7 Questions to Ask Before You Segment

Enterprise segmentation, expensive and highly valued for the customer view it promises, should realize its value by helping create more effective marketing. But in a dynamic market, many businesses learn that this approach consumes too much time and too many resources to be truly effective. Before committing to survey-based segmentation, behavioral segmentation or another high-cost study, consider these questions:

Are you prepared to reallocate marketing resources?
You may need to shift both budgetary and human resources if the segmentation suggests that you are not organized properly to meet the needs of customers in various segments.

Are you committed to act on the customer information you uncover?
Will you be ready to design new and unique products, messages and offers specific for each of the segments? Don't invest in segmentation if there's no plan to take advantage of the differences between groups.

Are you prepared to develop other types of models to support marketing tactics?
Segmentation of this type is really a strategic tool and not well-suited for deciding which customers are most likely to respond to a campaign or which are at highest risk to defect.

Will there be an action plan?
When you budget for the segmentation, you should simultaneously create a roll-out plan. Too many segmentation studies wind up becoming a set of dusty presentation binders stored on someone's shelf. Create a plan that includes communicating results to the organization, applying the segmentation to test cases and expanding the use of the segmentation based on early successes.

Are politics driving your decision?
Sometimes segmentation is seen as a way to rally support behind an already selected strategy or to resolve disputes within the organization. To rally support, you could probably achieve the same outcome at much less expense by simply testing the new strategy in the marketplace. If the idea is to use the segmentation as a peacemaker, be assured that no segmentation will ever be conclusive enough to win over warring sides. These sorts of human problems need to be solved first.

Will it meet all your needs?
Another difficulty is meeting the diverse operational needs of groups within the enterprise. To be versatile, segmentations often are designed to provide a broad set of directions. But such versatility comes with a price: It is seldom truly optimal for any of the tactics that the company must implement.

Are you prepared for change?
A major blind spot of most segmentation schemes is that they do not anticipate major shifts in the general population—not migration between segments, but fundamental market changes that introduce new segments and diminish others. Traditional segmentation assumes that the environment is stable and that marketing can concern itself with getting and keeping more customers in good segments. But think of how quickly markets can change: MP3 players and Napster-style file sharing to the iPod + iTunes + iPhone juggernaut; SUVs being the hot auto category to the Prius being a runaway hit.