Making Customer Segmentation Work
Customer segmentation remains a key concern for many organizations as the proliferating distribution channels and media vehicles are helping companies target the most valuable customers with focused servicing, product features and advertising. Companies need to be great at identifying and delivering distinctive value to their most attractive customer segments.
However, few organizations seem to get their segmentation strategies to work. Having a well-articulated, detailed segmentation plan is useless if the way they are defined does nothing to enable the organization to differentiate the value it offers specific groups of customers. Equally, many companies do not have in place the roles, processes and metrics to create those unique customer experiences by segment, nor do they enable the organization to respond quickly to shifts in a particular segment’s value.
In principle the theory sounds easy enough and so why have organizations been unable to make segmentation work as well as it might? We think that this is fundamentally due to the fact that it is more of a leadership and organizational challenge than one of data, analytics and technology. In short, any segmentation needs to be actionable.
Actionable segmentation requires that any segmentation strategy is meaningful and is integrated into the organization’s ongoing planning and performance management efforts. The segmentation must explicitly link corporate financial and risk objectives to the products and services offered and the behavior of the people servicing each segment and to the customer experience goals.
Leaders also need to establish a common language for talking about customers across the business with plans and actual results being discussed in common terms across segments regardless of channel or geography for example. Sharing information and determining segment level opportunities requires effective collaboration across the organization. Then, and only then, can segmentation impact the product mix, brand and service model.
So how can we deliver actionable segmentation?
First, consider implementing segment-based P&L’s and operating metrics, as when corporate financial objectives are explicitly linked to a segment, companies can ensure transparency and accountability for the performance of each segment.
Second, define who owns each segment and make them accountable for the segment performance.
Third, produce meaningful metrics and analysis to track not only segment performance but also the movement of customers between segments supported by performance management. Also track the customer experience by segment.
Fourth, build systems, infrastructure and processes that enable the effective segmentation and service/product offerings.
Finally, ensure each segment has a distinct, material and meaningful set of characteristics to be considered a discrete segment.
Only when customer segmentation is actionable can an organization have the ability to drive value from its segmentation program. Integrated goal setting, planning and performance management efforts with clear organizational accountability for segment level results is the only way to truly succeed…….
