Segmentation surprises
By Gary Dean, managing director of strategic consultancy, The Truffle Pig Consulting Co.
My last article of 2022 suggested some ways that might help in developing a strategy for success for your business.
In that December article I posed the question, ‘do you know where the profit in your business truly comes from?’
If you did this exercise, you might well have discovered that segmentation starts to bring in some surprises.
Looking deeply into your organisation leads automatically to you carrying out more fundamental segmentation analysis, so this time we will look briefly at some other ones you might need to consider and have in your toolbox.
You may be familiar with the ‘Pareto Principle’ which, incredibly, dates back to the turn of the 20th century when economist Vilfredo Pareto suggested this key ratio and how it could be applied with some rather surprising and consistent results.
The idea was further modified and retold in Koch’s book ‘The 80/20 Principle’ some 25 years ago.
Also known as the ‘rule of the vital few’ its basis is rather simple; 80% of all results come from 20% of all inputs. For example, 80% of your profitable sales come from 20% of your customers.
Try it out, though clearly never exactly an 80/20 split it is often very close when you carry out any kind of segmentation, and can be quite revealing.
Another helpful tool is what’s known as the ‘5C situation analysis’ which supports marketing development strategy as well as development strategy.
To do this well you need to be honest as always, to know the business environment in which you work in detail and know your organisations capabilities and limitations.
The 5C analysis is as follows:
Company – know your goals, your culture, your strengths and weaknesses, your USPs, your brands image, your price position.
Collaboration – know all the above about your suppliers, your distributors and any alliances you have.
Customers – know your customer groups, the market size, the markets growth or reduction per customer group, the behaviour of your customers, the loyalty of your customers.
Competitors – know your direct and indirect competition per customer and product group, envision the substitute products or new entrants that could present themselves in your marketplace, review the barriers to entry and be honest.
Context – know the political, economic, social and technological environment in which you operate and its influence.
Most of you will also have heard of SWOT analysis of course, its ubiquitous and often used as a strategic development tool.
Originally developed at the Harvard Business School in the 1960s, I have both seen and been told many times of a company’s SWOT exercises and how proud they are of it, a result of brainstorming sessions which are easy to understand and excite the participants.
SWOT is of course the review of a company’s Strengths, Weaknesses, Opportunities and Threats and it has its place to get the brain working. Personally, however, I don’t spend much time with this one. Why?
For me it has little merit. Fundamentally it provides no answers, or directions, and cannot be much value in developing a strategic direction. By all means use SWOT to put down ideas and collect impressions, but for me it lacks the actionable outcomes that I recommend consistently.
And this brings me to the last thought of this article, yes, my very favourite topic – setting goals and objectives that are realistic and that can truly be actioned.
The fabulous, post-impressionist artist Paul Gauguin inscribed on his Tahitian painting ‘Where do we come from? What are we? Where are we going?’ (in French of course).
If the above tools help us come up with the answers to the first two questions, then the cornerstone of your future business development strategy is the third answer. The long-term goals of your organisation are what you need to focus on now.
Goals should be the firm foundations which support your company’s strategic intentions and initiatives over the next five years or so, they should be motivational, be energising, help focus everyone on the key tasks, and encourage dedication and commitment (especially important in turbulent times).
Your goals are your own, I cannot advise you what they should be, they will be quite specific to your organisation if you consider them well, but they should reflect your values and be longer term.
Short term goals will not help to create your strategic development, we see short-term goal management fail ultimately and often because they are just financially expressed objectives.
So please, don’t confuse goals and objectives. Objectives tend to be short-term and expressed in numbers, whereas long term goals are what you clearly aim to become and are described in words.
Paint the picture and turn it into reality.
Happy New Year.