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Segmentation Best Practices

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Chadwick Martin Bailey’s Brant Cruz and Jeff McKenna presented best practices of market segmentation based on their years of experience working with clients like eBay, Electronic Arts, Plantronics, and Microsoft.

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Segmentation Best Practices

  1. 1. Segmentation Best Practices Rules of Thumb for Effective Segmentation and Three Case Studies April 29, 2010
  2. 2. Today’s Webinar • Who is Chadwick Martin Bailey? • Today’s Speakers • Segmentation Best Practices • eBay Buyer Segmentation Case Study • GE Healthcare Case Study • EA Sports Case Study • Q & A (please enter questions into the webex Q & A feature and we’ll answer them at the end) 2
  3. 3. Poll Question #1: What is Your Biggest Challenge to Successful Segmentation Projects? A. Convincing the organization to prioritize some segments over others B. Creating internal buy-in C. Getting information used by front line employees D. Naming the segments E. Keeping the segmentation “fresh” F. Creating globally-relevant segmentation G. Sizing the segments H. Back strains associated carrying with 100+ slide .ppt decks 3
  4. 4. Chadwick Martin Bailey: Company Facts • Founded in 1984 • 55 Employees • Headquartered in Boston • Global, Full-service Provider • Fully Dedicated Retail, eCommerce, Technology, Financial Services, and Travel and Hospitality Practices • Sweet Spot: when you want a supplier who will provide original ideas, not just a response to an RFP 4
  5. 5. Our Clients: We Partner with Leaders in a Range of Industries 5
  6. 6. Chadwick Martin Bailey: Our Specialties Finding the high potential growth opportunities and providing Segmentation direction on ways to realize the growth Customer / Brand Driving customer acquisition and market share by linking customer Experience experience to the brand message Product and Service Research to support the development, positioning, and launch of Development new products and services Customer Experience and Research to enhance (retain and build) relationships with key Loyalty customers 6
  7. 7. Today’s Speakers: Brant Cruz and Jeff McKenna Brant Cruz Jeff McKenna Vice President Senior Consultant Chadwick Martin Bailey Chadwick Martin Bailey 7
  8. 8. Segmentation Best Practices
  9. 9. Poll Question #2: Your Last Segmentation Was Like Which TV Show? A. Cheers: Great when it was done and lived on successfully after the fact B. Lost: It was complex, oft confusing, and enjoyable - and you’re still hoping that it ends well C. Two and a Half Men: It was fun while it lasted but ultimately useless D. American Idol: Picking a scheme became a popularity contest, not a merit contest E. The Jay Leno Show: The findings were good on paper but it didn’t quite work in reality F. All in the Family: The core team was happy with it, but the rest of the company thought you were “Meatheads” G. Buffy the Vampire Slayer: Just one nightmarish scenario after another H. The Hills: Lots of style, very little substance I. This is a stupid question, let’s move on
  10. 10. There Are Several Approaches to Creating Customer Segmentation Attitudinal / Psychographic or Lifestyle Behavior- Demographic / Based LifeStage usage patterns and purchase / sales volume Feature Preference Geographic / Household Motivational- Based core needs, attitude, or barriers 10
  11. 11. Best Practices of Segmentation: Rules of Thumb for Best Results • Start with the End in Mind: Determine how the segmentation will be used before you begin • Allow for Multiple Bases: Take a comprehensive, model-based approach, that incorporates all potential bases • Have an Open Mind: Let the segments define themselves • Anticipate Tradeoffs: Segmentation schemes have different strengths and weaknesses • Leverage Existing Resources: Harness the power of your internal databases • Create a Plan of Action: Focus on internal deployment from the start 11
  12. 12. Start with the End in Mind: Create a Plan And Stick To It Business Decision Information Needed to Decide Choose the optimal • What are the needs, goals preferences, experiences, knowledge, barriers, occasions #1 segmentation scheme/ which and characteristics for agents and consumers? high potential segments to • Which basis for segmentation will strike the best balance between being predictive focus on of preference/behavior and reachable, scalable and sustainable? • What is the size of each segment? • What is the realistic potential for each segment? Align Marketing / Sales • What are the needs, goals preferences, experiences, knowledge, barriers, occasions #2 strategies with target and characteristics for agents and consumers? segments • Where is there disconnect between current marketing/sales activities and the facts above? • What are the “Themes” (product groupings; others?) that run through the segments? • Which positioning will best resonate with and motivate each segment? • Which segments should be served by sales staff? • What are the preferred marketing/sales communication channels, by segment? Choose high potential new • Which new products/services have the greatest potential with which segments? #3 product/service concepts for • What “permissions” will be granted by each segment? further development 12
  13. 13. Allow for Multiple Bases: Account for Everything that Might Influence Behavior 2 4 Customer Goals Products/Services Competitors 1 Unmet Needs Preferences Image Value Drivers Competitive Position Initial Purchase Re-purchase (Loyalty) CHARACTERISTICS Cross-Purchase (Loyalty) Psychographics Advocacy Attitudes Relative Brand Knowledge Choice Behaviors Demographics Value Values Lifestyle Relationship Performance Staff Satisfaction Expectations & Problems 3 Availability Product Support Services Channel Features Competitors 13
  14. 14. Have an Open Mind: Let the Segments Define Themselves Segmentation Criteria INDEPENDENT PROFILE & EXPLANATORY MODEL USE OF SEGMENTATION ANALYSIS SCHEME EXPLANATION OF LINKED TO BUSINESS DECISIONS SEGMENTATION BASES IN Q’RE SEGMENTS Company View Prospect View Goals & Needs Optimization Hierarchical Company View •Mission •Specific Performance •Market Strategy Goals Occasions & Gains Narrows Goals (Acquire, Re- (Needs) Decision Making (Needs) sell, Cross-sell, many •Market Strategy new products, potential (Acquire, Re-sell, advocacy) Behaviors & schemes And/or Cross-sell, new Behaviors Behavior down to a Matrix Behaviors products, •Value Intentions few that advocacy) Behavior work Proposition(s) Behavior Intentions Intentions •Value •Pricing Strategy Preferences for Proposition(s) Decision products & Decision Making •Tactics pricing models And/or Making •Pricing Strategy Communication Clusters Performance Expectations s Performance Expectations •Tactics POP Company & Communications Product Competitor Operations Portfolio Evaluations Product Portfolio Channels Channels Sales Sales Characteristics 14 COMPANY PROSPECT
  15. 15. Anticipate Tradeoffs: Solutions Will Have Different Strengths and Weaknesses Clearly Defined Marketing Strategy Database Scoring Addressable Targets Clarity Accuracy Scheme 1 Scheme 2 Scheme 3 Scheme 4 15
  16. 16. Create an Action Plan: Involve Stakeholders Who You Need to Buy Into the Results AGENDA ITEM 1 AGENDA ITEM 2 AGENDA ITEM 3 AGENDA ITEM 4 AGENDA ITEM 5 Introduction & Segmentation Defining the Hypothetical Segment Confirm Project Warm up Basics & Process Business Decisions Brainstorming Alignment (15 minutes) (30 minutes) (1 hour) (1.5 hours) (45 minutes) • Name • What is it? • Explanation of Business • Goals: to accelerate the • Review original • Title • Why do you do it? Decision Worksheet questionnaire design process; proposal and anything • Stakeholders split up and ensure we don’t miss any that has come up from • Responsibility Area • Different types important segment-defining the previous steps into their core teams • Zodiac Sign • Different bases concepts • Do the sample groups (this does have a • Each team brainstorms purpose) • Guiding principles the decisions you want • Each team: brainstorm and sizes still make to make based on this segments you think exist sense? • Evaluation Criteria research, your current • Put each segment on a post-it • Are there new decisions • How long does it take? hypotheses, and note with some defining that must be made that • Where we’ll want information you need to characteristics are not covered in the involvement from the make decisions proposal? • Together, we brainstorm a broader team • Regroup and compare long list of measures that may notes; supplier define each segment for consolidates possible inclusion in the questionnaire 16
  17. 17. Create an Action Plan: Choosing the Best Scheme Is a Team Effort The “Mrs. Cavanaugh” Homework pre- and post- plane that allows you to get to know schemes we’ve narrowed down The “Daniel Webster” Start by letting anyone who wants to make a compelling case for their scheme The “Keanu Reeves” Force people to defend a scheme they don’t like The “Crossword Puzzle” Find segments from your favorite scheme hidden in other schemes 17
  18. 18. The Beauty of Predictive Questions What are they? How can I use them? 1. A short list of questions (1-2 minutes) • They are a tool that can live long after the segmentation study concludes, and can be used in a number of ways. Typically we see ? ? clients use them in… ? ? • Qualitative or quantitative follow ? ups to learn more about ‘target’ segments – such as ad testing, concept development, etc. 2. That feed an algorithm • Sizing target segments 3. That scores respondents into a segment 18
  19. 19. Poll Question #3: How Often Should You Refresh Your Segmentation? A. Every year B. Every 2-3 years C. Every 4-5 years D. Every time a significant change in your business occurs E. It should live on forever 19
  20. 20. A Few Details About Our Approach • Multi-faceted questionnaire • Multiple state of the art analytical • Allows us to look at multiple bases for techniques segmentation • Headlined by Latent Class modeling • And to profile them thoroughly • Backed up by CHAID/CART • Employ trade-off techniques • Efficient tools to quickly evaluate • Discrete Choice (a form of conjoint) every potential scheme and/or Maximum Difference Scaling • Magic questions and database (elegant in its simplicity) scoring for ongoing targeting and • Provides great variation on the increasing your knowledge base measures, and therefore great as a base for segmentation • Usually reserved for key real estate (like “needs”) • Eliminates by-country scale use biases 20
  21. 21. Comparing Approaches Issue Common Approaches Our Approach Benefits of Our Approach Trying to make the • Actionability is guaranteed because engagement is focused on Focus entire decisions from the start study relevant to Decision Making decisions after engagement on • Questionnaire stays on-topic and is focused business decisions the fact • Reporting is concise and relevant to business issues • Develop the best segmentation scheme from each base (and Focus on one base combination of bases). Evaluate them against each other along Segmentation Multiple bases of (e.g., a priori, needs / several key business criteria Base(s) segmentation preferences) • Benefit: we choose the best scheme without preconceived biases • Commonly used analytical techniques have advantages and disadvantages Analytical Use multiple Use single technique • Our experience shows the best segmentation may come from Technique(s) techniques any of these techniques; learnings from one technique can be used to inform the others Mathematical results Criteria for Choosing are the sole criteria Mathematical results • Actionability, Accessibility, Simplicity, and Consistency are also a Scheme (e.g., homogeneity of are only one input key inputs segments • We detail the best candidate schemes and discuss the pros and Final Recommended cons of each with you Is developed Segmentation Is dictated by you with you • “Selling” the results is easier; we work with you and your Scheme… stakeholders to determine the business criteria against which each solution will be judged
  22. 22. Making Segmentation Actionable A case study of Best Practices in action
  23. 23. Project Fast Facts • Planning • 10 group needs assessment interviews with 18 key stakeholders across multiple responsibility areas and 3 countries • 10 eBay team members where heavily involved throughout, representing all three markets • Questionnaire Design • Many iterations of the questionnaire, including 4 full days of onsite questionnaire planning and “finalizations” (Boston and London) • Shopping and Retailer Needs traded off using Maximum Difference Scaling • Data Collection • More than 20,000 interviews across US, UK and DE (25 minute online questionnaire) • Analysis • More than 20 schemes produced, profiled and evaluated by CMB • Using multiple segmentation bases and multiple techniques (Latent Class, CHAID, Hierarchical/K- Means) • Choosing the Winner • 3 Days in Berlin to discuss the 5 best schemes • 15 people, 8 structured exercises, countless debates 23
  24. 24. Bringing Buyer Segments to Life at eBay • Workshops and presentations to 2000+ employees • Incorporation of target segments into annual strategy and leader’s meetings • Employee online quiz with printable certificates • 80+ hours of ethnographic research create a documentary and personas • The “Ultimate Buyer Challenge” Offsite Program • Buyer segments shared with Top Sellers at Annual eBay eCommerce Forum 24
  25. 25. How Are Things Different? Outside of eBay • New Internal Lexicon: • Laser focus on the target buyer • Understanding who you are ‘for’…priceless • A lens to incorporate into testing and analytics • Data warehouse is scored! • eBay now has a Buyer Building • Buyer segments decorate the buildings & cubes • Segmentation extended to 8 total countries 25
  26. 26. How Are Things Different? Outside of eBay • New Advertising Campaign: • “Shop Victoriously” replaces “It” • New “Windorphins” campaign 26
  27. 27. Segmenting for New Markets A case study of Best Practices in action
  28. 28. … And long-term direction for future game development 28
  29. 29. Making Segmentation Matter Among Primary Targets Each group is profiled and named to attach a personality to the market segments as shown on the next slide Making it matter Group 1 Group 2 Group 3 Group 4 For me, both gaming and I am so happy I bought I'm your stereotypical I love gaming - however fitness is all about having the Wii! I would never gamer. I love video not quite as intensely as a winner and loser! EVER pay for that games! I'm the guy in Group 3. Rather than Segment Highlights expensive gym that line for the hottest new the challenge of a video Groups 1 and 5 and go to. release, and I spend a game, I'm more about fortune on technology. the graphics. A fitness alternative Products/Services that’s less expensive than to Build and Market the gym, that’s simple and convenient to do. Perceived cost Barriers to overcome When found online they are most likely on a Where to find them shopping site like 29
  30. 30. Graphics Greg THIS IS WHO I AM… Here we provide a profile of “Greg” in his own words. Segment size VALUE Likes, dislikes, media uses and gaming activities. Level of interest and spend High Segment profiles put a face on the segment in XX% % interested in “their own words” so information users can develop messaging and targeting strategies XX% EA Sports Brand Awareness: XX% product concept more effectively FITNESS ACTIVITY Level of fitness activity and types of activity High WHERE TO FIND THEM… Skew male (61%), middle-aged, and XX% % workout weekly or daily I’ll go to the gym as soon as slightly more likely than others to be I finish this FIFA 2009 in Germany (13%). game… the graphics are When online they frequent shopping insane! sites, weather sites, video sites, and Currently on a diet: XX% movie review sites. GAMING ACTIVITY Level of fitness activity and types Children living at home: 35% of gaming activity High XX% XX% XX% XX% XX% XX% AGE % play games 13-17 18-29 30-49 50-64 65+ weekly or daily GENDER 61% 39% CONSOLE OWNERSHIP COUNTRY 66% 9% 4% 9% 13% XX% XX% XX% Wii PS3 Xbox 360
  31. 31. Recommended Strategy 100% Future Product Consideration HIGH 90% 9% Interest: xx% 9% 7% Interest: xx% Interest: xx% 8% 80% Gaming Activity (% play weekly or daily) Gateway Product Interest: xx% 70% 15% Interest: xx% 60% 50% 13% LOW Interest: xx% 40% 40% 50% 60% 70% 80% 90% 100% LOW HIGH Fitness Activity (% work out weekly or daily) 31
  32. 32. Segmenting Businesses A case study of Best Practices in action
  33. 33. Let’s start with a familiar story • Have you heard your business use this combination: Small Segmentation & Medium-sized Large These statements lack customer values, beliefs, attitudes: The language of marketing! 33
  34. 34. About GE Healthcare IT • Unit of GE Technology infrastructure • One of 6 Healthcare business units: Diagnostic Imaging, Clinical Systems, IT, Medical Diagnostics, Life Sciences, Surgery • Is a provider of EMR, Physician Office, Radiology, Pathology, and other IT systems • Healthymagination: Reducing costs, increasing quality & access to healthcare 34
  35. 35. About the product in question: PACS • What is a Picture Archiving & Communication Systems? • Digitally displays images from CT, MR, X-ray, Ultrasound, Flouroscopy modalities • Replaces the age of manually hanging film on a light box • Creates work lists for radiologist to manage case volume • Provides advanced imaging analysis tools to diagnose anatomical and metabolic disease pathways • ~ $2 Billion global market • Who are our customers? • Hospitals (Radiologists, Technicians, CIOs) • Outpatient Imaging Centers • Physician offices • Governments • Non destructive Inspection applications 35
  36. 36. Use Practical Discussions… • Who can you sell more hot dogs to? 160 lbs Kobayashi 380 lbs. Perry vs. Firmographics do not tell the whole story 36
  37. 37. GE Healthcare needed to change • A classic firmographic split would drive decisions <50,000 >50,000 vs. procedures procedures We knew that there were values…but we did not have the right language to properly describe them. 37
  38. 38. GEHC Faced 3 Key Challenges: Market How can we increase the size of the pie? And increase share Challenge of wallet? Information What values define segments? What are they buying? And Challenge from whom? We try to be a lot of different things to a lot of different Identity people, but we don’t know who we really are, and people are Challenge out to get us. 38
  39. 39. How Do We Get From… …This …To This  “Dr. Smith makes our business “Dr. Smith is better” killing our “Why do we listen to  “We should spend more time business” Prestigious ACC with Prestigious ACC University University” because they represent the market segment we want” “Maybe we are not listening  “It’s OK to stop chasing segments to a profitable part of the that we may not have the right market” fit with” 39
  40. 40. Survey Breadth And Depth: We Considered Multiple Bases To Segment The Market Government Details Collected Details Collected Firmographics Specialty Future Goals Usage & Upgrade Survey Focus Firmographics Location Behaviors & Usage Modalities & Integration Hospitals Firmographics Size & Type Buying Behavior Purchase Decisions Values Strategic Direction Organization Staffing Values Vendor Relationship Behaviors & Usage Teleradiology Attitude IT savviness OICs Sample of hypothesis explored: Best-of-Breed Vs. Single Vendor Self serve vs. Vendor Reliance Physician Office IT Resources: Low/Basic vs. High/Complex Upgrade Driver: Proactive vs. Reactive Demand for Operational Efficiency: Low to High Specialty focus: Strong vs. Weak 40 Source: GE PACS segmentation 2008/2009
  41. 41. The Quantitative Questionnaire Included Several Trade- Off Exercises • Maximum Difference Scaling to differentiate needs and preferences • Selection Lists – thoroughly addressing elements of value (and not costs) • Focus on how and why institutions make choices • The tradeoffs between value (received) and costs (given) 41
  42. 42. Leverage Attractiveness Measurements in the Segmentation Study If You Can Segment C Segment A Segment D Market Average Index Alpha Segment E Segment B Market Average Index Beta Market sizes removed from graph; proprietary 42 Source: GE PACS segmentation 2008/2009
  43. 43. Tracking Results: Pilot Zone Program Before After Funnel Hit Ratio Funnel Hit Ratio 80% 80% 60% 60% 40% 40% 20% 20% 0% 0% $1-4 $5 $1-4 $5 • Disproportionate sales and service • A quote on every segment 5 desk focus • Executive presence & strategic • No specific hunting lists account reviews • One-for-all marketing strategy and • Growth strategies driven by data programs • Try and Buy programs to leverage • Shoot from the hip product radiologist user experience investments • Marketing elaborating benefits of the partners segment 43
  44. 44. Success was based on achieving a clear vision to serve the right target The Data Told Us Our Target… We Established Our Value Position… • Buys on relationship • Seeks strategic planning from vendor • Expresses intimacy with GE executives Partnership Presence • Wants to be heard and collaborate on ideas, features • Increase volume with same amount of resources • Have the highest PACS complexity (self ranked) • Radiologist still most influential in purchase decision Always Efficient • Leading technologies and protocols that don’t need the kinks worked out • Prefers focus on satisfying referring physicians (vs. patients) and staff • Seeks improved collaboration with referring on complicated cases Satisfied referring & staff • Looking for more efficient, but personal communication • Looking to expand beyond inpatient services 44 Source: GE PACS segmentation 2008/2009
  45. 45. Q&A: Enter Your Questions in the Webex Browser Brant Cruz Jeff McKenna Vice President Senior Consultant Chadwick Martin Bailey Chadwick Martin Bailey Follow us on twitter @cmbinfo , Read our blog at or become a fan on Facebook 179 South Street, Boston, MA 02111 ● 617-350-8922 phone ● 617-451-5272 fax