Market and Customer Segmentation

SITUATION

Our client, a manufacturer in the transportation industry, recognized the need for greater understanding of its market and customers. As is the case for every player in this industry, the manufacturer sells via dealerships and therefore doesn’t own the day to day relationship with the vast majority of its customers. However, they could see that some dealerships enjoyed greater success than others in key industry segments and wanted to understand what was working and then share this knowledge across the entire dealership network.

APPROACH

Before trying to understand why some dealerships were more successful than others in specific segments, we first had to define the segments. This sounds very simple but we found that different departments within the client organization, and sometimes different individuals within the same department, had a different understanding of the segment definitions. One issue was that the segments often overlapped as they were sometimes defined by customer type, sometimes by the use to which the vehicle was put, and sometimes by the physical attributes of the vehicle. As well as defining the segments differently, we found that departments were also using different data sets to size the segments. Creating a taxonomy was the key to developing a definition that was acceptable to all of our stakeholders.

Armed with a definition of each segment, the second step was to create a fact book for each segment. A standard list of content was used in each book. The information collected included:

  • An overview of the segment, with definitions, size, growth rate, market shares, vehicle usages within the segment, typical vehicle attributes and lifecycle, and market and competitive trends.
  • A deep dive on customers and their business drivers. This included a description of how they use the vehicle, their cost structure, their primary concerns, and their buying criteria.
  • A deep dive on competitors and their offerings. This included a comparison of the client’s product and service offerings to those of the competitors.
  • An internal perspective of the client’s offering describing the physical attributes and services that could be used to differentiate it.

The content for these fact books came from a combination of primary and secondary research. Primary research took the form of interviews with dealership employees, end customers, and product and market experts within the client organization. The secondary research relied on industry standard data sets and reputable online data and news sources.

The next step for us was to develop a playbook for the dealer sales force, describing ways in which they could compete effectively in the target segments. These external playbooks were supplemented with an internal playbook for the client organization, describing actions to be taken by each department involved in the sale and service of vehicles.

The third and final step for us was the development of training material for use with the dealer sales force. This encompassed a combination of presentations, discussions, exercises and tools. The content of the playbook and related tools were provided to the participants via iPad applications to ensure that they would be readily available during sales meetings.

RESULTS

There were several clear outcomes from this initiative. Perhaps the most immediate was the ability to use a common vocabulary within the client organization when discussing market segments. In combination with the fact book, this meant that the organization could discuss substantive issues rather than spend time debating which data was valid or what exactly was meant by a specific term.

The second outcome was an improvement in the quality of the discussion between the manufacturer and the dealership sales staff. Having a common understanding of the market and customer needs provided a reference for discussion of strategy and tactics.

The third outcome, and the whole reason for launching this initiative, was to increase sales within key market segments. Given the sales cycle time in this industry, it is too soon at the time of writing to know how successful this has been but the expectations are high for improvements over the next few years.

If you would like to discuss this topic in more detail, please contact us at inquiries@aptussc.com.