Perspectives of Segmentation

One of the three activities on customer analytics is segmentation. (psst: wanna know the other two... mail me on michaeldsilva@gmail.com). Most often when I discuss on performing segmentation analysis with the marketing folks.. I get the "we know our segment" arguement.

I have had marketing managers retort with "Yeah, we know what segments we target" or "we have the corporate, retail and government segment". They believe they have already segmented their segments and as such do not need analytics to further do any segmentation exercise. And they are correct. {now wait... am i contradicting?}.

It is at this point that I often take a tangential topic and take the white board for a chalk talk on the perspectives of segmentation. Let me take this opportunity to use this white space to do the same here.

There are basically three levels at which customers are segmented. The following diagram shows the three levels of segmentation.



The first level of segmentation is at a Strategic level. The segment defined at this level is primarily used for organization setup. As such, this segment should survive for atleast 5 years.

The second level of segmentation is at an Operational level. The segments defined at this level dictates the processes within the organization. Each of the segments require its specific approach to selling and servicing. This segment should survive for atleast 2 years.

The third level of segmentation is at a tactical level. The segments defined at this level often requires specific communication modes. This in marketing terms, refers to specific campaigns as well as offers. The segments at this level are more of an ad-hoc nature. These segments do not survive for more than a year at the max.

The role of statistics is primarily at the third level, that is the tactical level. And this is where the mismatch happens. While me as a statistical solution provider is taking of segmentation at level 3, the marketing personnel is often referring to level 1 or level 2 segmentation. However, often the two parties are not aware of their perspective at two different levels.

I often use this theory to address the conflicting scenario during my pitch to the marketing personnel. All the best with your understanding on marketing segmentation and the role of statistics.