Key elements of world class marketing

market segmentation and marketing planning

the essential prerequisites for
successful CRM systems

Marcus Clark
The Marketing Process Company

5th March 2002

What might keep you awake at night?

• How do I justify the investment in CRM (ROI)?

• Are we getting a return on the investment made?

(effectiveness and efficiency)

• Budgets/targets
CRM Strategy Map
 Segmentation and profitability

• Essential prerequisites - or the CRM system won’t work

• Issues to be checked and addressed if it doesn’t work

work = improved shareholder value

 What questions need to be answered?

• How does my market(s) segment in terms of need?

(need is not profiling)

• Which segments improve shareholder value?

• What are my strategies to better address those segments?

• What metrics should I collect to show the strategy is effective?

(make the important measurable, not the measurable important)
 Market Definition

People or organisations who share a common need

that can be satisfied by alternative solutions
 Market Definition

Financial services

• Pensions - build assets to provide income in the future

(asset mgt, life assurance, etc)

• Insurance - planning for unforeseen financial liability

(self insure, bonds etc)

• Wealth Mgt - advise me on various financial instruments

to exploit, to meet my financial needs and aspirations

• Loans/mortgages - help me finance the acquisition of assets

 Market Segmentation

People or organisations who seek the same or

similar benefits when they make a purchase
decision

Key points:
• Segments can have very different costs to serve,
profitability, and loyalty profiles i.e. a wide variance in NPV

• The competitive position for the same product offer

can be very different for different segments.
 The seven steps of segmentation
Market Mapping Who Buys Who Buys What*
Surfers
$800M Clubs Hire shops Clubs Private
15% Hire Shops A G P

Surfers Wind Private what what what

370ktns21%

850ktns27%
Nat
300ktns30%Distrib's
Consults
Surfers individuals where where where
1,250 ktns Distrib's(5) 1,935ktns 33%
1,970ktns
35% 400ktns38%Manuf's 2,385ktns 34%
Overseas Importers Independ 50ktns 35%Consults
Distrib's(245) 215ktns49% 200ktns40%
when when when
What* is Bought
525ktns25% 50ktns 40%Independ 355ktns15%
Co-Ops 290ktns3% Consults(150) Speclst
Manufs & Clubs (30) Public'n
2,500ktns 75ktns 22%
45% 405ktns6% 65ktns 8%
Wind how how how
Total Australian Market $2B Surfers What products, brand,
Our share - 15% package, quality,
$1,200M intensity, consultancy, A1 to A17 G1 to G13 P1 to P4
0% services Micro- Segments
Where, When and How

Segmentation Segmentation Why

Micro- Segments
Stage 2 Stage 1 Market CPIs A1 to A17 G1 to G13 P1 to P4
Size Differ. Reach. Beach nomad
Kid surfer Innovative/new score
Performance
Seg 1
Financing score
Seg 2 Occasional surfer
Durability
Seg 3

OK Wind addict Sophistication score

Seg 4 Advanced Ease of use
Seg 5 tutoring
Brand-quality score
Seg 6
Safety
Seg 7 Hire shops Customisation score
and compatible with Keen surfer
Price
the company! Total 100 100 100
 Market Map
1000
Big
300
Business
520
6600 1300 520 Direct Sales 220
1640
Suppliers 1300 ISPs Mobile
Office 5-30
130
130
Direct
130
Marketing 1690
Mobile
50 Office 1-2
2600 1800 1000
Contracted
500 1800 Lovers 1000 Direct Sales 250
Dealers
700
400
400 Retail 400

2100
400
Sub
400 200
Consultants
200
800 225 575
Mobile
800 Opportunists 225 Direct Sales 225
Professnl

175 1295
Local
175 Retail 175
Business

400
400
Overalls
400 Sub Dealers

750 600
Indepdent
150 600 Retail 600
Retailer

600 150

150 Direct Sale 150

2600 1820
2600 Tied Channel 1820 Direct Sales 650

1170
520
520 Retail 520

260
Direct
260 260
Marketing

Market Map
13 July 1999
 First cut Segmentation

Overall driver : Users want the smallest footprint without

compromising Image size requirements

Watchmaker
Carpenters Compromisers
Spinal
Traditional Orthopaedic Key requirement :
Vascular
or price sensitive Nearly meet as many
Urology
needs as possible
‘Key hole’
Key requirement: Purchaser:
smallest and simplest
Key
platform.
requirement:
Purchaser:
Image size &
Often direct to Surgeons
manipulation
in the German market Footprint = Weight,
Channel:
and private clinics in Size, portability,
Often Direct to
the F/D markets manoeuvrability etc
Surgeons
Competitive Analysis by market segment
CSF Bar Chart
9

6
TopUps
5
Delivery
4
QualityService
3 Price
2 WholeLifeCost

0
DAF

ERF

Mercedes
IVECO

VOLVO
-Scania-

MAN

Renault
Competitors
 Market Segmentation

Profiling

Age/
Life stage Income

Products purchased
 Market Segmentation

Profiling - can help in reach but do not necessarily define

need

Age/
Life stage Income

Products purchased
 Shareholder
Value

Cash Flow
Level Timing Duration Risk

Financial
Sales growth Operating margin Investment Cost of capital
Financial Drivers

Market Segmentation
Strategic Profitable Size Loyalty

Marketing
Technology Price Brands Service
Critical Success Factors
Determine the value of segments

Annual sales

Gross income

-
Cost to interface

=
Net Segment
profitability (NSP)
x
Expected length
of relationship
=
Discounted
Segment
profitability
 0
1
2
3
4
5
6
7
8
9
DollarCard-Celebs

DollarCard-ExPats

DollarCard-Ind Baron

DollarCard-IT/SB/GP

DollarCard-OldMoney

DollarCard-SplitResR
Segments

MAF Bar Chart

DollarCard-TaxAvoider

MAFs
DollarCard-TaxExile

EuroCard-Celebs

EuroCard-ExPats

EuroCard-Ind Baron

EuroCard-IT/SB/GP

EuroCard-OldMoney

EuroCard-SplitResR

EuroCard-TaxExile
RTB

AcqEff

TAP
 Impact on Shareholder Value
Directional Policy Matrix
High

Value Creating
Bearings - Food

Assemblies - Auto
Market Attractiveness

Usually Value
Destroying
HighPerf - Chemical

Bearings - Chemical

Usually Value Bearings - Electrical

Creating
Systems - Electrical
Value
Destroying Systems - Food
Low
High Low

Relative Strength in Market

 Market Volume

Directional Policy Matrix

High

Create value Gas - Spot Heat

Gas - DCH
Market Attractiveness

Gas - Patio
Gas - FLT
Gas - Poultry/G
Gas - Catering
Gas - Comm Heat
GasSegments
- Dep Fleet
Gas - Static Cav
Gas - Barbeque
Gas - Generators
Gas - Mobile Cat
Destroy value Gas - Quad Bike
Gas - Marine
Gas - Crop Dess
Low
High Low Gas - Touring C

Relative Strength in Market

 Strategy

The selection of key segments and their CSFs

should be the key driver for strategy and metrics
How Marketing Strategy and Customers
Impact Shareholder Value

Shareholder
Value

Cash Flow for

Earnings
• Revenue
• Net Profit Financial Performance
• Cash Flow
•Customer Satisfaction

Market Performance Metrics •Retention

•Perceptions of Value

Marketing Strategy and Strategy Implementation