is not solely based on a company its characteristics or expectations, but on a company or customer its behaviour that is not necessarily related to the product or service. An example could be growth ambition, which possibly says more about certain needs than current company size. Or the scope of business activities (national versus export) which, even if it does not impact direct product purchase, could tell a lot about the type of day-to-day challenges that he or she is facing. Both examples illustrate an understanding of the company needs beyond purely product related causes and directly catches on to the trend of personalisation.
Prioritising needs for modelling
Defining the root causes of a need is one step, deciding their impact on your proposition is another. While in an ideal world you might want to segment on hundreds of root causes and cater to specific individual customer needs, it is practically impossible to do so. To prioritise on the impact per need, we have created a method in which we use an impact analysis. This impact analysis is based on generic proposition elements to mathematically calculate which root causes are most impactful, based on qualitative research. These root causes can then be transformed into an overarching segmentation model, as we have practiced with one of our own customers. By not only catching company or customer characteristics but also incorporating company behaviours, you are able to create an innovative segmentation model that is fit-for-future.
Interested in what The Next Organization can do for you on the topic of segmentation and proposition development? Feel free to contact us!