Monday, October 13, 2008

knowing the customer - segmentation

If you asked a friend in San Diego how many words he has for the concept of snow, he might reply "one." with a puzzled look on his face. The same question asked to another friend in Boston might get the answer "two": snow, the old white stuff that you can build a snowman with, and sludge, a dirty awful slushy mess. Ask a Norwegian on the other hand, and you would get back eight different words, each referring to a unique variety of snow:

Skare: Fallen snow that gets damp, then forms an icy crust on its top.
Sne: Perfect, powdery Christmas-like snow glinting in the sun.
Sno: Generic white stuff.
Sludd: Rain/snow mix that falls on balmy, 32 degree days.
Slaps: Dirty sludge in the gutter.
Skred: A mini-avalanche.
Kram Sno: Wettish snow. For snow sculpting, not skiing.
Kladdefore: Snow clinging to the bottom of skis.

Even more descriptive is the Eskimo vocabulary, which includes 32 different types of snow. Eskimos use more words to describe snow because they understand and interact better with the various types of snow than the Californians, New Englanders, or even Norwegians.

Vocabulary is a key metric of understanding, in everyday life, as well as in business. It is interesting to see how many words a company uses to describe customer. Many corporations only have less than 10 words such as major accounts, manufacturing industry, indirect, etc. To be useful in marketing, each of these words that describe the customer should represent a segment. I am told that one company has over 300 distinct segments (and therefore 300 words that describe customer). Marketing effectiveness is limited by how well each segment's needs are understood and addressed in both the product and the marketing message. Being able to describe customer segments is a necessary first step to understanding the customer, which ultimately underpins a company's ability to sell to them.
Becoming customer-driven is a key factor of success in every industry, with the critical tool for addressing customer needs being segmentation analysis. Segmentation analysis facilities sales cost reduction because it allows for tailoring of the marketing message to the specific market segments targeted.
By constructing a clearer understanding of customers, both existing and potential, segmentation analysis empowers management to focus its effort on both managing the customer base and increasing marketing channel leverage.
At the next marketing meeting listen to the words being used to describe the customers and channels. How many different words are used in describing the customers and channel partners? Is this level of understanding sufficient to be the foundation for becoming customer centric?

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