A Practical Guide to Market Segmentation

In his article A Practical Guide to Market Segmentation, Paul Hague reviews the value of segmentation, outlines a ten-step process for successfully achieving market segmentation, and analyzes three approaches for performing that segmentation. Segmentation is a key strategy to improve our customer database efficiency. He (p 2) says that “Segmentation enables us to group together customers with similar needs so that we can bring together limited resources to best serve them.” He applies the Pareto rule to the customer base and concludes that 20% of our customers may provide 80% of the sales revenue.

He asserts (pp 1-2) that it makes sense to personally customize offers to these devoted customers, but it would be financially irresponsible to do so for the other 80% of our customer base who are small buyers. For this 80%, Hague has several segmentation strategies. Although he is discussing business-to-business marketing, such segmentation also makes sense for business-to-customer as well.

Steps three through eight are a description of the three overall approaches he considers for classifying a customer base including the advantages and disadvantages of each approach. Once a segmentation approach has been selected, the customer base should be grouped together using cluster analysis (p 5). He recommends that such clustering be done every “six to twelve months with current customers to ensure any changing needs are recognized and addressed.”

Implementation of the segmentation is usually done from a spreadsheet (p 5), which can vary in sophistication depending on the extent of the customer base. A different offer must be prepared for each grouping of customers, and it must use the characteristics of each group to fashion a customer value proposition. Hague warns (p 6) that salespeople have an instinctual belief that all customers are “price fighters.”

Three Theoretical Perspectives on Segmentation
His first segmentation strategy is business firmographics that he compares to customer demographics. A major issue with segmentation based on firmographics or demographics is that it is an obvious approach to all our competitors as well and so may not provide competitive advantage.

Another possible segmentation strategy is needs based, although we must be careful about changes in needs over time. This strategy requires more resources to do the necessary market research but (p 2) “Gets to the heart of marketing; that is the identification and satisfaction of customer needs.” Hague asserts that the actual need drivers will end up being simple or at least simpler (p3) than generally believed because of the “action of cognitive misers.” To analyze a customer base for purposes of needs segmentation, he recommends no more than ten need factors be used to categorize customers.

The last segmentation strategy he discusses is the middle ground in terms of effort. Behavior based segmentation finds an external behavior measure that reflects a hidden need. He gives an example of a behavior that can be used to categorize customers (p 5). Customer behavior regarding procurement vehicles is the example he gives and he has a simple two-behavior classification: 1.) a Request for Proposal (RFP); or the alternative 2.) a Request for Information (RFI). His experience is that the RFP customers are price focused and the RFI customers are more open to suggestions and less price driven.

Hague’s Main Conclusions
Hague drives home the main conclusion throughout the paper, and that is customers are different, they should be grouped according to the relevant characteristics of our relationship with them, and our marketing activities should form around those segments. He concludes (p 2) that this approach optimizes our application of scarce resources, and that the true test (p 6) of a good segmentation is that it brings in “business that is profitable.” Orienting the sales staff (p 6) is critical so that they understand the nature of the segmentation guiding their efforts, and that they cannot return to the “cozy life in which they are given free rein and any offer will do.”

For a complete précis of the article see Redmond Review of A Practical Guide to Market Segmentation.

References
Hague, Paul (n.d.). A Practical Guide to Market Segmentation. B2B International.

Creativity: A Visitation of Sorcerers or a Process?

Should Creativity Follow a Process?
It should follow a process. The complexity in Marketing Communications with the advent of interactive, addressable Internet media now requires technical deftness. It is no longer art, or copy in isolation. It now integrates art and copy and also technology: cross cutting skill sets. The goal is not just art but a meaningful product. As Jaffe (2008, p 1) says:

"Creativity is just way too important to be left to a single person, a dynamic duo or a department anymore."

He warns us to know ourselves (p 2):

• "how much time is wasted by slowing down the process”
• “how little time is actually spent collaborating with insiders and outsiders”
• “how many different platforms or approaches [technologies] were taken into account”

Koslow, Sasser and Riordan (2003, p 6) imply that creativity is already subject to an implicit process “imposed by strategic considerations.” They go on to say that the strategy brief provides a framework that “gives [creatives] latitude to define the opportunity, like a canvas for a painting. “

An expressly defined process from Graham Wallas (see Stultz, 2009, p 1), or James Webb Young (see Drewniany, 2008, pp 129-30) gives us the framework to focus and orchestrate work from various contributors to meet the needs of the client. Creativity becomes less arcane so well heeled account professionals can fit it into their business routine. Koslow, Sasser and Riordan (2003, p 5) observe that creatives are most likely to step back and let account execs control the creative dialog. With a well known creative process, the competitive account team knows when to take a back seat and let the less aggressive right brainers have a say.

Kracauer (1926/1963/2005, p 78) takes the opposite viewpoint. Kracauer was a cultural analyst and member of the applied social sciences group at Columbia University. His work laid the foundation for modern film criticism. He argues that an artist is too big and will appear out of place in a “mechanistic” process. His analogy was for Weimar Germany but an equivalent modern American example is that the exquisite Suzanne Farrell could never be just a line dancer for the Rockettes, not that there is anything wrong with them. She is too creative and their routine too mechanical.

However, Stultz (2009, p 2) points out, the purpose of creative advertising is not patrician art but sales so we need to produce what is appropriate for the target market. Koslow, Sasser and Riordan (2003, p 6) are more harsh and note that even if creatives think of themselves as artists they haven’t left their day jobs. They may want to be artists but are not big enough. So they apply their less certain creativity to further the aims of their patrons, and those banal brands.

Koslow, Sasser and Riordan (2003, p 2) provide a working definition of creativity as a combination of originality and appropriateness. Originality is easy to spot but conversely, appropriateness is difficult to assay (ibid, pp 2-3). Appropriateness is the basis of our paycheck from the client. The creative strategy is the roadmap to appropriateness. A well known creative process helps to ensure that everyone is singing from the same page so we avoid a mismatch between creative team and the account exec: one providing artistry and originality while the other is expecting strategy fulfillment and originality (see Koslow, Sasser, and Riordan, 2003, p 9).

Can Creativity Follow a Process?
Yes, creativity can be made into a process and the proof is that successful agencies like J. Walter Thompson (see Drewniany and Jewler, 2008, p 129) have defined and incorporated a creative model into their work. Yes, it can because certain techniques create an atmosphere of creativity so we can hot up the copy or visuals (for example see Stultz, 2009, p 3). Finally, yes because if a definitive process like the mind-numbing tedium of American public schools took our creativity from us (see Stultz, 2009, p 3), it is safe to assume a reverse process can help us to regain at least some of it.

Karl Weick, the noted psychologist believes that creativity follows a process and says (1979, pp 252-4) that “creativity is putting old things into new combinations or new things into old combinations. “ He describes techniques to cut through the overpowering tangle of words and images to arrive at a salient idea. Crovitz's Relational Algorithm is one of them.

To generate creative ideas, Crovitz uses a basic sentence structure: "Take one thing in relation to another thing." For us, the things are the key brand values, customer characteristics or market conditions. They can also be symbols or colors. The [in relation to] is a set of 42 relational English words. A substitution is iteratively applied: brand values into [one thing], customer attributes or market conditions into [another thing], and for each pair a rotation of the 42 relational English words into [in relation to]. Each sentence is then evaluated. For more information see Crovitz Relational Algorithm.

Weick also advises (1979, p 44) that creativity requires think "ing." By this he means that we should attempt to use verbs rather than nouns. Verbs anticipate objects and events, and apply meaning to them more so than nouns. Also, studies show that future perfect tense rather than simple future tense is more conducive to creativity (p 199).

Simple Future thinking is starting in the present and working to the future. Future perfect tense starts in the future, assuming the event occurred and works backwards to the present. Simple future is difficult because any possible outcome is considered in our thinking, including those not on the path to the desired result. One creative technique he suggests is to write yourself a congratulatory letter from the future that explains in detail how well your creative strategy worked.

The Risk of Bounding Creativity with a Process.
A fundamental risk is that we use yesterday’s vocabulary to understand today’s problem and to generate tomorrow’s solution. Furthermore, we risk reapplying a comfortable but characteristic design and so become predictable. What’s more, keeping in a “comfort zone” may be dangerous because we may lose the exuberant intensity that comes from being in an uncomfortable spot.

Another concern is that it is questionable how well a mechanical process understands meaning and so incorporates it into the solution. Hope is another part of the creative process. Again, it’s uncertain how well a mechanical process understands hope. Hope cushions the shock of setback so it may be that a non-process creativity is more persistent, especially after mechanical tricks don’t give a desirable solution.

Finally, in Kracauer’s view (1926, p 70), bounding creativity with a process is simple minded.

References
Drewniany, B and J Jewler (2008). Creative Strategy in Advertising. Wadsworth

Duncan, T (2005). Principles of Advertising & IMC. McGrawHill/Irwin.

Jaffe, Joseph (April 14, 2008 ). “Is it time to phase out the creative function?” AdWeek. Retrieved on January 27, 2009 from http://www.adweek.com/aw/content_display/community/columns/other-columns/e3i8302b5a754f42f182d4e5721245d5619

Koslow, S, Sasser, S and E Riordan (March 2003). What Is Creative to Whom and Why? Perceptions in Advertising Agencies. Journal of Advertising Research.

Kracauer, S and T. Levin (2005) The Mass Ornament. Harvard.

Stultz, L (2009). In Search of the Big Idea. Retrieved on January 27, 2009 from WVU.

Weick, Karl (1979). The Social Psychology of Organizing, 2nd Edition. McGraw-Hill.

Account Planning the Energizer Bunny

The Energizer Bunny is an inveterate flaneur. The pink icon has become a cultural touchstone and a metaphor in its own right, with an association connoting long lasting energy. For example, Bob Dole wanted to be the Energizer Bunny of politics.

According to the Associated Press (2008, p 1), the bunny is still going strong after 20 years. AdAge (2005, p 1) reports there is contested parentage over this appealing product demo on rabbit feet. DDB Needham Worldwide used a pink bunny in a commercial for Eveready in the 1988.

In 1989, the battery account was then given to Chiat/Day the noted account planning agency who had done the Macintosh Superbowl Ad (see Goldman, 1995, p 2). Chiat/Day kept the pink bunny but infused it with the rolling might of account planning. They still have the account.


Account Planning
Duncan (see Duncan, 2005, pp 285-6) defines Account Planning as:

“Using research and brand insights to bring a strong customer focus to the planning of marketing communications.”

I worked with Microsoft sales account teams, which have six supporting roles reporting to the Account Manager: 1.) Program Mgmt; 2.) Product Mgmt; 3.) Developer; 4.) Tester; 5.) User Education; and 6). Logistics. The Product Management role was very similar to Account Planner with a responsibility for customer research and for maintaining customer focus by all other roles. The team could then respond to the customer in terms of solutions and not just product.

This is something I think is critical – IMC no longer sells customers magazine ad space at discount, and Microsoft does not sell software products for that matter. We are judged on results so we must have a clear vision for successful solutions. Account Planning is the liaison between the creative power an agency offers and the customer (see Dreniany and Jewler, p 115). Microsoft used different elicitation methods to get the truth out of the consumer than marketing communications, which uses “surveys, focus groups, one-on-one interviews, observation, and projective techniques….”

Account Planning Process
The client is involved up front and in all stages not just as a later stage sounding board (see Goldman, 1995, p 4). The account planner must understand long term goals, policy and business strategies of the client; understand the target market for brand; understand the brand image and reputation with the client’s customers. They must elicit unique insight about client, market or client customers as a basis for the big idea so they can iteratively create the desired future relationship between brand and customer (ibid, p 5) and prepare selling strategy (Duncan, 2005, pp 286-289). They “pollinate across departments” to formulate the big idea from the insights (Goldman, 1995, p 8 and Duncan, 2005, p 291). They coordinate tactical guidelines for the creative and operational groups.

Energizer Bunny Brand Values and Matching Creative Strategy.
The Eveready vice president of marketing tells us the brand values, for the battery product line, in the St. Louis Post-Dispatch (2008, p 1).

"We wanted to focus on what the brand is about, the idea of keep going, never quit, never stop, and the bunny is the ultimate symbol of that perseverance ….”

The Post-Dispatch article goes on about the creative idea behind the ad campaign by TBWA\Chiat\Day

"We used iconic images of everyday people you instantly know have to keep going on and on," Bianchi said. "We want to be the sponsor of those people with that attitude and zest for life and associate that with Energizer," says Carisa Bianchi, account planner.

How Does a Pink Bunny Help?
AdChat (n.d., p 2) lists the symbolism of animals that can be useful for advertisers. They say that the bunny connotes longevity, and good fortune. Longevity is one of the brand values and good fortune is a collateral bennie.

Bear (2009, p 2) tells us about the meaning of the color pink. Pink is charming and used to express playfulness. Additionally, pink is a warm color and they energize us, but being on the lighter side of the warm palette, do not over-rev us. Reinforcing buttresses to complement the energy and longevity from the bunny.

Chiat/Day is the true originator of the Energizer Bunny. They took a physically uninteresting but perfectly adequate symbol from DDB and turned it into the sensitive misfit it has become.

References
AdAge (2005). THE ENERGIZER BUNNY. Retrieved on January 24, 2009 from http://adage.com/century/icon05.html

AdChat (n.d.) Symbolism of Animals. Retrieved on January 24, 2009 from http://www.adchat.net/AnimalSymbolism.htm

AP (11/29/2008). Still going and going: Energizer Bunny enters his 20th year. Retrieved on January 24, 2009 from http://www.usatoday.com/money/advertising/2008-11-29-energizer-bunny_n.htm

Bear, JC (2009). Color Meanings. Retrieved on January 24, 2009 from http://desktoppub.about.com/cs/color/a/symbolism.htm

Drewniany, B and J Jewler (2008). Creative Strategy in Advertising. Wadsworth

Duncan, T (2005). Principles of Advertising & IMC. McGrawHill/Irwin.

Goldman, D (1995). Origin of the Species. Adweek Western Edition. IMC 615 Week 3 Readings.

St. Louis Post-Dispatch (Aug 28, 2004). Energizer Bunny wants a charge from $68 million advertising campaign. Retrieved on January 24, 2009 from EBSCOHOST.

Casting Spells and Illusions is Harder These Days

Marketing is a commercial religion but the commercial ratio behind it has feet of clay and so marketing continually faces problems. It is a religion in that it is a meaning making process, as Drewniany and Jewler (2008, pp 36-45) observe. Marketing creates an identity and negotiates its meaning and therefore its image with the target audience. Marketing breathes life into the image by giving a name and logo as its genesis (p 38). Its adaptive and transferable meaning is from the baptism of the tag line (p 39), color (p 40) and sound (p 42) from its creator.

Redemption for those of us who worship the image is through consumption rather than faith. Consumption builds jobs which leads to more consumption. It’s an easy religion. Sullivan (2008, p 4) notes that there is a paradox in it, though. Advertising that generates sales is a “parade of [idiocy]” and offensive to our humanness. Moreover, marketeers, the hired agents of the brand image, are the least-trusted people in the world today. Well almost, politicians are the absolute worst people in the public’s view. Sullivan (2008, p 6) suggests that following Bernbach’s paradigm can separate an agency from the procession of witless charlatans who come up with “Dude you’ve got a Dell” marketing.

Another general marketing problem may be forming. The Green movement may be a harbinger of a new social order that Jack Lessinger calls the Caring Conservers (see Lessinger, 1991, pp 148-160). This movement is disenchanted by a commercial world whose logic stops at efficient production and consumption. The feet of clay for this commercial world is its efficiency at any cost foundation. It results in an endless race to the bottom, the cheapest, the most exploitative and the most risky practices. Unseemly risk, whether sub-prime derivatives today or some future scandal, will prove its undoing.

Nike’s business aggression is a poster child for our commercial world. Yet even it suffered from its child labor exploitation scandal in Indonesia (see McCall, 1998 and Vogler, 1996). In addition to the inhuman working conditions in its plants, it was noted that Michael Jordan got a bigger annual check from Nike than all its factory workers and factory children combined. Marketing can’t be part of something like that and expect to be held in high regards.

If marketing is a frontman for a problematic process, it is merely a carnival barker for the commercial world and part of the problem too. IMC should use its communication relationships, including those to top management and shareholders to extend the commercial logic to include environmental and human rights thinking.

The final general marketing problem is Accountability. That dread word. Sullivan does not like it and calls it “useless left brain crap” (p 9). However, marketing has acted like a junkie in the boardroom, tin-cupping for more money without demonstrable value. Spiller and Baier (2005, p 13) note that traditional advertising is largely unaccountable. Weber (2007, pp 115-116) notes there is a convergence between what management wants and what marketing can deliver with new technology. If management wants to know ROI on paper towels in the bathrooms, they want to know ROI on marketing. Embracing more measurable media venues will help establish marketing’s value to the firm.


References
Drewniany, B and J Jewler (2008). Creative Strategy in Advertising. Wadsworth.

Lessinger, Jack (1991). Penturbia. SocioEconomics Press.

McCall, William (November 9, 1998). Nike Battles Backlash from Overseas Sweatshops. Image Marketing. Retrieved on January 17, 2009 from EBSCOHOST

New American (11/28/2005). Protecting gun makers from lawsuits. Retrieved on January 17, 2009 from http://www.thefreelibrary.com/Protecting+gun+makers+from+lawsuits:+although+the+new+legislation+...-a0139717181

Spiller, Lisa and Martin Baier (2005). Contemporary Direct Marketing. Pearson/Prentice-Hall.

Sullivan, Luke (2008). Hey Whipple, Squeeze This. Adweek Media.

Vogler, I (January 31, 1996). U.S. Multinational Corporations in Indonesia. Retrived on January 18, 2009 from http://www.uwec.edu/Geography/Ivogeler/w111/reebok.htm

Weber, Larry (2007). Marketing to the Social Web. John Wiley.