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Toyota targets Scion marketing to less affluent consumers and cars from its Lexus banner to more affluent ones.
Toyota targets Scion marketing to less affluent consumers and cars from its Lexus banner to more affluent ones.

Mark Healy

How to split customer groups for marketing Add to ...

It is either foolhardy or impossible to build a good marketing plan in a vacuum, and understanding market context allows you to make decisions relative to competitors, to channel-partner preferences, and to customer trends.

A previous column dealt with the importance of understanding market context in the planning process.

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The next area of focus is to understand and catalogue customers. Rigorous marketing planning seeks to answer a series of logical, sequential questions, culminating in tactics that belong to programs or campaigns. Those, in turn, belong to plans, which lead to action strategies built after sorting out the value propositions and customer experiences designed for customer segments. Segmentation takes place after understanding the market context.

Here’s a visual look at the iterative, marketing planning process model:







I had a conversation with a colleague – a very senior consultant with significant experience in financial services – about customer segmentation two weeks ago. His big complaint? Segmentation exercises too often become academic and self-referential. In other words, it’s about making the exercise more clever in nature, rather than about achieving a useful outcome. He described one bank segmentation he had tried to work with and gave up on, because he couldn’t sort out who to target first, or what offers made sense for the different groupings.

When we think about customer segmentation, we think about grouping customers into buckets of similarity, in order to do something useful from a marketing perspective. Segmentations that separate customers but don’t lead to actionable conclusions may look great in journals, but they don’t help you with marketing.

Outcomes from good segmentations normally fall into one of three broad activity areas:

• Product or service design

• Customer targeting

• Pricing

The ability to do something practical in marketing with the segmentation is more important than the approach taken to generate the segmentation in the first place.

Product or service design

If the timing is right – segmentation before design – and if the segmentation is robust and thoughtful in regard to customer pain point or need, offerings can serve particular customer groups, or at least be tweaked to better serve the needs of those different groups.

For example, Cisco targets smaller businesses with products similar to those they make for consumers, recognizing the low technical complexity of those clients, while producing near-military-grade products for other enterprises, again respecting the needs of those customers.

Customer targeting

Targeting – a combination of three of the five P’s of marketing – positioning, placement and promotion – is how segmentation is most commonly thought about and used. Thorough customer research leading to segmentation will often shed light on how and where customers gather, or how they consume media or marketing messages. And it will give clues on what customers will respond and react to.

As an example, Ontario’s Shaw Festival a few years ago targeted sophisticated theatre-goers with arts-specific messaging in The Globe and Mail, while also targeting socially conscious patrons with completely different messages and language in publications catering to that specific audience.

Pricing

Pricing is often a reason or basis for segmentation in the first place, as in cases where customers are separated based on willingness or ability to pay, and serving different groups with different price points.. Those price points can be tied to offerings of commensurate value: Toyota does this by selling Scions to less affluent consumers and cars from its Lexus banner to more affluent consumers. Or price points can be tied to other elements of value for a customer, such as time, where airlines segment customers into planners and flexibility-seekers, selling the same seats at lower prices to planners.

But pricing can and should be an outcome of other segmentation exercises as well. Clues about willingness and ability to pay, and the need for and degree of discounting required, should be pulled from research insights regardless of segmentation objective.

May 1: There are countless approaches to segmentation, but they can be narrowed down to three generally accepted buckets. Look for it at tgam.ca/smallbusiness

Special to The Globe and Mail

Mark Healy, P.Eng, MBA, is a partner at Satov Consultants – a management consultancy with practice areas in corporate strategy, customer strategy and operations strategy. Mark’s focus areas inside the customer strategy practice include consumer insights, customer experience, innovation and go-to-market strategy. He is a regular speaker and media contributor on topics ranging from marketing to strategy, in telecom, retail and other sectors. Mark is known as much for his penchant for loud socks and a healthy NFL football obsession as he is for his commitment to Ivey and recent Ivey grads. He currently serves as chair of the Ivey Alumni Association board of directors. Mark lives with his wife Charlotte and their bulldog McDuff in Toronto.

Join The Globe’s Small Business LinkedIn group to network with other entrepreneurs and to discuss topical issues: http://linkd.in/jWWdzT

Follow on Twitter: @healymark

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