John from the pharma sector in Sydney wrote back with a question after my last letter….
I was just going to send him a personal reply but I thought you might be interested too.
Here’s the question he wrote:
“I was thinking about what you put in your first letter: that companies shouldn’t do over segmentation. What do you mean there exactly? I thought that knowing your clientele as close as possible to the individual level was the best knowledge a marketer can have!”
Yes, knowing your customer is important.
If you have a decent CRM you can scrape data from social media and then you’ll know what your customer ate for breakfast!
But if you are finding a strategy, a nice, clear segmentation (and targeting) makes it easier for you to win in most categories.
Here’s how I think about it.
Do you remember James Bond entering M’s office?
Hooks, Hats and James Bond
Bond arrives, then – to impress Moneypenny – throws his hat over the room towards the hatstand. Of course it never fails to land right on the hook…
Well, you can think of your market segments as HOOKS.
And the different HATS you throw at them are the – targeted – offers, for each hook.
When you’re like James Bond, and you hit the right hook with the right hat, you’re doing marketing right.
Over-segmenting is doing too much of a good thing… Too many hooks, too many hats… Confusion…
A segmentation that involves more than 9 segments is not much use for planning. When you have more than 9 segments it causes more confusion than help because the (normal) brain can really only deal effectively with 6-9 chunks of information at once.
More often than not, you’ll want a simple segmentation model that can be easily understood by the different groups you need to know your strategy; your board, executive, marketing, sales…
When segmentation goes bad: a true story
It’s 1997… I was John West account manager and went to present a fancy new canned fish market segmentation to Graham, my grumpy buyer at Franklins. Problem was, my friends in marketing had ‘discovered’ a revolutionary new segment called “Oral Stimulation”…
The buyer stood up in the middle of his office and shouted:
“Hey everybody, it’s Matt from Unilever – HE WANTS TO TELL US ABOUT ORAL STIMULATION!”
In hindsight we might have been over segmenting…
Oversegmenting can lose you money
I don’t intend to bore you with it now, but it’s also theoretically possible to lose market share by over-segmenting…. The reason is not just due to falling efficiencies – you can also reduce positive “spillover” effects from advertising and marketing.
Anyway, I reckon the Mad Men were pretty good at finding nice, easy to follow segments, then targeting them.
Those Mad Men: they kept it simple
- Cigarettes for Macho Men (or for Stylish Women)
- Travel for Business (or for Leisure)
- Cars for Jones-Beaters (or for Practical People)
- Shirts for Individuals (or for Adventurers)
- For 9 out of 10 businesses a simple segmentation, and decent targeting against the main ones, will do the trick.
How about a checklist…
Are you oversegmenting?
If you can’t answer YES to each of these, you might be oversegmenting:
– Does it feel useful? Make sense?
– Can you tailor your marketing in a meaningful way, based on the segments? (if not, you’re probably wasting your time)
– Could you explain it to a buyer without cringing like I had to? Would your sales team think it’s useful?
– Does it define who you could be chasing? Does it show you why, how or where to track them down?
– Is it feasible to segment and target down to this level as part of “business as usual”? (If not, you’ll be back to “Price vs Quality” in a heartbeat)