These segment managers, he continues, must be “political enough; can evangelize enough; can advocate for [their] segment and muscle up the changes in merchandising, store, product development, marketing and the rest” to pull off this approach.
What Are the Main Challenges?
At a tactical level, the focus is on identifying the key customer groups. Paulsen cautions companies against building these segments too fast. “We want everything oriented around the customers’ beliefs, passions, preferences and so on. But it’s not manageable to manage 20 million unique relationships. So, organizationally, if you do it around segments as fine as you can get them, then you know you’ve got a commitment to [getting more customer-centric],” he explains.
And for companies not ready to reorganize their entire operations, Paulsen notes that it’s worthwhile to start by customizing just your marketing messages, putting them in the tone and tenor of however many segments you can reliably define and manage. “You can argue that Tesco did that well,” offers Paulsen. “They didn’t change the layouts and merchandising in all their stores, but they ended up going from six segments to, what, 5,000 clubs? That’s not entirely customer-centric, but it’s fine microsegments of customer interest.”
Biting off not just what you can chew but what you can measure also is important, states Gary Hennerberg, head of Dallas-area marketing consultancy Hennerberg Group. First, he points out, you obviously need enough customers in each segment in order to test approaches to these groups. Second, he cautions marketers to recognize that consumers change their minds frequently. What they told you they wanted a month ago, he says, easily could change before you’re able to market to them. “Consumers are not static; you cannot put them in a segment and expect them to stay there over time. Segmentation is especially tough in these volatile times. And there is no computer model that can predict all the changes in a household; the consumer has to volunteer much of this insight.”