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Divide and Rule – Is Segmentation the crucial first Step?

In 1998 as a “Young Leader”, I joined one of the first private telecom operator in India offering Telephone connections, unheard of in the country till then. We had set a clear goal of identifying, selling and servicing a customer whose Average Revenue Per Line (ARPL) was above INR 3000 per month per line. Since then, Segmentation has driven telecom sector and how. From Micro segment to micro recharge of voice now to data. Fast forward to 2020, and we have Telcos creating Segmentation based on Data offerings.

Today Segmentation is shifting away from being something uniform towards dynamic. The critical question is not if or which Segmentation is right for your organisation?’, but ‘what will drive your customer segmentation, to serve your customer better and help solve the complex business problems.’

Having done this exercise with multiple Telcos over many years, one thing I can share is Segmentation has been a building block of the telecom business. I have seen instances of this across e-commerce and retail & FMCG.

FMCG was the pioneer in India for Segmentation followed by consumer durables and well adopted by new-age verticals like Telecom and E-Commerce as well as financial services. Traditional verticals like manufacturing are not far behind either.

Most Startups today are either trying to fill in the gaps not addressed by existing players or innovating to create new products and services. In such a scenario, the Segmentation strategy can and should become the basis of their business plans.

So what is Segmentation: 

Market segmentation is a process used by organisations to split up customers or cohort into tinier classes who share common characteristics.

Segmentation is what people bought (related or unrelated categories), but it goes beyond that, identifying who that person is, why they buy, and what it is that they need from you.

Today market evolution ensures that companies and service providers should focus their attention on the customer. Organisations need to involve customers more in the product/service development process so that new products designed must be market-driven.

Key Challenges

 How to Measure?

  • How to access the target group?
  • How to measure segments and micro/ niche segments?

Approach to Segmentation:

Organisations use Segmentation as a tool to identify their target audience based on unique attributes, create effective marketing strategies, find opportunities, optimise offerings.

How it’s done?

  • Preliminary KYC activities
  • Select bifurcation or segmentation criterion
  • Prepare research design
  • Measure & Analyse responses
  • Test & follow

 

While the generic approach to Segmentation is good to read in books, the actual Segmentation is pretty scientific and time-consuming. Hence most of the companies tend to carry out these exercises once every few years.

I don’t say that a vast topic like Segmentation can be covered under 5 mins. I believe, startups already struggling with limited resources, need to prioritise where to focus their energies. Especially where do they find paying customers and how to reach them. Segmentation is the definitely a first step in that direction.

Girish Trivedi Co-founder & Director, Monk Consulting)

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