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In business, objectives rarely change; they are almost always the same: sales growth, profit growth, year after year.

By Editor on Jun 19, 2006

In business, objectives rarely change; they are almost always the same: sales growth, profit growth, year after year. We all appreciate that the secret to achieving these are delighting and satisfying customers. So, happy customers will spend more money with us and refer others to do likewise. Simple!

But what does all this have to do with market segmentation? This article will reveal the mutual benefit that this principle offers to marketers and sales executives. Segmentation presents a unique opportunity for organisations that are serious about delivering on the promise of delighting their customers.

Segmentation has lost its true meaning amid a series of watered down explanations of what segments are. It is worth considering the fact that the origin of segmentation dates back to the 1960s. At its purest, segmentation is about grouping customers into clusters with same attitudes or behaviours, but more importantly, the same needs. Organisations then focused their efforts on targeting the segments where they could change perception or meet unmet needs. The idea of treating all customers equally is flawed and betrays modern business principles, such as customer intimacy and customer orientation. Fundamentally, customers are not homogenous - segments are.

Practices in other industries give us some insight. For example, the toothpaste market provides tooth cleaning materials, but its product range demonstrates how segmentation has helped them deliver on the promise of customer orientation. Their market naturally segments into whitening, protection, children and sensitivity, to name but a few. It is easy to see how a one-size-fits-all approach would be inappropriate here. These segments represent customers with specific needs, which impact the offering and the marketing mix. Targeting these customers based on usage pattern or demographics could prove disastrous unless these characteristics correlate with specific needs.

So how does this translate to useful guidance within the healthcare market? The application of segmentation within the healthcare arena needs to be tailored and adapted; it needs to be contextualised. Customers are different in terms of their needs. Therefore, effectively meeting their needs requires different marketing mix elements - differentiated messages, meetings, support and promotions. Granted, products are not always as flexible within the healthcare markets. Nonetheless, giving customers what they need and want remains paramount. The balancing act required is where authentic marketers differentiate themselves from the rest. Rarely are decisions by customers about organisations or products based on the core product alone. Therefore, possibilities to adapt must extend beyond the product. The marketing mix offers opportunities to tweak propositions to meet segment level requirements.

Historically, the healthcare industry has not utilised this well established marketing principle. However, it is being adopted increasingly by marketing executives as mature market impacts. The gains from aging demographics are countered by increasing pressures from payers and consumers. Reluctance to use this grandfather of marketing principles is usually attributed to market peculiarities and the challenges of implementing such approaches. However, our research sheds some light on this. Some experienced representatives regularly differentiate between their customers, based on needs.

Here is a simple example of how one experienced representative segmented his customers in the field for more effective service delivery:

Science-focused - Decisions based on published clinical information, requiring an in-depth look at head-to-head studies. These customers respond to engagements focused on clinical benefits and hard facts

Gadget-focused (early adopter) - Respected among peers with a good social network. Considers information thoroughly before adopting, but will adopt quickly and influence others if convinced. Likes a balanced perspective and support for their credibility building programme.

Patient-focused - Always thinking what's best for the patients, hence decisions are always viewed from the patient's perspective. Engagements with these customers are productive when patient benefits are emphasised. They are often described as "touchy feely."

Self-focused - These customers are interested in what's best for them. Therefore, patient benefits are only a turn-on (or relevant) if linked to tangible benefits for them. Clinical benefits are best when resulting in a gain for them, such as more free time.

The critical point is that this representative deployed differing tactics (supported by the marketing team) in the field depending on which segment he felt the customers were in. The appreciation of the underlying factors that made the customers tick enhanced the relationship building process and allowed resources to be deployed appropriately.

Most representatives and marketers recognise the customer segments described above or similar ones. So where does the friction come from when implementation is concerned? Does it really have to be so complicated to work? Can marketers and field representatives work together to make it happen? The sales representative argues that each customer interaction is bespoke, so why the need for grouping.

In most markets, there are key attitudes that prevail. Capturing these and categorising them provides an opportunity for the marketing team to design its offering and programmes to meet segment level needs. For example, your customers may all be radiologists, but they want different benefits due to differing needs. A generic approach will still have some impact, although a more insightful view of your customers will accelerate a change in behaviour and sales.

Synergy

Because the knowledge that goes into identifying these segments must come from the field as well as the marketers in the head office, team work is vital! We know that segments are not a one-size-fits-all solution, as the approach will vary by product type, sales force size, culture and other market peculiarities. Segmentation will not give a definitive perspective on individual customers, but on clusters. It is a "scientific art" rather than "pure science." Therefore, it is important that imperfect data not lead to "the baby being thrown out with the bath water." Accuracy is critical at a cluster level (group of customers), rather than individual.

The insight into the traits of each target segment will lead to innovative and differentiated activities that will engage the customers. Field forces can enhance relationships with customers further through the delivery of bespoke engagement plans based on the needs of each segment. Research by Agnito demonstrated a dramatic improvement in time spent with customers when a segmented approach is deployed versus a generic one, which is not surprising given the heightened attention to their needs. It is important to remember that neither sales representatives nor marketers create segments; they are identified. Segmentation, far from being a burden, is a key source of competitive advantage.

Making it happen

So given the general agreement of the existence and authenticity of segments, is there a way to bridge the gap between field and head office? As one senior marketer put it: "Good attitudinal-based customer segmentation holds the key to effective communication of key messages and ultimately ensuring the most appropriate use of resources to impact uptake and ultimately maximise ROI. Segmentation lives in the minds of everyone touching the brand and forms the basis of all decisions from channel selection to message communication. It has been an extremely worthwhile exercise and has helped us become a lot smarter in what we are doing."

Effective segmentation is helping this team win in their market. Our research shows that successful segmentation depends on the following:

STRIKER

- Simplicity - It need not be overly complicated. The strategy must be built around a field force's peculiarities. Keep it simple to make it work! Resources and capabilities must guide the process and the outcome of segmentation projects must be actionable. It should be a journey involving the sales and marketing departments.

- Training - Due to the inevitable changes in practice, training departments need to implement relevant programs to ensure all involved are clear on actions required and the benefits. Adequate training will also ensure all stakeholders are comfortable with the approach.

- Rationale - Mature markets, decreasing access, and customer dissatisfaction are some of the issues that make segmentation in the healthcare market important. No assumptions! The field must be told the why's and what's and benefit to them and the organisation must be clear.

- Involvement - The old adage is true here "no involvement, no commitment." Representatives must be involved in data collection, testing and research. This will ensure their views and concerns are captured and can be accommodated in the implementation plan.

- Key successes - Early successes at a segment level should be communicated to reassure any doubters and encourage early adopters.

- Evidence-base - Although data utilised are unlikely to be perfect, the robustness of the evidence that supports the approach must be communicated. It must be proven to work - and not just in theory. There are numerous case studies of how segmentation has changed the fortunes of major corporations.

- Reinforcement - Naming the segments and using these in ensuing communications, will reinforce the message and demonstrate commitment from the head office, as well as inject an element of fun into the process.

The reality is, when applied properly, segmentation represents a win-win scenario. Sales teams will benefit from an improvement in their interaction and time spent with customers. Marketers can deploy relevant strategies to complement the efforts in the field. When the field force and marketers are aligned, the impact on performance should not be underestimated.

Given ongoing issues with access, time with customers and pricing pressures in many markets, the case for adopting segmentation is compelling for the field force and marketers. Segmentation will ensure that needs of customers, the workforce and organisations are met. The path to a segmented and successful future is tough, but the rewards are huge. The current environment is unforgiving; hence, we all need to adapt our practices to remain effective. The success of customer segmentation depends on the representatives - so involve them.

Written by Baba Awopetu, (btawopetu@yahoo.co.uk) Senior Lecturer at The Marketer's Forum and a freelance healthcare writer and Akin Sawyerr, (tom.sawyerr@recordati.com) Business Manager at Recordati