Why we should be using segmentation and what we should be looking for to know that we are getting it right

Put your hands up if you have been in a meeting in the last 18 months where the term ‘segmentation’ was used repeatedly. Leave your hand up if you think secretly the word ‘segmentation’ is overused and poorly defined. My hand is still up, and I suspect many of yours are too.

A dive into my trusty English dictionary confirms that the definition of ‘segmentation’ is ‘division into separate parts or sections’. This brings to mind clementine or satsuma segments, the ones that are easy to separate, and each segment is distinct from the next. I think the segments that we in the pharma industry are working with are more like large navel orange segments which are often stuck together, hard to separate and can’t be eaten without getting juice all over your fingers!

So why should we be using segmentation and what should we be looking for to know that we are getting it right?

Segmentation essentially means that we look across our customer universe (both existing and potential customers) and try to group them into subgroups according to shared characteristics. How we define these characteristics is where it gets interesting because we need to look for the customers who could benefit most from our product or, in the case of healthcare customers, those who have similar clinical needs for their patients. Once we have identified these segments, we can decide how best to relate to these customers and meet their needs to maximise the value of each customer.

Why should we bother, what should we expect to gain from carrying out this rigorous analysis of our customers? Malcolm McDonald (Cranfield University School of Management) has written extensively about segmentation and shares this rather stark warning: ‘[…] any organisation that embarks on any segmentation path other than needs-based segmentation is doomed to waste an awful lot of time and money.’ If we can effectively segment, we can:

• Make our tactics more effective and relevant while improving the interactions and experience our customers have with our company and brand
• Help stretch our budgets further because we won’t be communicating with the wrong customers
• Increase customer retention because they are getting what they need and expect from our segment specific engagement plan
• Differentiate our brands by enabling the right customers to appreciate the true value of their clinical impact.

• Know why you are segmenting - what is the goal of segmentation, what outcomes are you looking for?
• Try different segmentation models - which are the most appropriate for your goal? There is no right or wrong answer, in some cases geographic segmentation or channel use segmentation may absolutely be the most pragmatic approach to get started, and other segmentation can be overlayed when the information is available.
• Make segmentation a cross-functional team affair – there is no point in one part of the company executing campaigns (omnichannel or otherwise) using segmentation and other teams using the same communication with every customer.
• Measure, analyse and iterate – without frequent assessment we cannot know if we are connecting with each customer segment, we cannot improve and we cannot drive greater uptake of our brands.