Segmentation, Value proposition & Go-to-market approach

Segmentation, Value Proposition & go-to-market approach

ComEx

The core elements of a company business model

2013 – Commercial Excellence Forum

2

Agenda

Welcome and introduction 09:00 - 09:05

Strategic market segmentation as the platform for differentiation 09:05 - 09:20

Inspired by the case : How do you ensure an effective use of

customer segmentation?

10:00 - 10:15

Short break and networking 10:15 - 10:30

Segmentation as a tool for prioritization

– Exercise in groups

10:30 - 11:30

Case: Tetra Pak’s customer segmentation model - Keynote speaker Sebastien Leichtnam, Tetra Pak

09:20 - 10:00

Networking and refreshments 11:45 - 12.30

Summing up the ComEx Forum event 11:30 - 11:45

Friday, 22nd November 2013

3

• Established in 1996

• 400 employees, more than 370 consultants

• Helps clients in Scandinavia, both private

and public, from our offices in

Copenhagen, Stockholm and Oslo

• Leading consultant company in

Scandinavia within business

transformation

• 20% CAGR since 1996

• Turnover +700 million SEK 2012/2013

Facts about Implement Consulting Group

Commercial Excellence Forum – Events in Stockholm 2013/2014

• 22nd of November 2013

Segmentation – a strong foundation for

improved differentiation

• 21st of February 2014

• Value proposition – how to increase

competitiveness

• 30th of May 2014

From customer insights to business growth

• More events during Fall 2014 to follow

Planned events in Stockholm

4 4

Most companies have ambitious growth targets - combined with and

increasing complexity in their business model

Products/solutions

• Solutions

– Family houses

– Office buildings

• Service

– Interior design

Areas of use

• Processing

• Residential

Channels

• B2B

• B2C

• Direct

• Specifiers

• Entrepreneurs

Geography

• Denmark

• Northern Europe

• Southern Europe

Competencies

• R&D

• Procurement

• Production

• Sales

Customer size

• Large

• Medium

• Small

Service offering

• Products

• Solutions

Sector of use

• Retail

• Production

5 5

We need to look at the situation from different perspectives…

6 6

…but at the same time make sure that we have a common focus

7

The agenda for the day

1 Market- and Customer Segmentation (CS)

2 Value Proposition (VP)

3 Go-to-Market approach

CASE

+

8

VP CS

CH

CR

Successful companies have a business model focusing on delivering

superior value to selected customers in the most effective way

1. (Market)/Customer Segments (CS)

Identify and prioritise relevant market

and customer segments and

determine needs and offerings

2. Value Proposition (VP)

Definition of our unique and

defensible differentiators and

potential value creation for our

segments and customers

4. Channels (CH)

- Efficient delivery

of value to chosen focus

customers?

3. Customer Relationship (CR)

Target communication and relation building

to chosen focus segments and customers

Value proposition Go-to-market approach Segmentation

10

Market- and Customer segmentation should help target the right

customers, but it does not always bring the indented value

Why Segmentation

The intent is to create the foundation for…:

• … a relevant value proposition

‒ With products matching customers needs

‒ With adjusting pricing and discount schemes

‒ With service offerings attracting and keeping the

relevant customers loyal

• … an adjust the go-to-market approach in order to:

‒ Utilize the best use of a multichannel approach

‒ Optimize sales efforts across the full customer

journey

‒ Align marketing and messaging toward our target

customers

• Companies try to use one segmentation model

for all purposes

• Companies have multiple segmentation models

without a clear and consistent link

• Companies base the model on data at hand

rather than what is necessary to make the insight

relevant

• The management is not aligned on what drives

and what describes the market

• Companies are letting the complexity of a few

key clients interfere with a simple market view

• The purpose of the segmentation is "lost in

translation" when executed on an operational

level

Common Obstacles

Market- and Customer Segments defines a number

of different groups of people or organizations,

which a company aims to reach and serve

11

Segmentation has three distinct purposes which needs to be

addressed individually but understood coherent within each brand

3 segmentation levels

Strategic

market

segmentation

Main questions Purpose

1. Understand the market landscape of our business

2. Evaluate where we are doing business

3. Identify & prioritize attractive market segments

• What are we selling

and to whom?

• Where to grow?

• Who is our primary

market segments?

Tactical

customer

segmentation

Operational

customer

classification

12

The strategic market segmentation will help our clients define

who their target segments are thereby where to grow…

Game board

Ma

rket

att

rac

tive

nes

s

Competitive position

Med High Low

Med

High

Low

ROI

Wh

at

are

we s

ell

ing

?

To whom or where?

Prioritisation matrix

“What are we selling to whom?” “How do prioritise our resources?”

Str

ate

gic

Ta

cti

ca

l

Op

era

tio

na

l

Case: Service Segmentation

Sébastien Leichtnam Service Sales Development

PBH/2012-10-12

14

Based on numerous projects, ICG has distilled 7 ”key learning” which are

critical in developing and implementing a successful segmentation

2.

Let

commercial

management

drive

7.

Focus on

segment

strategies and

consequence

s

6.

Measure

impact and

change on

segment level

– from day 1

3.

Involve early

and broad

5.

Roll-out

before you

are ready

4.

Keep it

simple and

operational

1.

Make it top

management

relevant

7 key

learnings from

segmentation

projects

Top management attention is instrumental – take part in the

process, take interest in the opportunities by demonstrating

passion for winning

Sales and Marketing managers are

key in making a useful

segmentation model - hence, they

need to front the process and be

active in developing the model

Not all issues can be solved by segmentation.,

To ensure impact the purpose needs to be clear

and it needs to be operational useful for both

Sales & Marketing

Input to the structure and content

should be developed as co-creation

with both Sales and Marketing as

from both corporate and

subsidiaries to ensure highest level

of innovation power as well as full

buy-in

Strong focus and

measurement of the change

in behaviour as well as the

business impact is critical to

ensure both focus and

motivation

Start using the segmentation

model as soon as you have

a valid draft in order to start

changing behaviour

Focus on describing the strategy

for each segment including targets,

value proposition, channels,

resources, activities etc – and

thereby what we need to do

differently across segments.

Key Learning's

15

Customer segmentation ensures insight about your target customers

and how to differentiate within the prioritized market segments


Strategic

market

segmentation





• Where to grow?


market segments?

Tactical

customer

segmentation

• What are the needs of

our primary segments

• What to offer our

target segments?

1. What are the needs and drivers for our customers?

2. What are the characteristics of the valuable

segments?

3. What are the criteria they make their purchases by?

4. What are their average basket and yearly spend?

16

Insight in customer needs makes it possible for us to

identify the right actions and target the execution

Target

Execution

Define

Actions

Actionable

Demographics

Behaviour Needs

Tactical segmentation levels

$

Needs…

• Needs are the customer’s

motivation to buy any product

or service

• Needs based segmentation

set the direction of any

business development

Behaviour…

• Behaviour like buying

frequency and size of receipt

help us understand the market

dynamics and how far we

have come

Demographics…

• Demographics and socio

demographics help us

describe the target group(s) in

general terms

17

There are many customer segmentation methodologies –

but we work with four key methodologies

The optimal segmentation level

and method strikes a balance

between:

• Customer insight

How much resources do we

need in order to get customer

insight?

• Potential value creation

How is our ability and

prerequisites for using the

customer insight

strategically?

• Understand needs as the

basis for demographics,

value and behaviour

High

Low

Low High Customer

insight

Po

ten

tia

l

va

lue

cre

ati

on

Behavioural

Value

based

Need

based

Line of balance

Demographic

Str

ate

gic

Ta

cti

ca

l

Op

era

tio

na

l

Tactical segmentation levels

Start

End

End

Start

18

There are many customer segmentation methodologies –

but we work with four key methodologies Ta

cti

ca

l

Tactical segmentation

Behavioural segmentation

Value based

segmentation

Need based segmentation

Demographic

segmentation

• What are the customers

perceived and unknown

needs across the

customer journey

• How does the

customer act across

the customer journey

• Turnover

• Margins

• Loyalty

• Age

• Gender

• Geography

• Income

• Education

• Life stage

Criteria

• Revenue

• Employees

• Sector of business

Awareness

&

Evaluation

Consideratio

n & purchase

Usage

& rebuy

Before During After

B2C B2B

19

Customer insight is the driver for both customer segmentation

and building your value proposition

Delivery

Assort-

ment

Coverage

Styles

Branding

Prerequisites - Qualifiers

Focus drivers & Differentiators

Determinator

Price

Customer buying criteria Value Proposition mapping on needs

Str

ate

gic

Ta

cti

ca

l

Op

era

tio

na

l

Importance

Customer drivers

(needs)

Potential gaps in

customer promises

Indifferent customer

promises

• Understand the needs (Key Purchase Criteria’s – KPCs)

• Align with Customer Promise (Input to the Cust Value Proposition CVP)

CP1 CP2 CP3 CP4 CP5

Qualifiers Focus & Diff Non

competitive

Determinators

Kobles til

modul

omkring

kunderejse I

næste MBA

Customer Promise

20

Bringing knowledge from the strategic segmentation about who your

target customers are next step is to identify needs and prioritize


Strategic

market

segmentation





• Where to grow?


market segments?

Tactical

customer

segmentation

1. What are the attractive customer segments within

the prioritized market segments?

2. What are the characteristics of the valuable

segments?

3. What are the criteria they make their purchases by?

Operational

customer

segmentation

1. Which customers are most attractive to our business

model?

2. What are the size/value of our customer segments

3. How do we service our different customers?

4. How do we differentiate our products and services

• Who to call &

who to visit?

• How to differentiate

within the prioritized

market segments?

• What to offer our

customer segments?

21

Within the prioritized market segments the operational

segmentation should help our client prioritize…

Operational segmentation

• What is Red and what is Grey?

• And what does it mean to our clients?

Str

ate

gic

Ta

cti

ca

l

Op

era

tio

na

l

100

20

80

100

80

20

22

The operational segmentation help prioritization of time and resources

and understand what to offer to who at what price/discount level

Time and value

100

20

80

100

80

20

Time Value

Str

ate

gic

Ta

cti

ca

l

Op

era

tio

na

l

• So how to understand where to use their

time and resources?

23

What are the relevant element in order to prioritize and

understand where to use their time and resources?

Exercise # 1

Directions:

• In the segmentation tool please consider what could

be relevant elements in prioritizing target customers

• One note for each criteria

• Write a card for the different dimensions you find

relevant to prioritize and add to the segmentation

tool.

24

The operational segmentation help prioritization of time and resources

and understand what to offer to who at what price/discount level

Time and value

100

20

80

100

80

20

Time Value

Str

ate

gic

Ta

cti

ca

l

Op

era

tio

na

l

Customer

Loyalty

Customer

Profitability

Customer

Value

Black

(Standard)

A

B

C

A

B

C

A

B

C

C B A

A

B

C

Bronze Silver Gold

Classification model

25

Tool for creating an overview of customer segments

Tool for mapping Customer Segments and Customer Relations

Customer I. T

yp

e o

f cu

sto

me

r

II.

Reve

nu

e

IV.

Bra

nd

Lo

ya

lty

III.

Po

ten

tial

V.

New

cri

teri

a

Segmentation

criteria’s

Customer rating

TOS 12 Business Partner

TOS 23 Key Account

TOS 34 Gold

TOS 45 Silver

1

Operational consequences

and next question

- What does it require to succeed?

26





CASE

+

27

Value Proposition

A Value Propositions describes

the bundle of products and services that create

value for a specific Customer Segment

CH

CR

CS VP

28

The Value Proposition is about bundling the products and

services that create value for a specific Customer Segment

Value Proposition

CH

CR

CS

Create Value Proposition

• Bring together the bundle of benefits

that a company offers its customers

Benchmark Value Proposition:

• Understand competitors main

strengths in relation to VP

• Understand own differentiations

towards customer & consumers

VP

• The Value Proposition is the reason why customers turn to one company

over another.

• The Value Proposition solves a customer problem or satisfies a

customer need.

• Each Value Proposition consists of a selected bundle of products and/or

services that caters to the requirements of a specific Customer Segment.

Rationale

29

The foundation for organic growth, is a strong value

differentiation which is perceived valuable by the customers

Valuable

“I want” & “I need”

Differentiated

“No alternatives are as good”

Substantiated

“I trust” & “I believe” • Premium pricing

• Lead generation success

• Loyalty

• Sales growth

• Market Share Growth

+

+ …which creates the foundation for ...

SELLERValue Proposition

CUSTOMERValue Perception

DECISION TO SELL DECISION TO BUY

Value

perception

gap

The components of strong Value Differentiation ...

...is the basis for closing the value perception gap…

30

Unique and defensible differentiators can be identified at

different levels …

Value to the

customer

(fulfil needs)

Uniqueness

(differentiate)

Low High

Low

High

Key defensible

differentiators Game

changers

New

offerings &

services

Existing

offerings &

services

Potential

Effect

Change

impact

ROI

Effect & impact Defensible differentiators

31

How well are you connected to your customers?

31

How loyal are

your customers?

32

How well are you connected to your customers?

32

33

You get loyal behaviour, when you deliver

better than your competitors on the

customers most important needs…

”Loyal behaviour is the consequence of meeting the customer’s needs.

Loyalty and satisfaction are both symptoms – not the cause”

34

The value curve can be used to design the customer

experience

Finding the Consumer value Curve

Customer

rating of

performance

on needs

Most important Less important

Low

High

Customer ranking of needs

INCREASE VALUE

ON CORE NEEDS

… BY REDUCING COST

ON BASIC NEEDS

IF RELEVANT INCREASE

VALUE

ON LESS IMPORTANT NEEDS

35

Customer insight is the driver for both customer segmentation

and building your value proposition

Company and competitor performance

Importance

Customer drivers

(needs)

1. Understand needs (drivers of the customer purchase)

2. Understand the market performance (Need fulfilment)

3. Understand own (company performance) and competitors

Qualifiers Focus & Diff Non competitive

Company ranking

Competitor A

Not fulfilled

Fulfilled

1. How does this match

2. Understand the market performance (Need fulfilment)

3. Understand own (company performance) and

competitors • Building a strong value

proposition requires detailed

customer insight within each

segment – focusing on

• What are the most critical

customer pains &

challenges?

• What are the derived

purchasing criteria and their

relative performance?

• How is our relative strength

compared to the key

competitors?

36

Tool for creating an overview of customer requirements


Customer A

B

D

C

E

F

Customer

requirement

I. T

yp

e o

f cu

sto

me

r

II.

Reve

nu

e

IV.

Bra

nd

Lo

ya

lty

III.

Po

ten

tial

V.

New

cri

teri

a

Segmentation

criteria’s

Customer rating A

B

D

C

E

F

G

H

via

we

b-s

ho

p

Company

requirement

TOS 12 Business Partner x x x x x x x x x x x x x (x)

TOS 23 Key Account x x x x x x x x x x x (x)

TOS 34 Gold x x x x x x x x x (x)

TOS 45 Silver x x x x x x x x

1

2 2

Sell-in Sell-out Sell-in Sell-out

37

What is the relevant VP?

Exercise #2

Directions:

• On the segmentation tool, please identify the relevant

Value Proposition for your customers

• Write a post-it for each relevant element within

1. Customer requirements and

2. Company requirements

38





CASE

+

39

Go-to-market approach

Value propositions are delivered to

customers through communication,

distribution and sales channels.

VP CS

CR

CH

Customer Relationships describes the

interactions a company establishes with

specific Customer Segments in order to

deliver the Value Proposition

VP

CH

CS

CR

The Go-To-Market strategy is the mechanism to deliver your

unique value proposition to the target customer segments –

It is a component of HOW the firm will make it happen.

42

Customer relationship are linked to the segmentation in order to

understand the cost and integration with the business model…

Customer I. T

yp

e o

f cu

sto

me

r

II.

Re

ve

nu

e

IV.

Bra

nd

loya

lty

III.

Po

ten

tial

V.

Ne

w c

rite

ria

Segmentation

criteria’s

Customer rating

TOS 12 Business Partner

TOS 23 Key Account

TOS 34 Gold

TOS 45 Silver

TOS 56 Bronze

A.

KA

M

B. Te

am

assis

tan

ce

D. A

uto

mate

d s

erv

ice

C.

Co

mm

unity

E.

Se

lf-s

erv

ice

F.

Co

-cre

atio

n

Customer

relations

x x x x

x x x x

x x x x

(x) x x

x

x

Aligning the interaction model

with the customer segments in

order to create as much value as

much, while still making sure that

this is profitable


43

… and must be aligned with value proposition and channels in

order to create the customers go-to-market strategy


Customer A

B

D

C

E

F

Customer

requirement

I. T

yp

e o

f cu

sto

me

r

II.

Reve

nu

e

IV.

Bra

nd

Lo

ya

lty

III.

Po

ten

tial

V.

New

cri

teri

a

Segmentation

criteria’s

Customer rating A

B

D

C

E

F

G

H

via

we

b-s

ho

p

Company

requirement

TOS 12 Business Partner x x x x x x x x x x x x x (x)

TOS 23 Key Account x x x x x x x x x x x (x)

TOS 34 Gold x x x x x x x x x (x)

TOS 45 Silver x x x x x x x x

TOS 56 Bronze x x x x x x

Go-to-market

approach 4

1

2 2

Sell-in Sell-out Sell-in Sell-out

3 +

44

Challenges can lead to success or failure

Success seems to be connected

with action. Successful people

keep moving. They make

mistakes, but they don't quit.

Konrad Hilton (Founder of Hilton hotel chain)

Contacting Implement Consulting Group

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Segmentation, Value proposition & Go-to-market approach

Business

implement

main questions

specific customer

mapping customer

primary market

prioritized

qualifiers

customer segmentation