Burke adds value to market segmentation assignments by better identifying segments that differ in useful ways for marketing purposes. We believe that great skill is required to select and “fine tune” a segmentation solution that is best aligned with your business objectives. The most critical element Burke brings to segmentation research is an excellent balance between technical and analytical skill and experience-based insight. This balance produces the most appropriate and most actionable segmentation findings for our clients. This section details Burke's expertise in the area of market segmentation research, and describes our SEGUE™ proprietary segmentation method.

A common trait among segmentation methods is that market segmentation should yield segments, or groups of customers (or prospective customers), where:

• Individuals in the same segment are similar to one another on important marketing-relevant variables
• Individuals in different segments are different from one another on important marketing-relevant variables

From a practical standpoint, however, the trick is to do the "dividing up" of the market in such a way as to produce groups or segments that differ in ways that are meaningful for marketing purposes. The underlying assumption of segmentation research is that the total or aggregate market is less actionable than a collection of smaller segments that differ in ways that can be exploited for marketing purposes. Value is added by identifying and "teasing out" these meaningful differences. Meaningful differences are typically characterized by segments that are identifiable, targetable, and/or profitable, depending on business objectives.

A common downfall of segmentation research is that the final segments are not as actionable as desired. This may happen because there are not very clear distinctions across segments on variables such as demographics or key behaviors that allow companies to best locate individuals in order to target them with marketing efforts. Burke developed the SEGUE™ market segmentation method to overcome these problems.

A common myth about segmentation is that there are segments "out there" waiting to be discovered. There are seldom any clearly right or wrong ways to segment, or the existence of the one "correct" set of segments. Success depends on a strong partnership between Burke and the client that enables both parties to have a clear fix on the objectives. Armed with a clear understanding of the objectives, Burke will recommend a research design and analytical approach that delivers a segmentation scheme that is maximally useful for marketing purposes. There are many routes . . . both analytically and philosophically . . . to segmenting a market. These methods range from very simple to highly complex. This concept is illustrated nicely with the example of segmenting a deck of cards. A standard deck of 52 playing cards can be divided into groups in a number of equally valid ways. Perhaps they could be divided by suit into 4 groups; by rank into 13 groups, or by color into 2 groups. Another grouping might be face cards, aces, and all others. The usefulness of the grouping may depend on the purpose for which the cards will be used - poker, blackjack, and so on. In a game of "Hearts", it may be useful to create the three groups of "Queen of spades", "Hearts", and "All Others".

There are several characteristics on which markets can be segmented, including (but not limited to):

• Product Parameters:
  • amount of use
  • type of use
  • benefits sought
  • attitudes towards
  • satisfaction level
  • brand loyalty
  • reasons for not using
  • substitute and complementary products
  • usage occasions
  • unmet needs
  • objections
  • attitudes
  • awareness
  • receptiveness to a product concept
• Psychographic Parameters:
  • lifestyle
  • attitudes
• Demographic Parameters:
  • household/family size
  • age
  • family life cycle
  • marital Status
  • gender
  • race/nationality/ethnicity
  • religion
  • geography/region
• Socioeconomic Parameters:
  • education
  • occupation
  • income
  • home ownership
  • social class

A key tenet of Burke's philosophy on segmentation is that such research must be strongly objective driven. The primary difference between success and failure is often the presence or absence of well articulated objectives for the research, and a clear vision for what types of actions will be taken as a result of the segmentation findings. Burke will be very proactive in working with you and your company to focus the research on specific, actionable objectives.

Some authors have referred to segmentation research as "death wish" research, making rather gross generalizations that the history of segmentation demonstrates little if any value for decision making. Burke has found that, if carefully planned, executed, analyzed, and reported, segmentation research can significantly aid marketing decision making. However, we have also observed that much time, energy, and money can be expended with underwhelming results, if segmentation research is commissioned without adequate discussion and design.

Arriving at the best segmentation solution in the context of your business objectives requires a lot more than technical expertise and cutting edge software. These are "necessary but not sufficient" conditions. Delivering great segmentation results requires several intangibles, such as experience, judgment, and category knowledge. This is why it is often said that segmentation is both "science" and "art." At Burke, we typically look at a lot of different ways of "dividing up" a market in any segmentation study. A key part of the "art" of segmentation is knowing a useful segmentation solution when you see one.

We believe each market segmentation study is sufficiently different so that no one method can serve as a default. The decision concerning the appropriate segmentation method is situation-dependent. The decision must rest on such issues as:

• What is the level of consumer involvement with the product or service?
• How much do consumers know about this product, service, or industry? To what depth are they willing and able to discuss this category?
• Is this a new or existing product?
• What is the goal of the segmentation study? Is it to increase loyalty among existing customers, attract new customers to the category, or attract customers from a competitor?
• Is the segmentation for short-range operational planning or long-range strategic planning?
• What paradigms or images of market structure currently exist among the company's managers and business development personnel?

The following diagram illustrates the general framework Burke applies to segmentation assignments. Because segmentation situations vary so much, the framework is often modified depending on what makes sense for a particular situation or set of research objectives.

Because of the high level of importance we put on conducting objective driven research, the framework begins with extensive dialogue between Burke and the client to clarify the objectives of the research, expectations about outcomes and deliverables, and the development of a clear understanding of the business decisions that the research will affect. Guided by objectives, the next step is to identify an overall segmentation strategy ("a priori" vs. "post hoc"), and then to make decisions regarding types of variables, analysis methods, data collection, segment identification and profiling, and finally selecting segments for targeting, if desired.

A key tool that Burke applies at the identification/profiling stage is a proprietary analytical technique called SEGUE™, which allows Burke to define segments that are maximally useful for marketing purposes.

A common downfall of segmentation research is that the segments derived are not as actionable as desired. This may happen because there are not very clear distinctions across segments on variables such as demographics or key behaviors that allow companies to best locate individuals in order to target them with marketing efforts. SEGUE is a proprietary Burke segmentation tool designed to overcome these problems. The goal of SEGUE is to simultaneously optimize distinction across segments on critical variables of interest, while minimizing changes to the character, "flavor," or make-up of the original segmentation solution.

The following chart is an example from the home electronics industry. Much effort and expense has gone into deriving segments on the basis of attitudes for high-end home electronics systems. Three segments were derived. In this example, the segmentation is not especially actionable because the segments do not differ sufficiently on key demographic variables that the client would like to use to develop an efficient marketing campaign, select appropriate media, craft appropriate advertising copy, etc.

In a situation like the one shown here for home electronics, SEGUE can be used to substantially improve the client's ability to correctly identify customers and prospects who belong to attitudinal segments, based only on knowledge of their demographic profiles.

How does SEGUE work? Regardless of what statistical or mathematical technique is used to derive segments, segmentation solutions are never completely black and white. That is to say, many people assigned to a given segment could have just as reasonably been assigned to an alternative segment. In any segmentation scheme, there are some individuals who clearly belong to their "assigned" segment (because their data would make it difficult to justify them belonging to another segment), and other individuals who are more or less "up for grabs."

SEGUE focuses on the individuals who dwell in the "border zones" between segments, so to speak. Burke works with great skill to use SEGUE to "fine tune" the segmentation solution so that it is best aligned with your business objectives. This is done by:

• Recognizing that any segmentation scheme consists of some individuals who clearly belong to specific segments, and other individuals who are in the "border zones" between segments.
• Identifying candidates for segment reassignment, then experimentally shifting the borders between segments.
• Working toward a final goal to simultaneously optimize distinction across segments on critical variables of interest, while minimizing changes to the character or "flavor" of the original segmentation scheme.

The best measure of how much SEGUE™ improves overall actionability and/or findability of individuals is in improving a client's power to correctly classify people into segments.

In a project completed for a pharmaceutical product, Burke was able to improve the client's ability to correctly classify customers and prospects into segments by 81% using SEGUE. In another situation for a personal care product, Burke was able to improve the predictive power of classification by 77%.

These are very important improvements for real world marketing action. Marketers want to classify people into segments as correctly (and efficiently) as possible in order to get the most bang for the buck from marketing budgets. By improving the power to correctly classify, we improve the ability to deliver the right messages, samples, products, etc. to the "right" people.

All a company might know about the bulk of its customers or prospects is some basic demographic information similar to that discussed here, things such as age, gender, geographic location, etc. Attitudes, perceptions, etc. are not typically known, since companies can't usually conduct marketing surveys among an entire population. Being able to much more accurately target marketing actions based on limited information translates directly into better financial results because of increased response rates (by reaching more of the "right" people), and because of less waste (by reaching fewer of the "wrong" people).

In the mid-1990s, a provider of wireless communications services was faced with a rapidly changing market. While in earlier years, such services were used primarily by professionals or more affluent individuals, wireless communications were becoming more of a mass market product. Accordingly, customers and prospective customers were becoming a more heterogeneous group.

This company had conducted a large segmentation analysis two years earlier. However the company was convinced that the earlier segmentation study was no longer valid. The company approached Burke to take a new look at the structure of its market. With new insight and understanding provided by Burke, the company could (1) identify and understand target markets and (2) gain insight in how to market to these targets.

Based on the benefits they derive from their wireless service, Burke identified six unique and distinct segments among current wireless users. Burke also uncovered a number of segments among "prospects" (those likely to become wireless customers in the near term) and among "non-prospects" (those unlikely to become wireless customers any time soon). Prospects were grouped on the basis of the benefits they would seek from wireless service. Non-prospects were grouped on the basis of their reasons for being apprehensive about becoming a customer of wireless service. Segments were profiled on demographics, attitudes, and behaviors, enabling the company to select the most efficient media to reach each segment.

The market segmentation scheme became an ingrained and widely-utilized paradigm in the company's marketing efforts for a number of years. The segmentation was used to tailor advertising initiatives and new product development efforts to specific segments.