Leg 2 from Lisbon to Cape Town. Theme 1: Segmentation Consumer Markets. Summary and Conclusions.

eleonoraescalantestrategy 15 Nov 2017 Leave a Comment

Hola a todos. From San Salvador City.

Here we are today. Segmentation Customer Markets Outline 1- 6.png

We will finish today with this theme, and I hope to be ready to start the next theme 2 about Intra-Industry Segmentation Analysis.

The segmentation of our clients is an art. I have seen marketers with sloppy segmentation analysis, and I have seen marketers which are so refined in the client’s characteristics, to the point of extreme details. For a strategist, the segmentation analysis (customer based or industry based) is relevant because the better we can support and align the marketers’ functions with the Board of Directors or the Owners strategic objectives, the better will be to be effective when helping them to lead the “customer-led business”. This way the organization will obtain the right amount of resources to meet the expectations of all stakeholders-shareholders, employees and the community.

To be a strategic tool, a customer segmentation scheme has to fulfill five criteria: (1) Effective, (2) Identifiable; (3) Profitable; (4) Accessible and (5) Actionable.

criteria for consumer segmentation Eliescalante

1.Effective. The segments identified should consist of customers whose needs are relatively homogeneous within a segment, but significantly different from those in other segments. For example, John Deere Tractors is one of the most popular International Farm Tractor Brands in the world & is very much in demand nowadays. We are sure John Deere Company has identified its products in relation to the use of the equipment:

Source: John Deere Products

But John Deere marketers also know many of the equipment used for Agriculture is also used for Landscaping and Grounds Care. Two different segments use the same equipment. If buyers in both industries purchase similar amounts at similar prices and have the same needs, do you think this is a useful segmentation scheme?

2. Identifiable. The business must be able to identify customers in the proposed segment. Some variables are harder to measure. For example, if a product is aimed at “extrovert” customers, it would be difficult to identify and measure the size of this potential segment only. To be useful, it is necessary to find some customer characteristics which link to psychological profiles such as age, media usage or nationality. Multiple bases segmentation helps you to identify your customer better.

3. Profitable: The more segments we can identify the greater the opportunity to target the offer precisely and to add value. If you can predict each customer buying decision process, we are refining our analysis.

The IMF is not the same than the World Bank

A narrower segmentation, the better you can approach them and find a tailor-made solution to each of them. For example, when I approach multilateral development financing entities to offer my services to them, I can´t generalize my products offer the same to the World Bank (WB) than to the European Bank for Reconstruction and Development (EBRD) or the International Monetary Fund (IMF). Three financial entities have different characteristics, separately targetting markets and “modus operandi”.

4. Accessible. Customers in each segment must be capable of being reached and served easily. For example, a decade ago, the World Bank started to decentralize from Washington D.C., and they have continued to open offices in each relevant country in order to be accessible to their clients.

Atrium is seen at World Bank headquarters in Washington

The World Bank fighting to end poverty?

5. Actionable. A company or entity must be able to take advantage of the segmentation scheme that it develops. For example, United Nations has to segment its services in a better manner. Many of the United Nations Programs have to be adapted to the needs of each country in which operates.

Global Peace Index 2017, Vision of Humanity

More than 20 Million people are starving in Africa.

The world has changed dramatically since the United Nations was established after World War II, but the organization has not adapted to reflect the most prioritized needs for the global population at the 21st century. For the whole world probably now the most relevant problem is still peacebuilding, and how to solve the problem of the violence (terrorism, war conflicts, gangs, tribe conflicts or internal power disputes) because any type of violence has an economic impact on the economies. Without peace, we can´t do business “in peace”, we can´t innovate in our businesses. In addition, the United Nations role and services have to adapt, for each country, because the priorities are different for each country. For El Salvador, the most relevant problem could be “extreme gangs violence and political ideology polarization”; meanwhile in other middle-east or Asian countries, the problem could be how to reach peace for a population with current war conflicts or how to solve a refugee crisis. Also, there are still countries with famine regions such as Yemen, South Sudan, Somalia and some parts of Nigeria.

SUMMARY AND CONCLUSIONS THEME 1: CUSTOMER´S SEGMENTATION Segmentation Customer Markets Outline 1- FINISHED.png During the last 10 days, we have seen several topics. We started with understanding the basics of the consumer behavior. Afterwards, we captured there are 4 main psychological processes influencing consumer behavior, motivation, perception, learning, and memory. We visited a “stage model” of the decision buying process with five stages:

Problem recognition,
Information search,
Evaluation of alternatives,
Purchase decision, and
Post-purchase behavior.

Moreover, we comprehended that segmentation increases profit opportunities because different groups of consumer attach different economic or psychological values to the solutions (products, services or experiences). We did a couple of examples: the European chemical company, which has developed a new organic herbicide line of products and the case of segmented pricing for an Airline trip from London to Paris.

Segmentation is more than color, tastes and flavor variations. It is the possibility to convert a single product into different ones in order to meet effectively the needs of the entire market. A price ratio of 1:10 from the lowest to the highest-priced offer in a segmented market is common. There are 6 main reasons for segmenting markets:

Better matching of customer needs
Enhanced Profits
Enhanced Opportunities for growth
Retention of Customers
Targeted Communications and
Stimulation of Innovation

Furthermore, we visited each the Bases for segmentation and the 4 main categories to identify and segment consumer markets: Behavioristic, geographic, demographic and psychographic.

Finally, we have understood the criteria for segmentation, to be a strategic tool, should meet five criteria: effective, identifiable, profitable, accessible and actionable.

Capitalizing on market opportunities requires segmenting the heterogeneous groups of customers and separate the customer groups into segments. Segmentation is the key to profitability. compass Market segments are not static but offer continual opportunities for innovation and market niches. Remember strategy sets the direction of the business and the means of getting there. In order to align the whole company to arrive safely at its destination, segmentation of customer markets has to be taken seriously by any strategist. The strategy is like the Volvo Ocean Race compass, guiding the development of the company leadership structure and systems in all the perspectives. The role of a Strategic Director or Director of Strategic Initiatives is like a compass. My role has always been to guide, as a compass… Guiding all the time to align the Board of Directors and the directors of marketing, financial, internal, technological, operational, personnel all together going in the same direction… All companies should have an experienced strategic director or an independent external strategic advisor. The strategy is all about alignment of priorities, it is about helping the owners to make decisions about growth and innovation.