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An Approach to Rethinking Segmentation
In many business-to-business organizations we have seen segmentation that is no longer relevant, implemented many years ago, and taken as a given. For myriad reasons, it falls off the corporate strategy radar. In last week’s post we identified how to determine if it is time for your organization to rethink segmentation by asking three key questions. If your answer to one or more questions was yes, our experience shows that it is time for a rethink.
A rethink requires an in-depth examination of your market with a focus on listening to and learning from all customers, including direct customers, intermediaries, and end customers. We recommend an Inside > Outside > Inside > Outside approach (Figure 1).
- Take stock of your current segmentation, noting where it is ineffective and where there are gaps, and identify potential alternatives. An outside perspective can often be valuable during the discovery process
- Conduct a set of in-depth market discussions to learn from the customers their needs and behaviors while identifying the key characteristics that indicate the differences. Test the alternative approaches you have developed. Customers’ needs and behaviors are often not readily apparent or directly communicated, requiring a skilled and well thought through approach to fully identify them
- Internally formulate your new segmentation, defining all of the key elements
- Go back to the market to validate across a broad set of customers and finalize the segmentation
Segmentation is a key factor in developing a successful growth strategy. If your company is having difficulty choosing where to target, developing distinct value propositions, or getting positive results in the market with its offering or sales and marketing activities poor segmentation is likely a significant contributor. Evaluate the strength of your current segmentation by asking key questions.
If it is time for a rethink, develop a segmentation approach that focuses on customer needs/purchase behaviors. Once your new segmentation is in place, build the foundations of your growth strategy. Leverage the segmentation to guide where to target, help define your value propositions, and drive the development of your offering to the market.
Learn more about this topic with industry examples: