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Market Segmentation at Dell: 7 Questions with Dell's Barry Jennings

Posted by Chris Neal

Wed, Jan 13, 2010

Chris Neal and the CMB team recently completed a segmentation of the server market for Dell.  The following is a brief Q & A with Dell's Chief SMB Researcher, Barry Jennings, discussing his thoughts on segmentation and working with CMB.

CMB:  Based on your experience, what are the key determinants of a "successful" segmentation project for Dell?

The key to successful implementation for us has been a very early commitment to change. I have been at Dell way too long and I have done segmentation a number of times. When it comes from the perspective of "this is a great idea, we should go do it and then figure out what happens," it usually fails. When it comes from a perspective of "we don't understand what's going on, but this will help us frame things out and better deal with it," that does not work either.

But when you go into a segmentation exercise saying "there are a lot of unknowns out there and we need to better understand and check out the market, we don't know how we're going to change, but we are very committed to change based off of what we learned in these key areas," that makes a very meaningful difference.   It allows you to bring people to the table who may not really care as much about the research, but they absolutely care about what the research drives.  That is how you get through to the organization and get people to take action based on what you've learned.

We did that with this segmentation working with Chadwick Martin Bailey and it worked out quite well.  There is a strong cross organizational commitment to embracing these segments. It didn't matter what the segments were, or what the agenda was to begin with, we are now committing to this framework.

CMB: Clearly there has to be a real connection to the business- not just conducting segmentation for segmentation sake, have you seen people make the mistake of running segmentation too frequently?

In the past, there have definitely been times when we used segmentation way too much or in too niche a way, and we have also at times done it too frequently or done it for the wrong reasons, so absolutely. Yes.

CMB:  What are some of the internal challenges of coordinating segmentation and what advice would you give in managing those challenges? What role can partners such as Chadwick Martin Bailey play in that process?

First up is commitment, just getting the executive to say, "This is going to be our new gospel."  We had a senior management team that really held the organization to the fire in doing this. We quickly brought in the CMB team to be a part of the process very early and very broadly.  We had kick off meetings with folks from engineering, from environmental design, from product development and from marketing and advertising. Many of whom who won't utilize the results for a very long time and not in their initial form but whose input and commitment was needed. 

For example, the raw segmentation was interesting to my advertising people, but segmentation with the personas and with the perspective around messaging is what they really need.

Bringing them into the very first kickoff allowed the CMB team to hear how we were going to deploy and implement the findings, or hoped to, and we factored that into how the segmentation was built. That way we didn't have to crash through any walls to get people to accept it later on.  You are still going to have to explain it but you're not going to have to bend the arms of people to accept it. We have had issues with that in the past because they didn't have any sense of contribution or ownership of the process. Having the CMB team come here and spend a whole lot of time In Austin to help figure some of these things out and do the working sessions, while exhausting at times, led to a very good result.

CMB: I would imagine that goes much further than designing the questionnaire, it’s really thinking through the whole project and its implications?

Absolutely.  CMB had to learn our business, or at least learn how we learn our business, which is key because like other server manufacturers, we work with parts from Intel and software from Microsoft so we need to know how everyone else works and act accordingly. That said, Dell operates the business with our culture, our focus on the customer, certain geographical focuses, certain ways we choose to build our product, certain channels we use, etc. When you factor all of that in it creates a whole lot of variables that needed to be thought through and considered as we designed the segmentation.

CMB: You talked about doing a lot of segmentation over the years.  What do you think are the biggest differences between conducting business to business and business to consumer segmentation?

I mainly do B to B and I like it a little more because in my opinion it is more real, more grounded and I believe that it is easier to see the actual usefulness within our organization.  I think on the consumer side, it can be more fun, sexier, more foundational in nature, and it is definitely something that you build off of, but it’s a little bit further from the direct action.

Usually in a consumer segmentation you have way more segments.  You have so many variables to consider and you are trying to reduce your focus.  In the B to B world we generally end up with fewer segments and probably have a solution that fits in every segment.  It is then more a matter of modifying your tactics and strategies than fundamentally changing your business.

CMB:  I know the server segmentation was a pretty recent project, but have there been things that you have been able to do already that have put that research to use?

Yes, we have already used the segmentation in product design decisions and we are using it in targeting decisions as well. We have also taken the profiling questions and scored them against the database of current customers and are using that to improve how we approach customers.

CMB:  Last question, if someone was considering or if you are considering a segmentation provider what do you think are the key things to look for?

It’s all about the people. 

I have been in research for 21 years.  I have been at Dell for 14 of those years and it almost always comes down to the people. Everybody is smart.  Segmentation is as much art as it is science. And generally speaking, everyone uses the same tools. Take that away and it just comes down to what type of team is going to show up, how well we are going to work with them, how well are they going to listen to us, how well they factor in our quirkiness, etc.

And in reality, we have worked with vendors that say, “Here is this other segment, you guys should really have a Dell branded store and have a Dell branded store on every corner to capitalize on it.” That tells me you don’t understand my business, you don’t know our legacy and it’s not that it’s a stupid idea but a recommendation like that would have to have a massive caveat.

You need to understand who we are and what our heritage is.  I think having people like Chadwick Martin Bailey who listen, who spend the time, and who are more than just methodological  purveyors understand your business is key.  Because at the end of the day, the methodology is very necessary and it yields a result.  What I’m really paying for is the result and a whole lot of other things factor into that beyond the methodology.

 CMB: Thanks Barry



Topics: technology research, Chadwick Martin Bailey, B2B research, Researchers in Residence, market strategy and segmentation

5 Questions with Electronic Arts' Stephen Day

Posted by Brant Cruz

Tue, Jan 05, 2010

t the 2009 Shopper Insights in Action Conference, CMB’s Brant Cruz presented alongside Electronic Arts’ Stephen Day on how EA has adapted their strategy to the changing “gamer” marketplace.  This session explored the rapidly changing dynamics of the gaming market and how Chadwick Martin Bailey and Electronic Arts worked together to build a foundation for developing new strategies.

   •  What the gamer market looked like 5 years ago and how it looks today

   •  The impact of the Wii on the gaming category as a whole

   •  What EA is doing to adapt with EA Fitness

   •  The role of research in developing their new strategy

Following the session, Stephen was kind of enough to sit down for a quick interview on the topic. 

CMB:  What were the big takeaways from your presentation?

This segmentation really helped us define and refine what we are doing on this specific product (EA Fitness) in the marketplace.  For this product in particular, we didn’t have a whole lot of data about who we should market to, who these people are, etc., so it really helped us not only really understand this marketplace and market to them in a way that makes sense. 

CMB:  One of the things you talked about was using in home ethnography on the front end and the quantitative ethnography on the back end, how did you merge those two information sources together?

The qualitative was really used more to guide the product development and refinement phase, along with some demographic information.  We used the data from that to help our product development efforts.  With the segmentation we incorporated some product development components but really looked down the line at the product development roadmap to match key segments with new innovative products once we’re out of the gate with this initial offering. 

CMB:  Was there anything in particular you think made this segmentation particularly successful or useful?

The segmentation for us, at a holistic level, was exactly what we needed.  We didn’t know a lot about the fitness marketplace in general.  We had ideas and hypotheses but this helped us clarify the internal thinking about where we need to go and what we need to do.  And it really helped us map out the future of this product line. 

CMB:  Now that you’ve launched EA Fitness, how will you use this information?

We’re definitely going to use it.  Going forward we’ll be looking at some of the specific segments you (CMB) recommended as high priority segments that we can develop products for, and market to effectively.   It is definitely going to help us clarify the roadmap for future product development and product market strategies. 

CMB: As we wrap up here at the Shopper Insights in Action Conference, any big takeaways you can use?

The one big takeaway for me and for us as a company is that we really need to do a bit more research that enables us to get into the mind-set of the shopper.  We haven’t done a whole lot of work in that area.  Our work is primarily focused on product development and product marketing, but given the status of the economy and changing times I think it is more critical now to understand consumer behavior at the point of purchase so we can design the best products and services for them.

CMB:  Thanks Stephen!

Topics: product development, Researchers in Residence, market strategy and segmentation, digital media and entertainment research

5 Questions with Wachovia's Dan Gilbert

Posted by Jim Garrity

Wed, Sep 10, 2008

Wachovia approached CMB in 2006 with a strategic goal of learning more about how to best tap into the small business market. The result was not just a research project, but a partnership that created a Small Business Advisory Board. Responsible for helping to support the strategic direction of the company, Wachovia’s Insight & Innovation team’s primary objective was to conduct frequent ongoing market research with a prequalified target audience who could provide behavioral data. Originally, the team wanted to recruit between 800 and 850 people, approximately 550 customers and 280 prospects, to participate in the online panel. The following is a brief Q & A with Wachovia’s project leader, Dan Gilbert.

What drove you to launch this project?

We recognized a need to better understand the small business market; the challenges they faced, what they wanted and what they needed from a financial institution. We wanted to hear the opinions of small businesses, understand their use of financial services channels, and use those insights to develop new products and services to meet their needs.

What was the outcome? Was it successful?

Overall this has been a very successful, very effective project. We’ve been able to make better decisions as a result of this work. We continue to gain insights from this project, and have been improving products and services for our small business customers.

Can you describe your role within Wachovia? How important is market research to the company?

I work in the company’s Insight & Innovation department, which is part of Wachovia’s Marketing division. Insight & Innovation is responsible for providing insight, and really foresight, to senior management. We are proud of the fact that we are a trusted source of information to help drive the strategic direction of the company. The need for the information we provide has become more and more critical in our business; an increase in the rate of adoption of new technology is one example why. So, we need to stay at the forefront of these changes and our work helps the company do that.

What about your relationship with CMB?

CMB was new to me. My colleagues have worked with the firm but this was my first experience. I was aware of their reputation for strong quantitative work, but this project gave me the opportunity to work with them on both quantitative and qualitative projects. I would say the relationship was and is a very good one. I challenged CMB, pushed them at times, and they challenged me as well. It was a very good thing. The give and take allowed us to learn from each other, resulting in a better outcome for me. I really appreciated the way CMB was a true partner in the process, not just a vendor, but a resource for ideas. CMB was flexible and delivered well thought out proposals. They are a valued resource for Wachovia.

Do you have any advice for others who might engage in this type of project?

Yes: be prepared. The panel had our name on it, which was the right thing to do, but it did expose us to a bit more risk. We had to be ready to deal with complaints, service inquiries, and other types of customer service requests because Wachovia’s name was on the door, so to speak. Wachovia is very proud of its reputation for excellent customer service, so the expectations were high, as they should have been. I would also recommend that you have a plan for refreshing the panel membership before you begin. We created a plan later, but the results would have been better had we started that process sooner.

Topics: strategy consulting, financial services research, Researchers in Residence

Segmentation at eBay: Reaping the Rewards

Posted by Brant Cruz

Sun, Sep 09, 2007

Segmentation has traditionally been a key component of eBay’s business strategy. Through segmentation research, eBay has continuously identified opportunities to introduce new services and products based on an in-depth understanding of customer needs. What follows are 5 questions with Meg Sloan, former Director – Market Research at eBay, about the benefits of effective segmentation.

CMB: Over the last few years, you have done a lot of segmentation work. Why is segmentation so important to eBay?

Meg: Segmentation is important to eBay for a variety of reasons. eBay is a very big ecosystem – in the U.S. alone we have around 26 million active users of our Web site. Realizing that nobody who comes to eBay is the same, we need to have an understanding of how our customers are different and then tailor the experience to them. Precisely because eBay is such a huge ecosystem, we recognize that we cannot be successful trying to be everything to everyone. Segmentation, in combination with our own internal data, allows us to understand and think about what we are for whom, how we are going to move the business forward, and what we choose to do in terms of changes to the site or the business model in general.

Segmentation is also very important to our sellers. We recognize that as a marketplace our sellers are the people who deliver great experiences to buyers. So at our ecommerce forumin 2007 we shared our segmentation data with our top sellers, in return empowering them to then deliver experiences that our customers really value.

One of our goals was to have the ability to take our attitudinal segments and apply these, with a scoring, to our internal data. I am happy to say that with the help of Chadwick Martin Bailey and great analysts at eBay we were able to get this accomplished.

CMB: Can you describe how segmentation has evolved at eBay over the past few years?

Meg: Certainly. Segmentation has definitely evolved over the past few years, and it will be a constant evolution for us as we get more and more sophisticated in terms of how we use segmentation. If we go back to 2003, we really had a single basis for segmentation, focusing mostly on behavioral-based, survey-based segmentation, as well as industry standards like VALVE and RFM – and because of this its shelf-life was limited; it just wasn’t stable over time because the way people use the web is ever-changing . Over the years, we have recognized that one basis for segmentation is not enough of a view for such a complex business in order for us to make the segmentation actionable. So one of the things we have done with Chadwick Martin Bailey is to understand segmentation across multiple bases. The goal now is to create the most relevant and actionable segmentation for our business by combining internal and external data (such as behavior, attitude and value) with multiple survey bases.  

CMB: How has segmentation changed the way that eBay currently conducts business? 

Meg: It has definitely changed the way that we think about our customers. A few years ago we thought about them as a more homogenous set. We thought about what people came to eBay for and what they did – but we did not have a complex enough understanding of who our customers are and what motivates their purchase and what kind of attitudes people have about shopping in general.  Now we have a much deeper understanding of our customers and this knowledge informs many aspects of our business, ranging from thinking about new ideas, proposing new initiatives and implementing service standards. The majority of our employees, and especially our most senior executives, also know what segment they personally belong to and will frequently reference this information when putting forth their thoughts.
One significant result of the segmentation work with Chadwick Martin Bailey is the understanding that a large portion of our customers absolutely love to shop and view the experience as a form of entertainment. Our site will increasingly cater to this group of shoppers who view shopping as fun and love to get great deals. Customers can get a preview of things that are coming at www.eBay.com/playground, which reflects our understanding that for many of our customers shopping is a fun hobby. We have introduced a new feature called “DealFinder” that allows people to find great deals that are ending now on really popular items – something else that segmentation clearly tells us that our target customer values.

CMB: eBay has a wonderfully large database of customers – and one of the big benefits of a large database is the ability to map people in the database to membership in a particular segment. How are you using the information in the database today and how do you plan to use this information in the future?

Meg: One of our goals was to have the ability to take our attitudinal segments and apply these, with a scoring, to our internal data. I am happy to say that with the help of Chadwick Martin Bailey and great analysts at eBay we were able to get this accomplished. Now we are beginning to incorporate the analysis into a variety of different aspects of our business. For example, we will be able to analyze our customer support data including the attitudinal segments, so that we understand the type of customer who calls, the type of problem that he or she is experiencing, the resolution that we provided and how this relates to the customer profile in our segmentation. In the end we will be able to tailor our response to our customers in a way that strikes a chord with them based on their specific shopping profile. 

CMB: If you could think ahead a couple of years, and reflect on the segmentation legacy at eBay – what would your biographers say about the role of segmentation at eBay and, in particular, your role – and the role of Chadwick Martin Bailey – in driving it? 

Meg: The one thing we have not touched on and that I am very proud of is the approach that we take to segmentation. From the beginning, we took a “do it right vs. do it fast” approach. We started with the end objectives (i.e., specific business decisions we wanted to make) in mind and certainly calculated every decision based on that. We also approached the project in a very global way – with a global team – making decisions that made sense for our biggest markets. Because of the approach we were able to expand segmentation beyond the original set of 3 countries to a set of 8 countries.
The success of the approach has meant that we could apply it not only to buyers, but also to the other major components of our company: sellers and the motors business. It has taken us about a year to feel the full impact of the segmentation and the scoring of the data warehouse – and we are only beginning to feel the true impact. The results are telling though because our approach is careful, decision based and global.  And, last but not least, we have a lot of fun on the way, which is very much the eBay way of doing things.
Thank you very much!

Topics: Researchers in Residence, market strategy and segmentation

The Truth about Loyalty Programs: Five (or so) Questions with Adam Burke, Senior Vice President and Managing Director of Hilton HHonors

Posted by Judy Melanson

Sat, Jul 28, 2007

CMB: How would you describe the importance of the HHonors program to the Hilton Family of brands?

Adam: I think there are two ways of looking at it. First is the historical competitive reality of the market and second, how you most effectively utilize a loyalty program.

Over the past few years, loyalty programs have become a key differentiator that gives customers a reason to consolidate their stays with us no matter what market they are in. So its a function of being a competitive necessity, but ultimately what makes it important is how cost effectively you can leverage the program to generate incremental stay activity. And that to me is central to it.

The importance of it to the Hilton Family is several fold. First of all, contextually it puts an umbrella over all of our brands and gives people a compelling reason to choose a Hilton Family brand no matter what market they are in.

Second, it is important because they have been able to quantitatively demonstrate there is sizable incrementality associated with members of the program so we know we are capturing incremental market share.

Most important is that the program is really a device by which we can enter into a relationship with our customers and we want to know about them as much as they want let us to know about them. So it is very much customer driven but to me it is vital because the competitive battle ground of the future is that all of the hotel companies are trying to cultivate relationships with their best guests. It is not just what information we have learned, it is how effectively we use that information to truly personalize the guest experience across every touch point. Thats why the program is so vital because it gives us a platform to really engage and deliver a customized experience for our best guests.

CMB: In past strategy sessions, we have talked about the need to set the term loyalty program aside and challenge people to focus on best guests, and think about the role of the HHonors program in providing for them.

Adam: Thats right, absolutely. Were not just focused on a program anymore. The biggest change is that I dont think that you could say that the program exists separate and apart from the branding work. The program is now a core brand attribute, just as any other feature of the brand value proposition is. And that our focus internally is best customers, not just best guests or members, many of whom are part of the program, but there is a sub-segment of those who are not. The objective is to utilize an engaged customer strategy across all best customers

CMB: Regardless of whether or not they are members.

Adam: Correct.

CMB: How has the program evolved over the past few years?

Adam: It is really a continual evolution. The biggest shift has been away from any singular message points and toward a customer-drive approach. Historically, I think that all of the programs relied on one key selling message. For Hilton HHonors it was points and miles. I think that as technology has finally caught up with customer expectations to the point now where can now deliver against the personalized choices that our customers make that yes, there are still some broad consumer facing messages that we use, but we have definitely moved away from a mass market general media approach towards much more of a segmented, direct communications approach including the offers that we make to different customers.

CMB: For example?

Adam: Whereas five or six years ago, we might have put out a promotion that would be – for a certain period of time there would be double points for everyone. The challenge with that is invariably that when you offer that across the board there will be some degree of cannibalization, because youre going to offer it to people who would have stayed anyway, you have no ability to really target it, it is difficult to really measure the incrementality of that offer, and it is very expensive to run. What we have been able to do instead is to develop a very rich segmentation model that allows us to say, Okay, lets offer different offers to different customer segments through direct channels where the offers that were putting in front of different segments are particularly relevant to them. The result is that we have seen a substantial return on our investment because were able to differentiate the offers by audience.

CMB: Looking towards the future, you talked about an evolution of the program, where do you see it 3-5 years down the road in terms of customization? Or are you reaching a point where it is more as an issue of execution than evolution?

Adam: You hit the nail on the head when you talked about the importance of execution. I think the programs that are going to be the most successful are those that are able to consistently and exceptionally deliver against the customer promise. Rather than our customers having to try to weave through the maze of information that is out there in our industry, which – lets face it, is very cluttered in terms of what all the programs offer I think that youll see that the HHonors program is going to be very differentiated by virtue of three things – simplicity, flexibility, and acceptability to our audience.

CMB: What role has research played in the evolution of the program?

Adam: I think research is absolutely fundamental to our efforts. We are very much driven by the voice of the customer and that it has been at the heart of how we have refined our program continually over the past decade. I would also say that there is a balancing act here. Research has been absolutely central to our strategic and tactical decision-making. Increasingly, however, we have relied on both traditional research methodologies and virtual communities to try to strike a balance between using research as a means of validating assumptions and learning about customer preference, while at the same time being more aware of emerging trends and trying to be at the forefront of innovation. Hopefully we can provide customers with things that they might not have even envisioned yet.

CMB: What challenges do think programs like HHonors will face in the future?

Adam: To be honest, remember that famous quote from Walt Kennedys Pogo Weve met the enemy and he is us? The biggest threat to ourselves is ourselves. It comes down to delivery and execution. I am confident enough in our strategy that, if well executed we will be highly successful. I think the greatest challenge by far is consistency and quality of execution.

CMB: Given that all of the big players have relatively viable programs, how do you steal market share? Does another company have to fall down on the execution to create opportunities for HHonors?

Adam: I dont think it is just about execution. It is about having the vision to stay with a long-term strategy based on who your core audience is. There is an inherent danger that in trying to personalize you can also try to be all things to all people. If you talk about additional challenges, one is that the clutter in the industry lacks a common currency across programs. Other than the most frequent travelers, a lot of people are still confused as to which companies offer what. We need to simplify the message to the point where customers are very clear on what differentiates us from the competitive set and in terms of a longer term strategy – it is ultimately a share of wallet game among the audience that is already out there and it will be a function of how we address emerging geographic segments like China and India and emerging demographic segments like the Baby Busters, Gen-X, Gen-Y. I think its going to be a matter of how adaptable we are in addressing those audiences in a way that doesnt take our eye off of our core audiences.

CMB: You talked about simplification and sticking to a strategic plan, what additional suggestions do you have for someone managing or setting up a loyalty program?

Adam:  First and foremost… Measure. Measure. Measure.

CMB: Good Answer!

Adam: Thats the biggest issue. If you want to maximize the return you should only field initiatives for the most part – I say the most part because you should be willing to accept some degree of risk taking and some qualitative, gut-feel initiatives but anytime you are going to try something you should be merciless about committing up front to what metrics will determine if something is successful.

Part of that also is being adaptable enough to recognize that as we go into a more personalized strategy it gets more difficult to determine which attributes of a program are specifically driving the decision. Because it is wonderful to say that factor x is most important to someone, but for most people it is going to be a combination of factors that make up the value proposition. You have to have a willingness to see your metrics evolve over time, see what is most appropriate to measure, and also look to methodologies like Discrete Choice analysis. Because if you rely on directly asking the customer what they want, it is going to be very difficult to come up with meaningful, directional input.

So, Id say its measure, measure, measure, have an openness to revalidating and modifying your measurement over time as necessary, look at Discrete Choice analysis as a key means for identifying what is most important, and make sure that you are continuously letting your owners, operators, whoever your key constituent groups are, look under the hood and know exactly what you do, how you do it, and why you do it. Ultimately, loyalty program managers depend on execution. If they dont have both support and more importantly, understanding of why we do what we do, youll find that there is not much commitment and buy-in to doing the necessary things to execute flawlessly at the business unit level.

Topics: strategy consulting, Researchers in Residence, customer experience and loyalty