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Mix It Up

Lately, I have been involved in a number of conversations regarding segmentation and targeting. I state it this way, segmentation and targeting, as if it were one topic with two words in the name because that is how many folks I have been interacting with refer to it. Combining the two terms, as if one, is a bit like giving this the status of something like gin and tonic. Gin and tonic water are two uniquely different things, but when mixed together they become a single, recognized entity. Segmentation and targeting are two uniquely different things and when combined together don’t become an entity, they remain two different things.

Now, the first thing you might ask yourself is, what possible difference does it make if people refer to these two things as if they are one thing? My answer is simple. They serve two different purposes, and if they are mixed up, there is a good chance you are getting the benefit of one and ignoring the utility and benefit of the other. I think it is important to get the benefits of both. If you mix gin with tonic (and add a wedge of lime) you get the benefits of both. But if you mix up segmentation and targeting, you are probably assuming they are the same thing and you are accomplishing only a portion of the value of what each can bring to your CRM program.

My here plan is to offer up my definition of each topic plus make some effort to show how they might be connected (but not synonymous). However, without doubt, I will define them incorrectly according to one of your favorite marketing reference books. Likewise, I will define them in reverse according to some of you – this I know because I have already engaged in that debate. No matter, I stick with these definitions, and I think you can find them useful. Here goes.

Segmentation – this is the process of differentiating your customer and prospect base into discernable categories, which aid in positioning the correct resource with the correct segment. Mostly this helps determine who talks to whom and who gets the priority attention. My customers use segmentation most often for territory management and channel assignment. For example, A customers get top coverage by the field sales force, B customers get secondary coverage by the field and primary coverage with tele-sales, and C customers get covered through the web and by tele-sales if they come through a campaign. You can use a number of different criteria for segmentation. Consumer banks use socio-economic status. Many B-to-B companies use factors that indicate buying potential. Some companies just follow a simple formula based on size (revenue, employees, customers, etc.).

Peculiar Customers

Targeting – this is the process of selecting customer or prospect segments or sub-segments for the purpose of a specific activity, such as a campaign, messaging, or promotional program. Targeting is all about rifle shooting versus the shotgun approach – getting the right message or offer to the right customer at the right time. Typically, targeting takes the basic categories of the segmentation structure and then divides up the population by another characteristic such as buying behavior, purchase lifecycle stage, customer base, or other trait. While there are a handful of common segmentation criteria, there are literally hundreds of thousands of criteria for targeting, all industry specific.

So, what is all the fuss about getting these confused? They serve a different purpose. Segmentation is really critical for building account strategies. Targeting is really critical for building marketing plans. Yes, they have a key overlap. Targeting typically takes into account the segmentation structure as one dimension, but it is usually more refined – there are more target groups than segments. Account planning can also include targeting strategies, and are best if done in collaboration. But, if you mix them together and think they are the same thing, chances are you are leaving out something.

Relying only on the process of segmentation probably means your messaging is only as refined as your segments. Relying only on targeting probably means you are focusing on the messaging process, but not on differentiating your focus on territory management and the prioritization of your reach. One crude distinction that I tend to make is that segmentation is a sales process and targeting is a marketing process. But, that is a dangerous simplification as they really need to be well integrated. Unfortunately I have seen too many companies where sales uses one segmentation structure for managing accounts and marketing uses a completely different targeting structure for programs. This is a disconnect that promotes the typical issues we see between these two functions. Targeting and segmentation have to include some element that links the targets to the segments. A lot of budget can be wasted on campaigns otherwise.

Mix up those gin and tonics, but keep your segmentation and targeting integrated not mixed up.

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