Vertical and Horizontal Segmentation - USBid

Vertical and Horizontal Segmentation - USBid

Vertical and Horizontal Segmentation Deb Gabrielson April 18, 2000 Segmentation - Why Do It? • Leads to relevancy of communication and offer • Bette...

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Vertical and Horizontal Segmentation Deb Gabrielson April 18, 2000

Segmentation - Why Do It? • Leads to relevancy of communication and offer • Better targeting - - more efficient use of marketing dollars

• Assist in prioritizing market campaigns • Creates more customer focused communications vs. product focus

           

The Role of Market Segmentation What Company Wants Find, understand, and focus on mostvalued customer High Value

Segmentation Scheme

What Customer Wants Understand and treat me as a very important market of one

Market A of One+ Market B of One+ Market C of One+

Not High-Value

Market X,Y,Z of One+

           

Many Ways To Segment • Demographic — Industry — Company size — Location

• Operating Variables — Technology — User/nonuser status — Customer capabilities

           

Many Ways To Segment • Purchasing Approaches — Suspect — Inquiry — First purchase — Repeat purchase — Long term or high value

• Situational Factors — Urgency — Specific application — Size of order

           

Many Ways To Segment • Personal Characteristics — Loyalty — Attitude toward risk

And On And On . . .

           

Criteria for Evaluating Market Segmentation Segment Definition:

• Is each segment made up of customers who have similar/unique product and service needs?

• Is the segmentation clear and understandable to all affected functions? i.e., Channels, Marketing, Marcom

• Will the segmentation allow a customer to feel that he is being uniquely and knowledgeably targeted and treated?

• Can desired customers be found and reached using the segmentation approach? Is it actionable?

           

Criteria for Evaluating Market Segmentation Segment Definition:

• Does the segmentation “force” you to focus on and increase contact, penetration, and service to the highest value customers?

• Are the number of segments reasonable for the organization to handle?

           

Criteria for Evaluating Market Segmentation Segment Execution: • Do you now have relationships that are closer, more in tune, with customers in each segment?

• Are you able to deliver more value to specific segments? • Can you track segment performance? Can you predict segment needs?

• Is it less expensive to target customers by segment than to address the whole market?

• Have you modified your business processes, information systems and organization structure to match your customer segments?

           

U S WEST’s Past Segmentation Schemes • Service vs. Priority • Owner/Operator vs. Manager • Needs Based • Classic vs. Complex

Too High-Level Unable to Translate into Marketing Actions

           

Why Vertical Segments? • Vertical industries are widely researched and measured • We can find them with internal and external databases for targeting

• Growth opportunities in telecommunications have shifted from providing commodity services to customizes services

• Industry-specific solutions offer value-added services that create customer loyalty by developing close link to customers core business

• We can focus on selected industries or sub-segments which are growing faster than the national average            

Transition From Segment Marketing to Creating Compelling Segment Solutions Segment Marketing • Talk to them in “their language”

• Know their needs so we can show them — Applications of our existing product lines in their industry — Bundles of existing products most appropriate for their industry

Segment Solutions • Complete solutions to solve specific industry business problems

• Addressing core business needs will build strong long term relationships

• Higher margins than “commodity” services such as POTS lines            

U S WEST’s Experience Focus on Six Vertical Segments

• FIRE • Professional Services • CAM • Retail Goods

Analyze the top growing segments

Compare the projected market growth to your growth

• Retail Skilled Services • MWT

Conduct research to understand specific needs, emerging trends Also look at “Value” Within Each Vertical Industry

           

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Industries Included in Vertical Segments and Sub-Segments Manufacturing, Transportation and Wholesale

Professional Services Legal Services

Transportation •Petroleum pipeline •Railroad transportation •Trucking and courier services •Warehousing and storage •Postal Service •Air transportation •Water transportation •Transportation Services • (non commercial) •Distribution Wholesale •Motor vehicle supplies and new parts •Lumber and other construction material •Electronic parts and equipment •Farm and garden machinery •Industrial machinery and equipment •Grain and field beans •Farm products •Durable goods •Non-durable goods

Manufacturing •Rubber and misc. plastics •Misc. manufacturing •Metal and fabricated metal products •Electronics and electrical equipment • (excluding computers) •Transportation equipment •Measuring, analyzing and • controlling equipment •Textile and Apparel •Lumber and wool product industry •Computer and office equipment •Paper and allied products •Industrial machinery •Printers and Publishers •Furniture and fixtures •Food products •Petroleum

Medical Services •Offices and clinics of doctors and dentists •Hospitals and nursing homes •Medical services Other •Cable, radio and television stations •Advertising agencies and advertising media and services •Professional services •Business associations •Personnel, secretarial and court reporting •Computer programming •Funeral services, crematories •Educational institutions and services •Social services: daycare, job training, etc. •Engineering, accounting, research, management and related services •Veterinary services: domesticated animals

           

Industries Included in Vertical Segments and Sub-Segments Finance, Insurance, Real Estate Finance •Credit and collection agencies •Foreign banking and branches •Depository institutions •National commercial banks •State commercial banks •Credit Unions and Savings & Loans •Mortgage bankers/loan correspondence •Security/commodity brokers and dealers Insurance •Insurance agents, brokers, and service Real Estate •Surveillance and security systems •Non residential building operators •Apartment/rental building operators •Real estate agents and managers •Sub-dividers and developers •Holding and Investment offices

Retail and Skilled Services Business Services •Photocopying and duplication services •Photo finishing services & photo studios •Wireless, cellular and misc. communications •Courier services (except by air) •Computer services •Rental and Leasing

Maintenance & Repair •Gas and electric services •Skilled services •Lawn and garden maintenance •Automotive repair •Pest control, cleaning & maintenance •TV and appliance repair •Misc. skilled repair •Private household services

Travel & Entertainment •Tour, travel & transportation services •Gasoline service stations •Eating places •Hotels and motels •Commercial sports •Golf courses and fitness facilities •Misc. amusement and recreational •Camp grounds •Motion pictures and video rental •Beauty shops and barbers •Auto rental •Museums, art galleries, botanical & zoological gardens •Shoe repair •Laundry, cleaning and garment services •Misc. personal and retail services

           

Industries Included in Vertical Segments and Sub-Segments Construction, Agriculture & Mining Construction •Single family housing construction •Nonresidential construction •Plumbing, heating, air-conditioning electrical •Roofing, siding and sheet metal work •Concrete work •Special trade contractors •Carpentry and floor work Agriculture •Agriculture production •Agriculture services •Veterinary services (non domesticated) •Farm labor management •Forestry •Gaming Mining •Metal, coal and oil, natural gas, and minerals •Mining services

Retail Goods Retail Stores •Department Stores •Prepackaged software •Equipment rental and leasing •General/specialty grocery stores •Garden, auto and home •Home furniture and equipment stores •Auto and recreational vehicle dealers •Drug stores •Optical stores •Liquor stores •Specialty and novelty stores •Apparel and accessory stores Auto and recreational vehicle dealers Mail order and non-store retailers

           

U S WEST’s Horizontal Segments • Home Office — Primary Self-employed — Part-time self-employed — Telecommuters — After hours corporate

• Start Up — Less than 2 years old in business — Entrepreneurs who have not yet opened for business but expect to within the next 6 months

• Hispanic

           

Primary Research to Provide Insight into Needs Phase I •

Qualitative one-on-one interviews mid-March representing a mix of small businesses in six segments

Phase II •

Quantitative survey to measure needs and characteristics identified in qualitative phase. Telephone interview 1,200 customers in June followed by mail questionnaire to respondents. (690 returned questionnaires by cut-off)

Phase III •

Follow-up qualitative to assess interest in solutions/packages developed from first two phases.

Sample of customers were portioned into quotas for each of the six industrybased segments, as well as quotas for each of the value segments.

           

Top-Line Research Results • Average monthly spend ranged from $867 to $1,305 • Ratio of inbound/outbound calls ranged from 65 to 110 • % inbound toll ranged from 9% to 40% • % outbound toll ranged from 10% to 38% • Mean number of lines at primary location ranged from 3.0 to 8.0

• Use of conferencing varied dramatically • Use of messaging and primary messaging system used varied

           

Top-Line Research Results • Types of employees needing mobile communications and who they are communicating with varies by vertical segment

• Incidence of using cellular/PCS ranged from 62% to 92% • Gross penetration of data communication elements ranged from 137% to 255%

• Incidence of transaction processing varied from 7% to 21%

• Incidence of internet access ranged from 45% to 71%