Insight and segmentation

Insight and segmentation

 

Customer Insight

Many possibilities for achieving insight. Companies are not lacking data or information as new studies on customers are available. Product and service usage and customer satisfaction are being monitored on a regular basis and customer data is being gathered into databases that analytical models mine to generate understanding on buying behavior. Furthermore, demographic and socio-economic customer data can be enriched with data on values and attitudes. Also, qualitative methods such as ethnographic research on customer practices are being applied. Despite all these opportunities companies are still struggling with the fact that insight is not cumulating and return on insight is often close to zero.

From fragmented information to unified insight. The reasons for low insight impact are many. Insight creation is often done on an ad-hoc basis and research is conducted in silos, resulting in sales, marketing and product development being unaware of what is already known in the company. Market studies and customer surveys are carried out for uncoordinated purposes with different data and customer classifications making it impossible to get a coherent view. Product managers are researching the market and new product launch possibilities from their own product’s point of view, resulting in a misunderstanding of the whole category and market.

Cross-functional insight process. What companies are lacking is crystallisations and actionable insight. Acting on market opportunities requires a capability to constantly combine insight from several different sources. It requires the companies to continuously find better ways for creating, synthesising and making action recommendations on insight. A cross-functional insight capability needs to be created in order to serve as a common decision-making platform for management, marketing, sales and R&D.

Vectia helps companies in creating actionable insight by:

  • Insight audit. An audit helps to get the big picture of the research a company conducts or buys, and to prioritise those in terms of expected ROI. Based on this knowledge it is easier to identify future development directions and to build a development roadmap for actionable customer insights.
  • Insight process. A method for embedding insight in all major decision points of key processes. Achieving this requires identifying and prioritising relevant business questions, defining roles and responsibilities related to insight creation, defining the use and update frequencies for reports and analyses as well as outlining the needs for new customer and market insight, and requirements for IT support.
  • Insight creation. Methods such as Practice Design™, Customer Safari and Value Research add valuable new viewpoints to companies’ understanding of the market and customer. While Practice Design focuses on investigating customers’ everyday practices to help concept and product development, Customer Safari concentrates on illustrating the customer experience in different contexts and encounters. Value Research on the other hand makes a deep dive into a corporate customer’s processes to undermine value drivers that can be used in designing customer or segment-specific solutions.

Success stories

Pfizer: Healthy Solutions With Customer Insight, Explore Spring 2010
Nokia: Teaming Nokia With Practice Design, Explore Spring 2007
Elisa: Using Everyday Practices As Sources For Strategy, Explore Autumn 2007
Finland Post: Sending mail is about remembering, Explore Spring 2006

Studies and presentations

  

Segmentation

Market, customer and end-user understanding through segmentation. In many companies a great deal of effort is put into defining comprehensive segmentation models and into collecting huge amounts of customer data. However, it is no longer enough to understand who your customers are and what they are like. It is at least equally important to understand who are not your customers and why. Besides understanding which segments bring in most of the revenues and which are the most profitable, management is increasingly concerned with market potential: are there segments on the market that are currently not part of the company’s customer base?

In addition to describing the market as a whole, the segmentation model should also contain proprietary customer insight, complemented with an understanding of the end-users. Combining outside-in and inside-out views creates a unique segmentation model that helps to differentiate from the competition. Even highly sophisticated models should, however, be communicable and usable – they should be intuitive to their users. Finally, segmentation models need to be dynamic to reflect changes in the market.

From segmentation to segment management. The real challenge does not lie in defining the segmentation model but in implementing it, that is making the model the backbone of all customer management activities throughout different functions as well as utilising it to drive the company strategy and business objectives. According to Vectia’s experience, managing customer segments systematically will help companies in implementing their strategies and will result in substantial business improvements. Best practices show EBIT improvements of up to 25% in cases where all customer management activities are aligned and clearly support defined strategies for each segment. Management of product lines, business units or geographic areas also need to be complemented with a customer perspective. This means defining and implementing segment management principles, processes, metrics and tools that help the company to truly manage its business through its customer segments and to take full advantage of the potential of the customer base.

Segmentation embedded in everyday work. Successful management of customer segments requires changes in company management and work practices supported by development of skills and capabilities. Segmentation should be visible not only in everyday marketing work but also in top management, sales and offering development:

  • Basis for top management strategic decision making. Following up segment-specific key figures, identifying growing segments to support resource allocation, making conclusions on success areas and strategic alignment.
  • Framework for customer management and sales activities. Supporting customer’s business by developing solutions based on customer and end-user understanding, differentiating sales arguments for segments.
  • Source for offering differentiation, development and innovation. Taking segment-specific characteristics and needs into account in offering differentiation and new product development.
  • Tool for planning and follow-up of day-to-day tactical marketing and sales campaigns. Developing segment-specific marketing activities (messages, channels), following up segment-specific marketing communication, supporting new product launch from segment point of view.

Vectia has developed its B2B and B2C segment management competences for over 10 years. We have worked with companies from the following industries: chemical, finance, hospitality, logistics, media, metal, oil, paper, telecom, utility and FMCG.

Vectia helps companies with segmentation and segment management with:

  • Segmentation objectives. Defining how the segmentation model should be used in different functions to support the company strategy and business objectives.
  • Segmentation logic and data analysis. Choosing the most appropriate segmentation criteria for grouping customers according to their value to the company and the needs of the customer. Data collection from internal and external data sources.
  • Segment management. Defining segment strategies and the use of segmentation in key processes like sales, marketing and product development. Adding the segment dimension to the management system.
  • Segmentation tools. Integrating the segmentation logic and data into the CRM system. Vectia SalesDriver™ provides faster time to benefit with segment management software modules, such as customer segmentation, segment business plan, customer selection criteria and reporting.
  • Segmentation training. Supporting internal communication by describing the segments into a handbook or electronic formats, e.g. e-learning modules. Organising and facilitating roll-out workshops and training events to gain hands-on experience on the defined segments.
  • Work practice design. Analyzing current and coaching desired ways of working to ensure cultural change in the organisation and to make segmentation a part of everyday work.

Success stories

  • Fazer Bakeries: Category leadership in the Baking. Explore Spring 2010
  • YLE: Getting intimate with the public. Explore Spring 2009
  • TeliaSonera: TARGET: One-To-One Relationships, Explore Autumn 2008
  • Kemira GrowHow/Yara: Finding Growth Through Differentiation, Explore Spring 2007 

Studies and presentations