This Advice Will Make a World-Class Segmentation Approach Affordable To Any Size Company
Are you one of those marketing professionals who has looked into or invested in research to segment your customers? Often these studies cost several hundred thousand dollars.
Many of you are in businesses that can’t even contemplate this type of expenditure on market segmentation research. And those of you who can and have made this investment may have experienced an all-too-common result: the segmentation approach was never implemented.
This article brings good news for all of you. If you are a big company marketer, you will find out how to never waste money on failed segmentation studies again. If you are in a smaller company, you’ll see the keys to making segmentation accessible to your firm by doing key parts of the research yourself.
The First Mistake: Not Taking Control of the Needs Hypothesis
If you spend $100k + on a segmentation study, it’s natural to want your research firm to do everything. But there’s one early step that’s critical for you to take ownership of.
A research company can’t do a segmentation study without surveying customers about their needs in some form. And if you are segmenting on some other basis besides customer’s needs, you won’t get much insight.
To survey customers, a researcher needs to do more than use their standard list of questions or just ask “what do you need?” In our experience, this won’t yield much more than a blank stare and some very obvious responses (e.g., “lower your prices”, etc.)
It’s vital that customers have a starter list of relevant needs ideas in the survey to confirm, deny, add-to, or expand on. Our own Vietnam Card Sort method is useful in this regard – contact us if you’d like to hear more about it.
Our strong advice: do some or all of these initial interviews yourself to gather hypothesized needs, rather than outsourcing it to the research company. Using our card sort method, you’ll overcome any biases that you might be worried about.
At the very least, you can negotiate a lower price on the overall study by doing this part yourself. But this is just the tip of the iceberg. You can take control of this step and yield massive benefits even if your company can’t afford to involve a research house at all.
The Fatal Mistake To Avoid
To gain the full benefit of a B2B segmentation study, the sales team must buy into the approach — period.
Ignoring this is the #1 cause of failed segmentation initiatives. The salesforce is the key execution component in most B2B industries.
And we don’t mean “training” the sales team on the segmentation approach after it’s been developed. Involving the sales team early and often will ensure your success. But how?
Why not work with them to develop the initial needs hypothesis we recommended above? They have the necessary access to customers. Ask them to help gather, refine and prioritize the initial customer needs list.
You probably already know which members of the force to tap for this duty. Recruit the open-minded ones that also have influence on their colleagues.
You’ll definitely want to keep them involved beyond the initial hypothesis step. Give them a voice in reviewing the research findings, making decisions about targets and value propositions, and developing execution plans.
You may find that the sales team takes so much ownership that they begin to believe that the whole segmentation idea was theirs. That’s when you’ll know you are on the verge of success!
How The Diagonal 1’s Can Save You the Entire Cost of Market Research
If you are a bigger-budget company and you follow the advice in the two sections above, you are golden. The research company can conduct the survey and analysis, providing you with statistically-significant options and different ways to interpret the findings. Just remember to keep the salesforce involved as you go along!
But what if you are without the resources to do a study and still want to segment your customers? You can use a method we call “the Diagonal 1’s” to create a segmentation approach without formal research. Then you can use your growing partnership with the salesforce (assuming you developed an initial needs hypothesis and involved them in the activity) to test it.
The gist of the Diagonal 1 approach is to use the 4-5 most powerful, non-overlapping needs from your initial hypothesis. Simply assume there is a segment of customers that would rank each of these needs as the most important.
Along with your sales team collaborators, name each segment something that signifies their defining need (e.g., if a group of customers would say their top need is “help me to drive waste out of my operation” you might call that segment “Efficient Operators”).
Then, take the initial 4-5 segment hypothesis out to a broader audience of sales personnel. Let them give input about what is right and wrong about the Diagonal 1’s segment hypothesis.
In our experience, they will enthusiastically recognize their customers in some of these segments. They will also give you some useful refinement ideas. Just a few of these meetings will provide the alignment you need to confidently start working on strategy and execution plans.
Why You Can Trust This Approach
Why should you trust this approach we’ve outlined to work, even if you can’t spend a dime on research validation? Because when it comes to needs-based segmentation, any initiative is better than none!
Your current lukewarm tea approach is likely already frustrating your customers. They will welcome even wobbly steps towards addressing more of their needs.
But don’t take our word for it – experiment with a customized approach designed for just one segment. Change nothing about your approach for everyone else.
Measure the differences. The vast majority of you who test in this way will become segmentation zealots due to its effectiveness.
What’s not to like? Your savings doesn’t even count your upside from designing and selling more relevant products and services than ever before. Nor does it count the money you will save from not wasting resources on the wrong customer segments.
Even in the most well-funded companies, saving $100k is a big deal. And if you are in a smaller firm, the content in this article will allow you to qualitatively segment your customers in a powerful way — even if you have no budget at all. Try it. Your customers will appreciate it and reward you with much more of their business.