[Audio Insight] Part 2: 5 Strategic Segmentation Best Practices

By: Max Kenkel

Thanks for tuning in to Audio Insights—you’re listening to 5 Strategic Segmentation Best Practices. This is part two in our three-part series. In case you missed it, check out part one.

ITA Group customer experience expert Max Kenkel continues his interview with Chadwick Martin Bailey (CMB) CEO Jim Garrity, discussing strategic segmentation. Plus, Jim shares his five best practices to keep in mind as you approach a segmentation study.

Listen to the audio above or read the transcript below.


Max Kenkel (MK): Hi, you’re listening to ITA Group’s audio insights, and I’m your host Max Kenkel. Today, we’re going to continue our discussion with Jim Garrity, CEO of CMB located in Boston.
We were talking about segmentation in our first session, which is available on our website. In the recording, Jim and I talked through the changing and evolving marketplace during this disruption and how that's impacted segmentation.
Today, we’re going to cover some of Jim’s best practices and how he coaches brands on segmentation. Let’s jump in.
When you talk about some nuances brands need to pay attention to now, what are some of the best practices you’re sharing with brands today? What do you guys keep top of mind as you approach a segmentation study?
Jim Garrity (JG): When we think of keys to a successful segmentation and engagement, there are five best practices, and I’ll go through them. I’ll list them off here so it’s easier for your listeners to get them all in one go. Then I’ll expand on each of them at length.
  1. Focus on the business decisions from the start—just to be really clear about what you’re trying to accomplish
  2. Account for a wide range of influencers (the demographics, the behaviors, the attitudes, the preferences)—be really broad in all the different things that you’re trying to bring into a segmentation study, because you want to be able to define and bring that segment to life, so you need a lot of information
  3. Anticipate tradeoffs—there are going to be pros and cons of various segmentations schemes, and not all of them are going to be successful at every one of the critical factors
  4. Leverage existing resources—harnessing the power of internal databases
  5. Empower the decision makers to act so that we give them what they need—not just handing them over the solution, or helping them bring it to life within the organization

But let’s dive in a little bit on each of those.

1. Focus on the Business Decisions From the Start

As I mentioned, the first one is to focus on the business decisions from the start. I think one of the interesting things that we've seen in segmentation is we have people and clients coming to us and saying, “I want to do a segmentation study.” So we asked them, “Great, what are you trying to accomplish?” It’s not always, but it's not infrequent, that they’ll say, “Well, we want to accomplish a lot of things. We’re not quite sure, but we’ll figure it out after the fact.”
So we tell them, “We’re going to push to be very clear at the outset about what you're trying to accomplish here. Are you going to use this for marketing messaging? Do you want to use it for product development? Do you want to use it for operational alignment?”
We’re going to conduct stakeholder interviews with all the key players and ask them you know, their hopes, their dreams, their wishes—and sometimes we find that different stakeholders have contradictory needs. Or they’ve got high ideals as to all the things this can accomplish.
Which brings us to the next thing we do in this first phase: the liftoff workshop. We bring stakeholders together to prioritize business decisions, to rank them and say which ones are most important to identify the success criteria upfront. That way we can evaluate different segmentations against that success criteria at the end. We’re not making it up on the back end because we’re thoughtful upfront about what this segmentation needs to do. What does it need to accomplish? How does it need to do that? Then we grade each of the different segments and patient schemes against that. We also capture hypotheses about existing segments and use that as great input fodder for us while we’re doing it.
The last thing we’re doing this first phase is building out a business decision worksheet. We’re really clear about what are the business decisions we want this to be able to drive. Those are the kind of keys when we talk about focusing on business decisions and starting with the end in mind—what do you want to accomplish and being really clear about that?
MK: That makes sense. What’s a realistic timeline for that first phase?
JG: The first phase takes place in the form of a few weeks. The stakeholder interviews don’t take very long; the liftoff workshop is in our three to four-hour session; and the business decision worksheet is pretty quick coming out of that. We’re talking about a couple of weeks for just that phase.
MK: It’s pretty fair then to say for a brand considering this approach and this type of study, be sure to account for a little bit of time upfront. That way you guys can really run with it from there. Once you kind of have things in place and have those key decisions and clear focus on what the outcome needs to be then you guys are ready to rock.
JG: Yeah, absolutely. I would say partnership is absolutely critical in a segmentation study. There’s a lot of checking back with the team to make sure that we’re making the right choices along that pathway. It’s absolute critical, and a great point you bring up, that we make sure that there is someone on the client side who can speak for all the stakeholders and make some of those decisions. If we haven’t been clear about what we’re trying to accomplish and what our needs are, then it’s not going to work. There are a lot of those small decisions along the way that really requires a good deal of partnership.
MK: Alright, let’s move on to the next best practice.

2. Account for a Wide Range of Influencers

JG: The second best practice is to account for a wide range of influencers. At the end of the day, we want to be able to describe these segments. We want to know who they are, so we need to capture demographics and psychographics. We want to know what they believe, so we need to understand their knowledge level of various products and services, competitors, and their attitudes and satisfaction levels. We want to be able to describe what they need—what they believe they need (their goals, their preferences, their unmet needs). We need to capture all those. Plus, what they want to do (their behaviors, advocacy, their preferred channel usage, their products and services that they use). All of those things are inputs for segmentation, because, at the end of the day, we need to be able to paint a holistic portrait of each of those segments archetypes.

3. Anticipate Tradeoffs

JG: The third best practice is to anticipate tradeoffs. This goes right back to the critical success factors that we talked about outlining right up front. There are an infinite number of ways to segment a marketplace, and they are all equally valid, but they’re not all equally useful. That’s the key difference.
We’re trying to find the most useful way of doing it. Once we capture what the criteria for success are, we need to have real clarity on the marketing strategy. Or we need to be able to find clearly addressable target segments for product development. Or we need to database score at a high level of accuracy because we’re going to do marketing communications on direct mailing and direct emailing to them.
Whatever those critical success factors are, we're going to grade various segmentation schemes on those things. And there isn’t a segmentation scheme that’s going to get an A+ on every single one of them—you might have three to five success factors. You have to settle for a B on some of the less important criteria in order to get an A on some of the more important criteria.
That’s just a realistic thing we like to talk to our clients about at the outset. If you’re thinking that you’re going to get everything, you’re probably going to be disappointed. Anticipating tradeoffs and acknowledging how we’re going to deal and how we're going to prioritize within those criteria—that’s critical.
MK: Does that vary client to client based on how much of that first- and maybe zero-party data they’ve already got versus how much you have to help them sort through?
JG: Yeah, it can. If one of their success criteria is, “We need to be able to score the database,” and they don't have a lot of transactional data, or first-party data, then I can go off and create the most beautiful six segment solution. But without the internal data by which to grade and score their database it’s going to be a setup for disappointment.
Again, all this we do upfront to understand what their needs are, what they have in terms of their own internal capacity, databases and other knowledge. We’re able to give them a sense up front as to what’s likely and what is unlikely to happen. We don’t want people that are expecting one thing and being delivered another. That’s not a pathway to success for anyone.
MK: Yeah, that makes a lot of sense. I think what you described there to me is a situation where brands benefit just as much from someone like you who’s experienced in doing these for years, as they do from the output to help guide them and help get them into the right fit for what they’re looking to do.
JG: Yeah, absolutely. I think a lot of people go in with faulty expectations. We’ve certainly done segmentation studies for clients that have had a bad experience before. Typically, what we find when we go through and say, “Here are five best practices,” they will look at those at least one or two, or maybe even three of those and say, “Yep, that’s what we screwed up. That’s what we didn't do. That’s why we were disappointed with the end result.” They can clearly see why a previous experience was not good. We’ve had great success because of these best practices. You know, they want more of that because they see the value of being really clear upfront, being anticipatory and being highly collaborative.
MK: Every time I see somebody who’s pretty confident and pretty direct about a best practice, I know that person’s taken their lumps, and I should learn from them rather than trying to figure it out myself.

4. Leverage Existing Resources

JG: The fourth one is leveraging existing resources. This goes back to that internal database—do you have internal database? How robust is that internal database? Can we use that to create a solution in and of itself?
Typically, many of our clients can. Then we will put that up against another segmentation scheme that uses a combination of their database plus primary data, which they often find is superior for the business purpose they have. Then we’ll look at other segmentation criteria that just use primary data. We’re looking at a whole host of things—a whole host of existing resources that we can bring to bear that is going to make for the best segmentation scheme and output.

5. Empower Decision Makers to Act

JG: The last one is to empower decision makers to act. This is socializing the segments and inspiring action—everything from the naming and the profiling and persona videos. We can create segment membership certificates based upon being able to ask people a half dozen to a dozen questions. Give them a sense of which segment they belong in. Then we do workshops, oftentimes, because that’s really helpful to bring them to life. What we don’t want to do is just be like, “Here’s the segments. Here’s what they’re named. Here are the different elements characteristics of them. Good luck. The world is your oyster.”
We want to help our clients brainstorm for messaging purposes, for product development purposes, for segmentation specific initiatives. We think that the empowerment is really critical in order to get them rolling, socializing and evangelizing the segmentation scheme throughout their organization.
MK: That makes a lot of sense. I think the biggest issue that companies face is not being able to act on information, whether it’s data straight out of research, or even sometimes anecdotal stuff. It’s just hard for them to all get moving around those initiatives sometimes. Anytime that you’re able to take that step of action, that’s a big win.
JG: Exactly. It’s absolutely critical because you can get overwhelmed with this. This is why we’re working with people throughout the process. Most companies can deal with a segmentation solution that's on the order of six to maybe eight segments. So, we want to make sure that we're building something.
We’re not coming back with, “Oh, we fell in love with the segmentation scheme. It’s got 22 different segments,” and the company, the marketers and the product developers are left overwhelmed. We’re always looking for how we can solve problems before they actually become problems. We need to understand what they can work with and what they need—we can provide for them. That’s where that brainstorming and evangelization becomes absolute critical. It really gets them rolling within the organization.
MK: We’ve been talking with Jim Garrity from CMB about segmentation. To learn more about CMB and the work they do, please visit the CMB website. Thanks.
Max Kenkel
Max Kenkel

As Customer Solutions Manager, Max leads our Customer Solutions line, ensuring all six components of a successful loyalty program deliver for our clients. With more than ten years of experience in strategy across customer, channel and employee loyalty programs, he’s seen a lot. You’ll often hear him talk about how important data is to brands. In his words, “It’s easy to make decisions on intuition, but it’s a lot easier to justify to shareholders when you can back it up with data.” Beyond his professional passions, Max plays bass in a pop punk band, visits as many national parks as he can and is an aspiring poet, publishing his first book in 2023.