Using structured processes and systems to help managers develop strategic segmentation

An essential input for the successful implementation of every business fad, matrix guru, paper, course and initiative is a detailed understanding of customers and how they segment. Customer segmentation, therefore, has a profound impact on business strategy and getting it right cannot be left to chance. But what is ‘right’?It is the contention of the authors that if ‘segmentation’ is how customers are represented in a market then segmentation has to have a customercentric focus. So, it is no longer how the company segments its market, it is how the customers segment in their market. And there is only one way customers segment, and that is according to how they maximise their purchase value.Reviewing the literature reveals that most of the academic work in this domain is prescriptive, with virtually no pragmatic guidelines provided to enable managers to make sense of the confusing array of data and information available to them. So the authors undertook an extensive series of workshops across a wide range of businesses to determine whether a segmentation process existed.There is such a process and it can be applied to both business-to-business and consumer markets.The initial approach suggested by the authors when adopting their process is one which utilises information already held by or accessible to a company. For many companies this approach, on its own, has provided invaluable insights into their market. In numerous instances it has provided sufficiently robust conclusions for the outputs to have an immediate impact on a company's marketing activity. Once this initial approach has been exhausted companies can then review what external research may be required in order to either verify their own conclusions or fill in the information gaps revealed by the process.The key components of the process uncovered by the authors is contained in this paper, a process which has been extensively adopted around the world. It should be noted, however, that by its very nature, obtaining a detailed insight into how customers segment takes time and this paper aims to provide an overview of how the process works. It is also presented in a format designed to utilise information already held by or accessible to a company.Bringing this customercentric approach to market segmentation into discussions about business strategy has seen companies increase their market share, increase their margins and leave the competition both confused and some way behind. And that is without having to adopt the latest idea to hit the corporate in-tray.