The Segmentation Research Crisis
A lot of time and money is wasted on segmentation studies. Here’s why, and what to do about it.
By Rich Schreuer
Last November I partnered with a banking client for a conference presentation on a segmentation study we conducted to help guide his organization towards greater customer-centricity. The study provided market insight to help transition from a product-based to a customer-centric organization by identifying need, attitude, and behavior-based segments. The results helped them develop value propositions customized for each segment, which addressed products, messaging and customer experiences.
The study was a great success. It’s used by our client in many ways, and was “actionable” in every sense of the word. But rather than dwelling on our very great success, it got me thinking about why segmentation studies are often not acted upon. In my 25 years of market research experience, I have found that segmentation studies are often found “interesting” but not “actionable.” And it’s often not a function of the quality of research. Poorly executed studies are never actionable. But even well executed studies may not be actionable. (And, by the way, when a client finds a study “interesting,” for me, that’s code for “I don’t want to hurt your feelings, but you failed.”)
Back to the conference presentation…at the start of our talk I asked the audience how many had worked on well-executed segmentation studies (either as a supplier or a client) that were ultimately deemed “not useful.” I knew the situation was bad, but I was shocked when about four-fifths of the audience raised their hand. So, here are a number of things we at CMB have learned over years about how to make segmentation actionable. Note they don’t have anything to do with the mechanics of execution.
It’s the process, stupid (apologies to James Carville)
While any good market research firm can write a decent questionnaire, structure a sound sample, and use state-of-the art analysis techniques, it’s the process that usually determines the project’s fate. Simply soliciting client input, executing the study and presenting results is not enough. The study will be a success if the process involves making information-users partners by capturing their definition of success, upcoming decisions and hypotheses, and then including these partners in selection the final segmentation solution.
Articulate and agree on business decisions
Our experience shows that while, many research consumers are good at listing information needs, few actually identify the decisions they intend to make with this information. Most seem to believe that if they have enough information they will find insights to help make as yet undetermined decisions. This problem is especially acute in segmentation studies, because different types of decisions (product development vs. messaging vs. targeting) require different type questions and measurement techniques.
Many options, but no silver bullet
Over many years and many studies I have never had an engagement where one segmentation solution worked equally well for all decisions. For example, solutions that are stronger for targeting will typically be weaker for messaging. At CMB, our process involves examining and rejecting up to 50 solutions, and then presenting four or five really good ones to our client. This is where management art blends with science. By understanding competing decisions at the start, we make rational tradeoffs to select the best solution.
Real work begins when the study ends
A segmentation study is typically treated as a discrete project with a beginning and end date. If the final presentation is well-received the supplier and client may have celebratory drinks or dinner, if not the supplier quietly slinks off to the airport. But the reality is that no matter how positive the initial reaction, segmentation studies can die on the vine if planning for implementation doesn’t occur before the final presentation. In successful segmentation engagements, the final presentation is not “the end,” but rather “the end of the beginning.” Segmentation often requires managers to think differently about the market, and this can’t occur without a process to support and reinforce this way of thinking. We typically use a set of cross-functional workshops in which participants work with the information and participate in exercises to develop plans with input and support from the group
If you can internalize and act on these principles you’ll never have to slink back to airport after a final presentation.
Rich is Senior VP and Chief Methodologist at CMB, he also knows the secrets of raising chickens, and the lost art of ski ballet.
You didn’t think we’d give away all our secrets did you? Join us this Wednesday the 27th at noon to learn more secrets to successful segmentation.