Voices: the CMB Blog

A lot of time and money is wasted on segmentation studies. Here’s why, and what to do about it.

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.

1. 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.

2. 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.

3. 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.

4. 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 27^th at noon to learn more secrets to successful segmentation.

In recent years, innovation has become the latest catchword in US boardrooms, and even slow moving industries not normally associated with innovation suddenly see it as a capability critical to survival. Recently, however, a quiet backlash is forming as the word conjures up images of afternoons lost to brainstorming sessions and stickie-noted walls, with little to show for it in the bottom line.

The fact is, most corporate innovation initiatives—regardless of industry—will fail. And the seeds of that failure are often contained in the lack of clarity on what innovation is and how it will help the company achieve corporate goals. For any business leader, innovation must be viewed as a means to an end. In our experience, the best innovation programs are focused growth initiatives with clear business goals or at least parameters, not a free-for-all of ideas. Thus, we define innovation as the process of finding new and better ways of helping customers achieve their goals in a way that creates value and growth for the company. It’s all about creating value for the customer, and capturing that newfound value to increase the bottom line for the company.

Using this definition, innovation need not be as far-reaching as a new branding campaign or a shake-up-the-industry product in order to be a success. In fact, for most companies innovation is less about coming up with new ideas and more about re-purposing or combining existing ideas into a better solution. Uncovering these opportunities requires a multi-method approach we call Focused Innovation, which is based on the belief that the strongest innovation strategies are built on superior market insights and a laser-like focus on customers’ goals.

How “focused” is your innovation strategy?

Posted by J. Mark Carr, Mark is co-founder and managing partner of South Street Strategy Group.

South Street Strategy Group, an independent sister company of Chadwick Martin Bailey, integrates the best of strategy consulting and marketing science to develop better growth and value delivery strategies. 

Join us, in Boston, May 6th-8th at The Front End of Innovation Conference for: Focused Innovation: Creating new value for a legacy brand

Come enjoy visions of distant lands and mouth-watering adventures as you learn how Tauck Worldwide, an 85-year old tour company, applied the principles of focused innovation to successfully reinventing its core offering for a new audience: the affluent baby boomer.

Speakers:

• Jeremy Palmer, Vice President; General Manager TWD Land, Events & New Ventures, Tauck

• Judy Melanson, VP, Travel and Hospitality Practice, Chadwick Martin Bailey

• J. Mark Carr, Managing Partner, South Street Strategy Group

Originally Published on Loyalty360

Shoveling snow, grocery shopping, folding laundry, some daily activities just don’t scream fun…but maybe they should.  We’ve all heard about gamification–using game design elements to drive desired behavior while making life a little more enjoyable. While the day you get points for unloading the dishwasher may be a long way off, gamification is being used to drive member engagement in many loyalty programs.  To spur some creative thinking, I’d like to present some ‘games’ currently offered by loyalty programs. 

 But first, a quick review of the different game mechanics that can be used to dial up the fun:

1. Points and levels: Keep track of game progress and link to a benefit

2. Appointments: Ask members to visit at a certain time to get a benefit

3. Progress: Show members what percentage of a task they’ve completed

4. Countdowns: Limited time to complete a task adds to add urgency

5. Sharing: Gain status/points for social behavior

6. Leader Boards/VIP lines: Publicly celebrate high achievers

7. Loss Aversion: Force members to complete a task or lose the benefit

Here are some recent examples of travel and hospitality brands that are creating more rewarding and fun loyalty programs through gamification; hopefully this list will encourage you to think about all the ways you can make life a little more fun for your customers.

• The enduring popularity of Jeopardy, bar quizzes, and games like Trivial Pursuit, should leave no doubt that people love trivia games.  The InterContinental Hotels Group’s (IHG) trivia game—Win it in a Minute—awards correct answers with free miles, and capitalizes on the universal desire to prove how smart we are. And it’s proving a smart move—the VP of loyalty programs reported that in the first two weeks of the “Win It in a Minute” promotion IHG has seen 100,000 game plays and has handed out more than 100 million Priority club points.

• Leave it to Caesars Entertainment to take a different spin on loyalty. Having a huge amount of guest data means Caesars can reward their loyalty members based on projected spend, rather than past behavior, as well as present customized offers in real-time to their guests. They also offer Reward Credits through gaming (of course) but also through social gaming by playing Caesars Interactive Facebook games like Caesars Casino.  Total Rewards Members can also use the Social Rewards program to engage with the brand on Facebook, Twitter, and YouTube to earn even more credits.  These twists on the typical points based approach are making the Total Rewards an even more effective loyalty driver.

• I hadn’t harbored any ambitions to become a “mayor” using the Foursquare app until I heard about their partnership with Starwood—Starwood Preferred Guest (SPG) members vie to become “SPG Mayor” by checking into any of the Starwood’s hotels. Along with bragging rights, the Mayor gets to share travel tips and tricks with the rest of the community, as well as additional points and rewards. It’s a simple but effective way to harness the appeal of location-based mobile technologies and our competitive natures, while showcasing the brand’s most loyal members.

• TripAdvisor has employed many strategies from the gaming industry – and they seem to be reaping the benefits of rewarding participation. The popular trip review company grants their contributors badges and titles, like Senior Reviewer, and the approach seems to be paying off for all involved:  TripAdvisor has benefited from more postings (as the ‘competition heats up’) and the traveler can assess a reviewer’s trustworthiness based on their volume of reviews. 

What do these programs have in common? They align with the brand and the way their customers experience that brand.  They embed fun, competition, achievement, status and rewards to increase member engagement.  It may sound simple, but gamification is a strategic choice and you’ll need to ask the questions:

• Why are you adding game design elements to your loyalty program?

• How does it benefit members? Will they enjoy it?

• What are your business goals?

• What actions do you want members to take?

• Which members are most likely to participate?  How valuable are they?

• What metrics will you use to measure your effectiveness?

To incorporate game mechanics into your loyalty program you need to start with the end in mind, ask what’s your vision of success? And think about the most important behaviors you’re trying to motivate. What actions link to those behaviors?

Building customer loyalty is hard work. But while you’re delivering the brand promise, fulfilling customer expectations and enlisting your promoters…stop to have some fun.  At this (and any) time of year, your members, particularly those who live in the frozen Midwest and northeast, will probably love to play along!

Judy is VP of CMB's Travel & Entertainment practice and loves collaborating with clients on driving customer loyalty.  She's the mom of two teens and the wife of an oyster farmer. Follow Judy on Twitter at @Judy_LC

In Orlando for the Loyalty Expo March 20-22? We'll be there too, stop by our booth!

Those who know me understand that I am not afraid to admit I love reality TV.  Combine that love with an interest in pop culture (generally), and a passion for understanding what people do and WHY they do it, and you have a match made in heaven. So obviously Catfish—the MTV series —is right up my alley.

Talk of "Catfishing" seems to be everywhere these days, but for the uninitiated, I’ll give you the quick (Wikipedia) definition: “A Catfish is a person who creates fake profiles online and pretends to be someone they are not by using someone else’s pictures and information.”  Put simply:  Catfishing is a relationship built on deception.

So what does Catfishing have to do with online qual?

As a qualitative researcher, I have to build “relationships” with strangers all the time, both online and in-person.  I can guarantee you that these relationships are genuine, authentic and honest—at least from my end.  My ultimate goal is to better understand research participants as human beings—how they live, what they value, what makes them ‘tick’, etc.  Most of the time, I truly feel that those I’m spending time with (both online and offline) are also being authentic and honest with me. Notice I said most of the time. 

Though it doesn’t happen often, it IS possible to come across a phony (AKA “Catfish”) in an in-person setting.  There are some pretty savvy people out there who seem to know how to make their way into a focus group for some extra cash.  Thankfully it’s rare—and most of the time these folks get weeded out before they even enter the room.  Online qualitative research, on the other hand, is ripe for Catfish.  Unless we are conducting video web-based research, there aren’t any visual clues to help us validate identities.  Therefore, we can’t be 100% sure that the person we THINK we are talking to is really that person.

The good news is that as researchers, we can take measures to protect ourselves from these Catfish participants online—it just takes a little effort and creativity.  Here are a few methods I’ve used successfully in the past:  

• Demographics:  If you have a participant that has an annual income of $50K and claims to spend an average of $10K a year on vacation, you’ve got yourself a red flag.  Taking the time to cross reference demographics with online responses can be extremely helpful in getting to the truth.

• Common sense:  Individual responses don’t stand alone, but pulled together they create a story.  At the end of the day you either have a story that makes sense or you don’t, and a story that doesn’t make sense is another red flag.  Just as one would do when moderating an in-person group, there are times when you must revisit what someone said earlier, and if necessary, request clarification.  (In the immortal words of Judge Judy: “If it doesn’t make sense, it’s not true.”) 

• Consistency:  A lack of consistency can be another red flag.  If a participant says one thing, but contradicts themselves sometime later, there might be a problem.  Here’s an example:  in a recent “vacation” study we had a participant who changed her dates of a travel a few times (not unusual).  She later confirmed purchasing a package (air, hotel, car) for a family of 5 one week prior to departure (somewhat fishy … especially for someone who was very price sensitive).  Her “confirmed” travel dates were from the 25th-30th of the month—and when she hadn’t checked in, as requested during that time, we reached out to her to find out that she was “already home” on the 29th.  Suspicious?  Very.  This lack of consistency—along with several other red flags—confirmed our suspicions that she was not being truthful and she was pulled from the study.  Again, to quote Judge Judy, “If you tell the truth, you don’t have to have a good memory.”

• Engagement:  There are always going to be participants who choose to do the bare minimum in order to get their incentive.  However, a lack of engagement and openness—coupled with any additional red flags—requires some investigation.  Is the participant just taking the easy way out by answering questions in as few words as possible, or are they skipping key questions altogether?  Skipping key questions (e.g., “Tell us what you like best about product X”) could be a sign that they really don’t use product X after all.  Again, it’s important for the moderator to probe accordingly and if the probes go ignored … you guessed it … another red flag.

With online research (and plenty of Catfish) here to stay, we need to continue to be vigilant in crossing our T’s and dotting our i’s.  I, for one, am ready to catch them … hook, line and sinker.

Anne is CMB’s Qualitative Research Director.  She enjoys travel and thanks to DVR, never misses an episode of Judge Judy. Anne especially loves being able to truly “connect” with her research participants—it’s in her Midwestern blood.   

Learn more about Anne and her Qualitative Research team here.

Originally Published in Loyalty Management Magazine

Recent articles on the “new economics” of loyalty programs and the choices program managers face may be important to read, but many of them leave me bewildered. These articles warn that in the new loyalty environment, credit card companies will play an increasingly disruptive force as members seek reward currency that offers them more options. They encourage executives to restructure the currency to ensure its dominance, and some authors argue that cash-strapped firms should divest their loyalty programs to generate revenue for the company. 

I agree that if you manage a mature program, with a point or mile-based currency, you need to ensure your program offers a relevant currency with a competitive “earn and burn” structure. This currency and the associated promotions are table-stakes; a requirement for both acquiring and retaining valuable customers. But ask yourself this question: is a loyalty program where your primary focus is on the currency (and its economics) really supporting your customer loyalty strategy? 

In our opinion, real loyalty—the kind that spurs evangelization, incremental trips/purchases, paying a price premium—doesn’t come from delivering points. Your customers don’t buy from you because you give them points. They choose to buy from you because of the distinct value provided by your brand. The key problem with enhanced focus on program currency is that points and miles don’t reflect your brand or its unique value proposition—and won’t engage your passionate customers. 

So how can you ensure that your loyalty program IS supporting your loyalty strategy? 

Relevant communications: Reflect your knowledge of your members’ behavior and preferences in your program communications. I fly out of Boston: why does American Airlines regularly send me promotions on flights out of Chicago? 

Build out ‘soft benefits’ that reflect the brand: Consider why your loyal customers are passionate about your brand—why they choose to spend money with you and not your competitors—and incorporate supporting elements into your program. You can ramp up these “connective tissue” benefits as customer value increases. 

Consider ‘unpublished’ surprise and delights: Instead of revamping the loyalty program and listing all benefits on the web site, invest in delivering valuable customers an item they’d value on a one-time basis. The benefits are clear: you create good will with your most valuable customers. You’re also not raising the bar, adding to the arms race or increasing expectations. And, in today’s connected world, some of these “private gestures” will support positive comments on social-media channels. 

A few brands whose published loyalty programs reflect their brand value and underscore their unique selling proposition:

One hotel chain that excels at the special touches is Kimpton Hotels. The small boutique chain’s unique, fun, and socially conscious brand promise infuses everything, from their rooms to their website, to their loyalty program—InTouch, and their elite loyalty program Inner Circle. Their InTouch program offers traditional perks like free nights, but the preferences of loyalty members also get recognized—the hotels customize amenities (like pillow, newspaper, mini-bar) based on guests’ stated preferences. The rewards are more valuable for the Inner Circle members—those who stay 15 times within a calendar year—they include direct access to the CEO along with the more typical complimentary upgrades. 

While hotels have multiple touch-points for sharing their brand with their guests, retail stores can face more of a challenge. But Neimen Marcus’ five tier InCircle program clearly demonstrates an understanding of why loyalty program members choose to shop with them. The program’s benefits reflect their unique brand proposition and reflect the store’s deep understanding of their target customer —affluent shoppers who value luxury and a high-end shopping experience. Neimen’s rewards include perk cards which can be used for dozens of services including alterations, in store dining, monogramming and shoe repair. Rewards highlight exclusivity as well as the more traditional point based rewards. 

With truly vast amounts of data, Amazon could be content with offering suggestions based on previously purchased or viewed items—it’s no small thing to show your customers you know what interests them. But Amazon’s rewards program goes beyond the data warehouse, and while Amazon Prime isn’t free, the free or reduced shipping, and access to content, the Kindle lending library, where Kindle owners can borrow and read books for free, are powerful reminders of the value of the brand and strong motivators to encourage frequent shoppers to return again and again.

Judy is VP of CMB's Travel & Entertainment practice and loves collaborating with clients on driving customer loyalty.  She's the mom of two teens and the wife of an oyster farmer. Follow Judy on Twitter at @Judy_LC