Article:
Good Versus Bad Market Segmentation
by Copernicus Marketing Consulting and Research
The qualities of good market segmentation include the results - does the research yield distinct, proprietary, highly profitable market segments? Copernicus Marketing Consulting and Research shares their 5 steps toward good market segmentation.
Market segmentation forms the foundation of marketing strategy.
Unfortunately, many CMOs complain they can’t do anything with the end result of their market segmentation research.
They end up with a bunch of groups that aren’t different in demographics or media profiles, never mind potential profitability. They have to rely on their intuition to pull together a brand strategy or a marketing plan and basically roll the dice that their marketing programs will work. And as we all know, most of the time they don’t—at least not as well as they could or should.
Good vs. Bad Market Segmentation
Good market segmentation research provides a company with clear direction on which group or groups represent the best target—one that represents a disproportionally high share of potential profitability to the company and can easily be identified in the population or in customer databases. If a market segmentation meets those requirements, then it will pay for itself many times over. If it doesn’t, then it will become a quickly discarded waste of resources—gathering dust on a shelf.
We don’t want to waste your time, money, or energy. The end-goal of every one of our market segmentation research exercises is to yields distinct, proprietary, highly profitable market segments—segments that your competitors do not even know exist!—described in rich detail in order to dramatically improve marketing efforts, boosting market share and profits.
Market Segmentation Should Show You the Money
We can’t emphasize enough the importance of including measures of profitability in market segmentation exercises. In addition to financial measures of revenue (e.g., lifetime value, current spending in category dollars, profit margins in the channels where the customer buys, current share for your brand today) and cost (e.g., cost to reach and influence with sales force and media, cost to deliver and serve) there are also at least 10 important stand-ins that reflect, for instance, how hard it’s going to be to get and keep them, how enabling they’ll be to marketing efforts, and future behavior.
The additional “proxies” for profitability provide a far more robust picture of the value of individuals—be they current customers or prospects—to a company.
Our Approach to Market Segmentation Research
Some research and consulting firms love to wax poetic over the latest statistical algorithm to use in market segmentation research exercises. That’s not us.
Step #1
We believe usability, actionability, and applicability to different marketing, operational, and business decisions all depend on understanding exactly who in the company plans to use the results and how the plan (or hope) to use them. So that’s our first step.
Step #2
Unlike other consulting firms, Copernicus Marketing Consulting recognizes that no one—no one—can possibly know what descriptive, definitive variables will be predictive of profitability and desirable behaviors until we talk to current and prospective customers, collect data from a representative sample of customers and prospects, and undertake serious analysis. This study must include hundreds of diverse variables—all of which might be candidates for a market segmentation solution—including needs, psychographics, demographics, behaviors, and media preferences.
Step #3
Next, we test them to see which are related to profitability and proxies for profitability and identify the key variables about people—or firms for a B2B product or service—that best predict what they are doing or will do (or both) in the marketplace. We use different analytical tools including cluster analysis, latent class, and neural networks.
Step #4
With some possible market segmentations schemes in hand, we evaluate possible solutions in terms of managerial, statistical, and financial criteria. We ask questions such as are we seeing different brand preferences? Different consumption levels? Different levels of profitability? We also consider their “manageability”—which market segmentation solution is most easily understood? Is this approach more or less easy to implement? Will the sales force be able to use it?
Step #5
Last but certainly not least, we rank order alternative market segments in terms of their return on investment and hand the client marching orders—here’s who you should concentrate your marketing efforts on to grow your business.
A Hypothetical Market Segmentation:
One key segment - Energy Seekers - represents 20% of the population and accounts for 55% of Zippy's potential profitability.
This content was provided by Copernicus Marketing Consulting and Research. Visit their website at www.copernicusmarketing.com.
Other content shared by Copernicus Marketing Consulting and Research
Get More From Advertising Tracking Research
by Copernicus Marketing Consulting and Research
Advertising tracking research often returns results that don't help marketers: it can take months for tracking numbers to change significantly and even when they do, they provide little insight into why they went up or down. Here are three things you can do today to get more from advertising tracking research tomorrow. Read Article »
Psychographic Profile: What Your Position on the Legalization of Marijuana Might Say About You
by Copernicus Marketing Consulting and Research
Psychographics include variables related to attitudes, interests, personality characteristics, and values. This psychographic profile looks at a side-by-side comparison of the attitudes, behaviors and demographics of the opposite sides of a hotly debated topic: the legalization of marijuana. Read Article »
Marketing Myth: Positioning Is No Longer Relevant
by Copernicus Marketing Consulting and Research
Marketers have lost control of certain aspects of brand communication - it is no longer enough to identify and communicate one brand position. Brands now target specific groups of consumers to ensure their message is relevant, compelling and motivating. One of the most important steps is using customer input, as described in this article. Read Article »
Innovation Needn't Be Such a Scary Proposition For Marketers
by Copernicus Marketing Consulting and Research
Marketers view innovation as key to combating hard economic times, yet less than half have expressed satisfaction with innovation efforts. Creating a new product includes finding the perfect price: market research helps pin down this element and in turn helps produce a market winner. Read Article »
The Real Mystery of Political Polls
by Copernicus Marketing Consulting and Research
Ahead of the 2008 U.S. presidential election, Copernicus Marketing Consulting and Research looked at the phenomenon of "polling failure" and response bias based on social desirability. Read Article »
Attitudinal and Behavioral Profile of People Who Are In Excellent Health
by Copernicus Marketing Consulting and Research
Do you start every conversation with litany of what ails you? A behavioral and attitudinal comparison of people who say they are NOT in excellent health vs. those who say they are. Read Article »
You Can Get Marketers To Eat Their Spinach
by Copernicus Marketing Consulting and Research
Marketers tend to distrust research and data, even though in principle they agree research is good for decision-making. This article shares tips for getting marketers to bring together principle and practice. Read Article »
Study Shows Emotional Connection Currently More Pipe (or Hype) Dream Than Reality
by Copernicus Marketing Consulting and Research
Brands strive to build an emotional connection with consumers, but how many consumers actually respond to these efforts? This article reveals findings from a study of U.S. consumers about emotional connection to brands. Read Article »
Marketing Decisions Still Made With More Guts Than Brains
by Copernicus Marketing Consulting and Research
This article shares findings from a survey of marketing executives and their decision-making approaches - intuitive judgment versus data and research-based. Read Article »
Interview: Adapting Marketing Research Tools for the Digital Age
by Copernicus Marketing Consulting and Research
Marketing Fray sat down with Copernicus' Eric Paquette, a senior vice president at the firm who's leading the digital charge, and posed three questions about how and what marketers can do to make good digital marketing decisions. Read Article »
3 Tools to Get a Read on Marketing Performance in 30 Days
by Copernicus Marketing Consulting and Research
Why Doesn't My Market Segmentation Work?
by Copernicus Marketing Consulting and Research
This article shares scenarios where you might run into problems with market segmentation. Read Article »
Psychographic Profile: East Coast vs. West Coast Stereotypes
by Copernicus Marketing Consulting & Research
Psychographics include variables related to attitudes, interests, personality characteristics, and values. This article shares insights on East Coast vs West Coast stereotypes. Read Article »
Top 10 Reasons for New Product Failure
by Copernicus Marketing Consulting and Research
This article presents reasons why only 10-20% of new products and services succeed. Read Article »
Rolling Out a New Product? Take 3 Steps to Nail Execution
by Copernicus Marketing Consulting and Research
While finding the right new product or service is a pretty high hurdle in and of itself, there’s also the marketing plan and the often overlooked execution plan to consider. Here are three steps you can take to keep all the parts of the marketing plan heading in the same direction as you roll it out into market. Read Article »
How to Identify the Most Profitable Targets
by Copernicus Marketing Consulting and Research
A top ten list of criteria used to identify financially-optimal targets. Read Article »
Simulated Test Marketing Gets Your New Products/Services Off on the Right Foot
by Copernicus Marketing Consulting and Research
Simulated test marketing research enables you to experiment and hone in on the best marketing plan. Learn more about this method and its application in this article. Read Article »
"Actionable Insights": Watchword or Buzzword?
by Copernicus Marketing Consulting and Research
This article discusses the measurement of the return on marketing research investments and what to with all the “insights” into customers and prospects. Read Article »
Customer Satisfaction in a Slump: Even the Net Promoters Agree
by Copernicus Marketing Consulting and Research
This article discusses the the latest statistics from the American Customer Satisfaction Index (ASCI). Read Article »
Interview With An Expert: Rolf Olsen on Social Media Listening
by Copernicus Marketing Consulting and Research
Social conversation may offer marketers a constant stream of real-time data on trends, unmet customer needs, and campaign and new product performance, but there’s a whole host of questions that marketers still have to answer when it comes to using and applying information gathered via social listening to marketing decisions. Read Article »
10 Need-to-Knows to Find Good Customer Targets in the Digital Age
by Copernicus Marketing Consulting and Research
In addition to revenue measures, there are other characteristics that make one customer more valuable than another because they’re easier to get and keep, as well as engage as co-marketers. Here are 10 need-to-knows about current and prospective customers that will clearly and definitively guide marketers to good customer targets in the digital age. Read Article »
