Voices: the CMB Blog

Don't let your segmentation study languish on the shelf. CMB's Brant Cruz, shares the five C's of great segmentation socializers. Learn how to get your segmentation embraced and used by your organization:

Brant Cruz is our resident segmentation guru and the Vice President of CMB’s eCommerce and Retail Practice. Read more of Brant’s thoughts on segmentation here.

Along with millions of Americans-patients,doctors,lawyers and, politicians-health insurers also waited with bated breath for last week's Supreme Court’s ruling on health reform. Now that the Supreme Court has upheld the basic provisions of the law, health insurers face the challenge of understanding how traditional markets will be impacted by the individual mandate and implementation of health insurance exchanges.  

Even with the ruling, there is still much that remains unknown about the law’s impact, and significant uncertainty about how the law will be enforced in each state.  But there are still critical questions insurers must consider now as they adapt to a new era in health reform, including:

• How will this ruling and the establishment of exchanges impact company revenue and profitability?  Are there ways to take advantage of this ruling and increase company margins and revenues?

• How do we compete effectively in an open exchange?  If price is the key criteria to consumer decision making, is there a way to minimize its influence and yet be successful?

• Is there a need to re-examine the existing client base beyond the traditional demographics? Will an alternate classification help create a competitive advantage?

• How do we move beyond the traditional employer sponsored channel?  How can we take advantage of technological shifts?

• How relevant is the present communication strategy? Is there an opportunity to approach the future in a new, cohesive way that complements the product and distribution strategy?

Addressing these questions and mitigating the coming challenges will not be easy; surviving and flourishing in a changing market requires a truly new and innovative approach. We believe insurers must:

• Reconsider how they approach product development – the insurers who will be successful in this new reality will be those who are able and willing to stretch boundaries of what insurance products look like to meet the needs of the customers, including offering supplemental insurance, wellness programs, incentives and monetary gains for meeting health goals, etc.

• Go beyond traditional ways of looking at the market – motivations, attitudes, goals, and behaviors will become as, if not more, important to understanding and effectively messaging to insurance customers. Alternate classification of consumers could help insurance companies underwrite consumers in a more effective and efficient manner.  This could be especially advantageous for smaller insurance companies that cannot compete solely on price; perhaps it is time to start looking at a niche strategy. For a more detailed look at alternative market segmentation for health insurance, read our white paper: A New Approach to Segmentation for the Changing Insurance Industry.

• Embrace the leaps in technology – insurers must explore the possibility of reaching consumers directly (internet, smartphone, etc.), and simplifying the purchasing process.  A simple product lineup with an easy buying process can go a long way in increasing an insurer’s favorability rating.

• Consider a new messaging strategy – the health industry’s transition is a great time to consider resetting the existing image. Great products and great service need great messaging.  What are the goals people are trying to achieve? What is it that truly motivates them? What is it that truly sets us apart and does it add value to our customers’ lives? Is there a need to have specific messages to specific groups of consumers? Think about the answers to these questions. Insurers in the end must be able to convince consumers that they are partners in this journey and are mutually dependent on each other’s success.

Amidst all the uncertainty insurers are facing, we believe that to mitigate the uncertainties of the reform landscape, insurers will have to go back to the drawing board, rethink how they look at the market, engage in product development and address the fundamental goals of their customers. Insurers must recognize and leverage core capabilities that others cannot replicate. Competitive advantages stem from not one but from a series of strategic decisions. The correct mix of product, distribution, message and market coupled with inherent operational strengths (e.g., knowledge of a local market, ability to underwrite at low costs,  relationships with existing customers) can set insurers apart from competition and pave the way to long term success.

Posted by Amy Modini. Amy is an Account Director for CMB’s Healthcare Practice, when she gets the time she loves going to the beach with her two kids.

All seasoned business travelers have their share of funny or painful airline stories, and I’m no exception.  But a particularly memorable incident on a recent flight to SFO got me thinking, and it’s the genesis for this blog.

Long story short, I was sitting by the window and celebrating the open middle seat next to me when a 6’8” 350 lb. man shuffled down the aisle and plopped into it.  Our conversation went exactly like this:

Giant:  “I know, I know, I’m a giant. Sorry.”
Brant:  “I have to admit, I was chanting ‘not him, not him’ from the moment you walked on.  Sorry.”

From there the conversation (between my snores) was amiable.  And then, somewhere over the Great Plains, my new friend spilled cranberry juice all over his seat-back table, and himself.  Have you ever seen a man that size try to clean himself in an area that small?  Not pretty.

My mind ran with this incident, and I immediately started thinking about the seemingly ridiculous (to me anyway) amount of cranberry and tomato juice that is consumed on airplanes.  The data below is completely fictitious, but I bet it is directionally accurate.

 

Now, what does this have to do with market research?  Not much… but I’ll reach.

To me, the chart above segues nicely into a discussion of the differences between Market Segmentation, and Needs-State (AKA “Occasion-Based”) Segmentation. 

Market Segmentation groups people or businesses into mutually exclusive and collectively exhaustive (MECE) groups.  It is limited by the realities that people and businesses are complex, don’t always think or behave the same way all the time, and because of this any segmentation scheme is forced to be an over-simplification of reality.  However, despite these limitations, great market segmentation can provide businesses with a common lexicon to use to describe the audiences it serves, prioritization of who to invest in, and the foundation for understanding what to say and where to say it in marketing at a brand level.  Market Segmentation is great for setting strategy.  If I’m a cranberry juice company, I’m going to go after segments that drink a lot of juice (kids, active women in their 40s, health/energy motivated people, etc.)   But it is far less useful in some important areas … namely in identifying the best places to reach our core segments, what improvements to make, and how to grow our business beyond the core.  This is where Needs-State Segmentation comes into play.

Needs-State Segmentation groups together occasions (e.g., shopping trip types, travel trip types, usage occasions and information gathering moments) based on common needs, rather than grouping people or businesses.  While the Needs-States are mutually exclusive, each person/business can experience multiple needs states as they interact with the category.  Needs-State Segmentation has two major orientations:  purchase decision occasions, and usage occasions.  A segmentation focused on purchase decision occasions will break down all of the critical moments in the purchase funnel where the process of buying is impacted (from seeing a commercial on T.V. to chatting with a friend / WOM).  This type of segmentation will dramatically improve a company’s ROI on their integrated marketing plans by highlighting the most important occasions to hit and what to communicate in them.  In contrast, a segmentation focused on usage occasions will lay out all of the moments when actual product usage occurs and what distinct needs must be fulfilled in each.  This is the bread and butter of innovation for both short-term improvements within an existing line of products and for longer-term high growth innovation where a new niche in the market is identified (like when Red Bull figured out that it could target the mid-night clubbing need state rather than the afternoon-pick-me-up occasion).

Market Segmentation and Needs-State Segmentation complement each other.  I can only assume that cross-country flights are a unique need state, where multiple segments swerve from their typical behaviors and begin pining for bright red liquids.  The question here is do the bright red liquid companies know this?  And if they do, do they understand the need state deeply enough to take full advantage of it?

Posted by Brant Cruz and Lori Wahl, Brant is resident segmentation guru and the Vice President of CMB’s eCommerce and Retail Practice. Read more of Brant’s thoughts on segmentation here.

Lori is a former CPG marketer turned researcher, who now runs her own strategic qualitative research consultancy, BIGinsightz.  Lori is an expert in strategic market research, having built three best-in-class insight processes for her former company that drive product, branding and selling strategies.  You can reach her at BIGinsightz@gmail.com

The 2014 implementation of many of the Affordable Care Act’s (ACA) key provisions has sparked a great deal of speculation about the future of the healthcare market; there seems to be no end to the models predicting how the law will impact the insurance industry. There is no question that reform will shift the health insurance industry to a more retail based model, and in the process challenge traditional insurers to develop new consumer oriented capabilities.  A vital piece of planning for this shift will require understanding changes in consumer decision-making. The traditional approach of health insurers to segmenting the market is unlikely to provide the kind of insight necessary to win in an industry facing such fundamental regulatory, economic, and cultural change.

Traditional segmentation approaches cut the consumer market by demographics (e.g. age, gender) or funding source (e.g. who pays).  This approach was appropriate in years past when there was relatively little competition, differentiation, and when choice was limited. However, the insurance industry’s move to a more complex and competitive model requires a more nuanced understanding of customer needs and differentiators. The newly minted college grad indeed has different needs from their parents moving toward retirement or the young professional starting a family. This is proven out in some recent research we conducted.

To get a better sense of insurance consumers and their preferences, CMB and the South Street Strategy Group analyzed the responses of nearly 1,500 Americans over the age of 18, surveyed as part of CMB’s Consumer Pulse Program.  We then segmented the market by plan features and found five distinct segments that illustrate the needs and goals people have for their insurance coverage.

The segments we found are defined not solely by age or insurance source but by the needs and goals people have for their insurance coverage, and provide far more insight than traditional methods. For example one large segment, who we’ve termed “e-Patients” are the most interested in managing their healthcare or “visiting” their doctor online.  They’re price sensitive, want out-of-network coverage and are willing to switch primary care providers to get the benefits they want. Knowing the attributes of this and other significant segments of the insured population is invaluable to insurance providers who are facing an increasingly customer-centric industry.

To learn more about our approach and see more detailed profiles of the other segments click here.

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. 

I’m always looking for some angle that allows me to marry my love of sports with some at least tangentially-related topic from marketing research.  This one I think is actually pretty good.   Tebow is a media lodestone right now, and segmentation… well, that’s about my favorite topic (outside of sports and food).

Without further ado…

There is no shortage of skeptics when it comes to either segmentation, or Tebow.  Segmentation studies (not mine) are notorious for providing “interesting” but ultimately useless information.   Similarly, Tebow has been dissected and criticized by a myriad of experts, including draft gurus Mel Kiper Junior and Todd McShay.

Neither segmentation nor Tebow are about perfection, but about increasing your odds of winning.   Given each individual is unique, the only “perfect” segmentation scheme would have one segment per member of the population.  So given perfection is impossible, segmentation becomes an exercise in finding a scheme that dramatically increases your chances of “winning” with individuals through differentiated treatment of the groups (e.g.,  better products and/or marketing messaging and/or targeting).  Similarly, Tebow is far from anyone’s epitome of NFL QB perfection.  He’s too short, too stocky, and has lousy mechanics.  But he’s a proven winner at the NCAA level, and Denver is 6-21 in Kyle Orton’s last 27 starts.

 

 

Both Segmentation and Tebow are about leadership and both can change cultures.  Strategic segmentation (when done well) can change organizational cultures by defining which segment(s) a business will “live for.”  Better understanding your most important segments of customers and prospects helps define what their North Star is, and can result in dramatic changes to everything from product offerings to how your company is organized.  It provides a foundational roadmap for where a business needs to go and why.  Similarly, Tebow’s greatest strength is his leadership.  His quiet and humble confidence is infectious, as witnessed by how universally (with the notable exception of Brandon Lloyd) both sides of the ball rallied around him before and during last Sunday’s game.  In the matter of a week, the Broncos went from a team mired in failure to one with a lot of hope.  (Yes, I know, we can thank the Dolphins for that too… but cut me some slack here).

Segmentation and Tebow will both take time and dedication to succeed.  Segmentation is foundational, and therefore should not be rushed.  It takes time to create the instrument that will allow you to uncover and profile the most actionable segments, and time and effort analyze and evaluate the data too.  Similarly, Tebow is a work in progress.  For 50+ minutes on Sunday, Tebow looked like he had no business playing QB in the NFL.  He was woefully inaccurate, and he was uncomfortable reading the defense.  It’s possible that his mechanics will never improve, but Tebow will never stop trying to get better.

Segmentation and Tebow are both partially defined by faith and abstinence.   Unlike some market research studies where the results can be very clear and prescriptive (e.g., the most profitable product configuration and price from a conjoint-based study, or choosing the right product positioning from a monadic concept test), segmentation is usually the beginning of a journey rather than the end.  Action either requires more research on the most important segments, or some leap of faith to decide to (for instance) create new messaging based on their motivational profile.  It also requires abstinence in that segmentation is almost always about who you don’t (proactively) focus on as who you do focus on.  No company can be all things to all people (or businesses), and the decision to walk away from some audiences is hard.  Like Tim (who credits his faith for the strength to resist temptations that have kept others in his position from reaching their potential)—it’s important to focus on your goal, and avoid distractions that might sidetrack you along the way.

In a nutshell, both strategic segmentation and Tim Tebow are potential sea-changing initiatives that can have major impacts on the organizations that undertake them.  Risk free?  Absolutely not.  But with the right time, effort and coaching they can both pay off big time. 

Posted by Brant Cruz. Brant is CMB’s self-proclaimed Segmentation Prophet.  And, he’ll be rooting hard for Tebow to succeed (except when he plays either of Brant’s fantasy football teams or his beloved Chicago Bears).