How to implement a winning strategy

A must read article for all marketing professionals from MarketingProfs, authored by Steve Bassil.

How to Implement a Winning Segment Strategy
by Steve Bassill
February 21, 2006

Have you learned the best way to identify and serve customers in your target segments?

Segmentation could be the marketing tool that sets your company apart from the competition. The business organization that goes all the way from developing a winning segment strategy to committing the resources needed to implement the strategy will be more profitable.

One of the basic segmentation rules is that the segment must be "reachable." It's essential for marketers to have the ability to identify and serve customers in the target segment.

However, in today's complex business environment, markets are becoming more and more fragmented. When you consider the increased number of niches, you realize what a daunting task it is for businesses to deliver across so many segments.

A quick review of basic segmentation theory illustrates why this is the case. The simplest way to think about market segments is to picture different colored balls—each color represents a customer segment with unique application needs.

In the power tool industry, for example, there are three very basic segments: the do-it-yourself individual; the craftsman (who is more than a casual tool user); and the professional (who handles the tool for a living). At a minimum, the colored balls represent three distinct segments.

After segmenting customers based on tool application, marketers have several tasks to execute before they can adequately serve these segments. Let's take a look at the classic four "Ps" of marketing:

1. Product: Do you have products that meet the specific needs of each, or any segment? Meeting the customer's needs relates to the product's performance, look and feel, brand image, ease of purchase, and ease of use.
2. Place: Do or can you offer your product for sale where the customer wants to buy it? You must have the distribution channels in place to intercept buyers wherever they shop.
3. Promotion: Have you created messages designed to communicate your product's features and target those customers most likely to buy? Effective vehicles include trade shows, advertising, word of mouth, and the Internet.
4. Price: Are you in the right price band for your target customers? You don't have to be the least expensive, but you have to be considered competitive.

You must align your segments for success. What makes alignment so important to segmentation is that all four of these variables could be different for each segment you target. The greater the difference between the needs of each segment, the more essential it becomes to customize your offering and organization.

Ask yourself: Are you prepared to back up your product with the features and support that your customers require?

Let's take a look at the diverse needs of the power tool market.

The craftsman may accept returning his power tool to the manufacturer when it needs to be repaired.

On the other hand, the "professional" segment requires much more responsive post-sales support and may even demand a loaner or same-day repair.

The do-it-yourself segment might require a help line to answer questions and troubleshoot.

Building an organization capable of providing the type of support that each customer segment expects is crucial to achieving success. Of course, you'll want to take a close look at the potential financial income generated from each segment first to establish whether it merits investment.

Behavioral segmentation opens many possibilities for marketers to be more efficient and effective. Behavioral segmentation distinguishes the buyers from the shoppers. Rather than investing time and money on consumers who are not ready to purchase, the marketer can spend his valuable resources on customers who are motivated to buy in the near term.

This builds momentum. The net effect is to generate more sales out of the same sales and marketing investment. On the other hand, chasing pretenders can stall sales momentum, frustrate your sales force, and ultimately require the investment of additional funds to re-energize the sales initiative.

Behavioral segmentation is like taking our original three balls representing the power tool market, and exploding them exponentially into 9, 12, or 15 more balls. To reap the advantages of behavioral segmentation, businesses will have to implement organizational changes to effectively reach these additional sub-segments.

Developing customer profiles, using CRM to keep track of prospects, and educating sales people to distinguish the buyer from the shopper could be some of the steps taken to target sub-segments. These are not trivial efforts. Although it takes time and money to put the infrastructure in place to support behavioral segmentation, doing so can mean the difference between success and failure.

If there is a lesson to walk away with when you start to think about segmentation, it is this:

• Segmenting your market gives you the opportunity for rapid, highly profitable growth.
• But segmenting your market requires a commitment to make the changes necessary to win and maintain your customers' business.

So, as you look at segmentation opportunities, make sure you clearly identify every internal/channel change required to capture the market. Continue to monitor your strategy over time.

Markets change rapidly, and it's critical to make adjustments accordingly. Don't let your segment strategy fall short. To be successful, you've got to align your segments and back them up with the investment needed to generate a revenue stream.

Steve Bassill is president of QDI Strategies, Inc.

vivekhattangadi@yahoo.co.in